Social
Studies - 3rd Quarter LT
Lesson
9: Economic Decisions
2
Conflicting Conditions in the Economy:
1.
Scarcity – natural condition prevailing in every country
- reason why we need to maximize the use of our
resources
2.
Shortage –
temporary condition
-caused by the manipulation of some individuals
resulting to an artificial shortage of goods
HOARDING – keeping the supply
of goods and wait for the price to increase
CARTEL – group of businessmen
who manipulate and control distribution, consumption, and pricing of a certain
product
Economic Problems:
• PRODUCTION – process of using resources to produce goods and services
• DISTRIBUTION – distributing the goods and services to the different sectors of the
economy
Allocating
the Resources:
Allocation –
mechanism that deals with the distribution of natural, human, and physical
resources to diverse uses in order to answer the problem of scarcity
Ex:
Market – one of the most important
mechanisms of allocation
-
it shows how resources are being used in the production
3
Steps to Make Resources Extensive:
1.
effective,
orderly, wise use of it
2.
investment
3.
use of
modern technology
Conservation – wise
use of natural resources
The
Nature of Economic Systems
ECONOMIC SYSTEMS – covers the structure of governance composed of institutions and
mechanisms that deal with different economic activities that will answer the
basic questions on the needs of an economy
3 Types
of Economic Systems:
ECONOMY
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DESCRIPTION
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DESCRIPTION
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TRADITIONAL
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• Answers
the economic problems based on the customs, traditions, beliefs, and norms of
the society
• They
know their roles in the society
•They
can’t have the goods and services they want
•They decide
on the goods to be produced
•
Practiced by primitive people and tribes
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MARKET
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• Individuals and private sectors make decisions to
answer the WHAT, HOW and FOR WHOM to produce in the economy
• MARKET- arrangement between sellers and buyers to make
transaction
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FEUDALISM
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- economic
and political system that deals with extensive land
ownership
- basis
of man’s power depends on the ownership of extensive land
-LANDLORD (Feudal lord)
-VASSALS (military servants)
- FIEF –land that is rewarded to vassals in return
of their service
-MANOR – center of agricultural economy during
manorial system
serf – farmers and slaves
-weakened
when towns and trade were developed
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MERCANTILISM
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- 16th
– 18th century; Europe
- GOLD & SILVER
- power
and supremacy of a country depends on the possession of gold and silver
-
accumulation of gold & silver through colonization of weaker countries
Ex: Britain, Netherlands, France, and Spain
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CAPITALISM
(FREE
ENTERPRISE / FREE MARKET SYSTEM)
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-
ownership of land, capital, labor and entrepreneur are the factors of production in
the hands of private sectors or individuals
- Industrial Revolution (paved way for
the recognition of rights of private sectors in developing industries
-Adam Smith
– laissez
faire doctrine
-underscores
important role of private sectors in economic development
-popularized
Capitalism
CHARACTERISTICS
OF CAPITALISM:
1.
Ownership of Resources and Wealth
- freedom
to accumulate wealth
2.
Decision-making
-decentralized
(make their own decision)
3.
