Lesson 3: Basic Economic Problems
The Philippine Economic Problem
The Philippine Economy is no exemption from continuing structural economic vulnerabilities,
these are varied observation about the continuing problems that we have in nation. The standard
& Poor Ratings services, following in the footsteps of Fitch Rating, had just awarded the
Philippine with its second credit ratings- raising hopes of sustained economic boom in the years
to come.
What are the Basic Economic problems?
All societies face the Economic problem, which is the problem of how to make the best use of
limited or scarce resources. The economic problem exists because, although the needs and wants
tof people are endless, the resources available to satisfy needs and wants are limited.
Limited Unlimited
Scarce Production wants and
Resources needs
Limited Resources:
resources are limited in two essential ways:
1. Limited in Physical quantity, as in the case of land, which has finite quantity.
2. Limited in use, as in the case of labor and machinery, which can only be for one purpose
at any one time.
Choice and opportunity Cost
Choice and opportunity Cost are two fundamental concepts in economics. Given that resources
are limited, producers and consumers have to make choices between competing alternatives.
All economic decisions involve in making choices. Individuals must choose how best to use their
skills and effort; firms must choose how best to use their workers and machinery and
government must choose how to best to use taxpayer’s money.
Of all the seemingly economic problems that we might think of, there are three very dominant
basic problems and these are:
What to produce- refers to the first main problem of the economy which is to decide what
products and services to produce and in what quantity.
How to produce- refers to the economy’s basic problem which is to decide on how to produce
the products. This involves finding the efficient and effective technique for production.
For whom to produced- this refers to the problem on who will receive the products and services
an economy produces.
From the three economic Problems, it can be seen that the basic concept of supply and demand
respond to economics move beyond how to meet society’s needs and wants so authentic
development is pursued.
We, as a people must ask: What do we really want as a nation.
Basic Economic Problems and The Philippine Socio Economic development in the 21st Century.
In the 21st century, the Philippines has been faced with several economic problems such as the
following:
1. Poverty and Unequal Distribution of Income
Poverty – is a condition experienced by millions of Families that prevents them in
attaining the minimum level of consumption for subsistence living.
Two Categories of poverty
Absolute Poverty- the lack of income to buy the basic food and necessities for
subsistence living.
Relative Poverty -It does not have sufficient income to purchase the minimum
requirements for daily survival.
Poverty Threshold -The income needed to purchase theses minimum nutritional
requirements and other basic necessities for daily survival. Those below threshold
are considered poor since they cannot even have the income to purchase the
minimum nutritional requirement for daily subsistence.
1st sem of 2014
P10, 534 per year -per capita food income
P 29/ individual /day to meet the minimum food intake for daily survival
Below threshold are considered poor.
Poverty incidence is the proportion of household in the country with family
income lower than threshold or poverty.
1st sem of 2014
20% of all families
25% of all the population
These proportion show slight decline from the poverty incidence
recorded in the previous year.
2. Unemployment- occurs when a person is unable to find work
3. Corruption- refers to dishonest or fraudulent behavior by people with power such as
managers
4. Poverty- refers to the state or condition in which people do not have the minimum
standard of life deemed accepted by the society
5. Price Volatility- refers to the unpredictable changes in prices (i.e. commodity price)
6. Tax issues- refers to compulsory contribution to the country’s revenue
7. Issues on education- includes tuition and other fees increase, bullying, and even graft and
corruption
What are the socioeconomic indicators of Development in the Philippines?
1. Gross Domestic Product – GDP per capita refers to the total value of goods and services
produced with in the country divided by the total population.
2. Formula for Calculation:
GDP=consumption + investment + (government spending) + (exports -imports)
Purpose: To find out the strength of a country’s local economy.
3. GNP= Gross National Product refers to the total value of all final goods and services with
in the nation in particular year and income by its citizen. It is the economic measures of
whether a country provides a higher quality of life or not.
Formula:
GNP= GDP + NR (Net income inflow from assets abroad or Net Income Receipts) – Net
payment outflow to foreign assets.
