Economic
Institutions
Learning Objective;
Analyze economic
organization and its impacts
on the lives of people in the
society.
Economics
Social science which studies the production,
distribution, exchange, and consumption of
goods and services.
Economy
The wealth and resources of a country or
region, especially in terms of the
production and consumption of goods and
services.
Institutions
Basically durable systems of
established and embedded social
rules that create a structure for social
interactions.
Economic Institutions are the formal and
informal rules that organize the economic
flow and the activity of a society.
The system that society develops to satisfy
the needs and the wants, every society
develops a systems of roles and norms that
governs the production, distribution, and
consumption of goods and services.
Economic institutions aid in strategizing and
deciding the flow of production, consumption,
and distribution of goods and services of a
society to ensure that each individual’s needs
are met.
Three basic economic questions:
1.What goods and serviced should be
produced?
2.How should these goods and services
be produced?
3.From whom should these goods and
services be produced?
In what way are the economy and
economic institutions connected to each
other?
Non-Market Transactions
Reciprocity
A form of gift exchange between two parties
wherein return is expected after product or gift
giving.
”pay it forward” – scheme wherein one
is encouraged to reciprocate the good
deed or product that was provided to
them by helping out someone else
instead of paying back to those that
provided them service in the first.
Types of Reciprocity
Generalized
Balanced
Negative
Generalized Reciprocity - refers to an
exchange that incurs no calculation of value
or immediate repayment of the goods or
services.
Balanced reciprocity involves
calculation of value and
repayment of the goods or
services within a specified time
frame.
Balanced reciprocity means that
the worth of what is given is
expected to be reciprocated with
a similar worth of goods or
services in return.
Negative reciprocity occurs when one
party attempts to get more out of the
exchange than the other party.
Negative reciprocity occurs when one
party attempts to get more out of the
exchange than the other party.
Transfer are payments that are
made without any good or service.
Redistribution is the process of transferring
income and wealth - be it in the form of
money, physical property, and the like –
from one individual to other individuals.
A simple example of redistribution is a group of
friends sharing their food equally. For instance,
imagine that five friends went on a picnic, and each
of them brought different types of food. One friend
brought sandwiches, another brought fruits, another
brought chips, and so on.
If they decide to redistribute the food equally among
themselves, they would divide the total amount of
food equally among all the friends, regardless of who
brought what. This means that each person would
get an equal share of the sandwiches, fruits, chips,
Market Transactions
Basically the system of exchange in a market.
It is when goods and service are traded and
bartered amongst individuals within their
market and society.
Purchases
A buyer and seller interact with one another
to exchange goods for an amount of money.
Loan is a sum of money that a person may
borrow. The borrowed money will then be
returned to where the person loaned it from with
added interest.
Mortgage is a type of loan that was
created for purchasers to be able to
make homeownership more attainable.
Bank Accounts
These types of accounts are deposit accounts held in a
bank or any other financial institution that allow
individuals available access to money through cash
withdrawals, checks, and debit.
Two Major Economic Systems
FACTORS OF PRODUCTION
Land - it refers to natural resources Capital- it refers to all manufactured
such as soil, water, mineral, plants, goods used in the production process. It
animals, sunlight, and wind. also refers to the means to purchase
goods, stocks, or other items.
Labor - it is also called human Entrepreneurship- it includes the
resources. It involves anyone who organizational skills and risk taking
works to produce goods or attitude in starting a new business.
services.
Capitalism
An economic system wherein the
investment and means of production,
distribution, and exchange is under the
control of a small minority of private
individuals and corporations.
Capitalism is often thought of as an
economic system in which private actors
own and control property in accord with
their interests, and demand and supply
freely set prices in markets in a way that
can serve the best interests of society.
Socialism
An economic system in which all resources and
means of production are controlled and owned by
the state.
Promotes common ownership, and the rights to
private property are very limited.
Socialism is a way to organize a society. It
deals mostly with the economy, or the part of a
society that creates wealth. The goal of
socialism is to spread wealth more evenly and
to treat all people fairly.
MODERN ECONOMIC SYSTEMS
Welfare States
General welfare of citizens is a basic duty
and the ultimate end of a well ran politics
and governance state.
MODERN ECONOMIC SYSTEMS
Mixed economy
Based on a mixture of public and private
ownership of the means of production, and
on a considerable public regulation of the
private business sector.
REFERENCE:
Understanding Culture, Society, and Politics
Ma. Perpetua Arcilla - Serapio
2016