Pricing
-based on
the prevailing price in the market
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COMMAND
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• State
has the sole responsibility in solving economic problems
•Decisions
come from the authority, people are expected to abide
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COMMUNISM
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-state
controls and owns all the industries and resources of the country
- CENTRAL PLANNING BOARD – plans &
decides
• Karl Marx –socialist who
believed in the equality of people
- wanted
a classless society to give the working class (ploretariat) the power to lead
-wrote “Das Kapital”
(bible of communism) & “Communist Manifesto” (with Friedrich Engel;
caused the spread of Communism)
- “Father of
Communism”
Ex: Nicolai Lenin (Russia)
Mao
Tze-tung (China)
Ho Chi
Min (Vietnam)
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SOCIALISM
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-combination of capitalism & communism
-main
industries are controlled by the state
-individuals
are allowed to own small industries which the states can interfere
-collective
ownership
- people
receive equal benefits from the state
-started
in France and Great Britain; 1830
•Robert Owen – capitalist; first to use
the term “socialism”
-established
Utopian
Socialism based on the principle of Thomas Mores “Utopia” or
ideal society
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FACISM
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-resources and industries are controlled and owned
by the state under a dictator
-dictator
decides all activities in the state
-importation
of goods, labor unions & strikes are not allowed
-“The
people are for the state, not the state for the people”
• Benito Mussolini – started
facism in Italy, 1922
-established
Fascist Party
• Adolf Hitler – introduced
facism to Germany
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Lesson
11: Production Linkages
PRODUCTION – process of using the resources to produce goods and services that
satisfy the needs and wants of individuals and businesses
Factors
of Production
•Anything
that is used to produce goods and services
FACTOR OF PRODUCTION
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DESCRIPTION
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FLOW OF PAYMENT
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Land
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• encompasses all natural resources that
contribute to production
• natural factor – where raw materials come from
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Rent – payment for use of
land, received by landlords
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Labor
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• human abilities
•physical or mental talents, abilities and
strengths of the people used in production
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Wages – money received as payment for their service
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Capital
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•produce goods used to produce other goods
•material things created by man, used in production
FINANCIAL CAPITAL – money used to buy machineries
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Interest – received by
capitalist for lending his money used in production
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Entrepreneur
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• person who has managerial ability and willing
to accept risk in entering into a business
INVESTMENT – addition of productive capital in business
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Profit – payment after
deducting all expenses in business operation
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Importance: Goods and Services
Lesson
12: The Concept of Demand
DEMAND – number of goods and services that consumers are willing and able to
buy at alternative prices at a given period of time
Relationship
between Price and Demand can be
described in….
1.
Demand Function
-mathematical
expression of the relationship of Quantity
Demanded (Qd) – dependent variable and
Price (P) –independent variable
-shows inverse relationship of Qd and P
2.
Demand Schedule
-table showing
the units of the product, which the consumer is willing to buy at different
prices
-as price increases, demand decreases if all other
factors remain constant
-ceteris paribus – “all other things remain
constant”
3.
Demand Curve
-graphical
representation of the inverse relationship of P and Qd
- line represents demand curve
4.
Law of Demand
-explains how people react every time prices change
in terms of the quantities of the product they purchase
-as price increases, the quantity which the buyer
is willing to buy will be lesser
5.
Market Demand
-combination of all demands of the consumers
Determinants
of Demand
1.
Population
2.
Income
NORMAL
GOODS –goods, for which the demand increases as income
increases
INFERIOR
GOODS – goods, for which the demand does not increase
even when income increases
3.
Expectation
- calamity,
war…
-when
consumers hear about a discord/trouble, how will they react?
4.
Occasion
5.
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Price of Substitute Goods
6.
Price of Complementary Goods
7.
Preference
8.
Price
Graphical
Representation of Effects of Demand Factors / Kinds of Demand Curve
1.
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POSITIVE – SHIFT DEMAND
2.
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NEGATIVE
–SHIFT DEMAND
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3.
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UPWARD DEMAND CURVE
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DOWNWARD DEMAND CURVE
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Shift of the Demand Curve
Factors
that Can Shift the Demand to the RIGHT: (increase in Demand)
-
increase in income
-product
preference
-expectation
and speculation
-increase
in number of consumers
-occasion
-price
decrease of a complementary product
Lesson 13: Elasticity Demand
Price Elasticity of Demand –
degree
of responsiveness of demand with a change in price
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Kinds of Elasticity
1) INELASTIC
-consumer’s
response is less than percent change
-E
< 1.0
-
%AQ < % P
-steep
slope of graph
2) PERFECTLY INELASTIC
-
demand does not change at any price
- E = 0
- %Q = 0
- vertical slope of graph
3) ELASTIC
-demand changes in price
- %Q > %P
- E >1.0
- nearly flat slope of graph
4) PERFECTLY ELASTIC
-demand changes even with no price change
- %P = 0
- E = undefined
-horizontal slope of graph
5) UNITARY
-demand will decrease by 1 % when there is 1%
increase
-E = 1
-%P = 1 = Qd
