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 The root problem is SCARCITY.
 SCARCITY alone does not explain completely

the economic problem.

 Human beings have multiple WANTS and

desires thus resources have alternative uses.

 Scarce resources need to be allocated among

different needs.
 List down 10 needs / wants, identify whether
they are basic or created and cite the factors

Wants / Needs Basic or Factor/s

Created Influencing
The Need
• What commodities are being produced and in
what quantities?
• How are these commodities being produced?
• Who get these commodities and in what
quantities?
• How efficiently are society’s resources being
used.
• Are these resources being fully utilized?
• Is the economy’s capacity to produce
improving over time?
 Scarcity and Choice – Opportunity cost
 Rational Behavior
◦ Human behavior reflects “rational self –
interest”
◦ Individuals look for and pursue opportunities
to increase their utility – pleasure, happiness,
satisfaction
◦ The same person may make different choices
under different circumstances.
◦ Assumes that choices vary
◦ May change as costs and benefits change
◦ Self interest is not the same as selfishness
 Marginal analysis – cost and benefits
• Science is not confined to the physical
sciences.
• Social Sciences are systematized bodies of
proved or demonstrated explanations
about observable phenomena.
• It is called social because the interest is
man and the society in which he lives in.
• It is a science because it is a systematic
body of knowledge and utilizes both
deduction and induction in explaining the
various events and happenings in the
economy.
“In fact there is better understanding today that
the mere accumulation of goods and services,
even for the benefit of the majority, is not
enough for the realization of human
happiness. Nor, in consequence, does the
availability of the many real benefits provided
in recent times by science and technology,
including the computer sciences, bring
freedom from every form of slavery. On the
contrary, the experience of recent years shows
that unless all the considerable body of
resources and potential is guided by the moral
understanding, and by an orientation towards
the true good of the human race, it easily
turns against man to oppress him.
 Physical Sciences – have increased the
resources available to man.
 Philosophy and Theology – philosophical and

theological principles serve as value

judgments in choosing among alternative
ways of achieving economic goals.
 Other social sciences
Economic for
citizenship
Professional and

personal application
 React to the statement:
THERE IS NO FREE LUNCH!!!
 Write your reaction in an

intermediate paper.
• All men are born with basic needs and desires.
• Simple to complex
• Can pertain to the individual, household, social
group, national
• Our wants seek fulfillment and must be satisfied.
• When wants are not satisfied  uneasy and
frustrated
• Wants can either be economic or non – economic
• Economic wants are greatly intertwined with non
– economic wants
• In highly advanced and industrialized countries,
basic economic needs are adequately satisfied.
• “However these countries face the more serious
problems of moral degeneration that an overly-
materialistic outlook in life inevitably brings.”
• The Philippines must be seriously concerned not
only with many material or economic problems
but with non – economic problems as well.
• Every economic fact of development has its non –
economic implications or consequences.
 Those goods and services which exist in
limited quantities and can be acquired only
at some effort and cost.
 Free goods such as air and sunshine, which

can be acquired in unlimited quantities are

not economic goods.
 Demonstration Effect
 Population Growth
 Rising Income
 Urbanization
 The tendency of the individual to imitate or
follow the actions and mannerisms of
other individuals for whom he has certain
regard.
 Has good and bad influences
 1960  27 million; 1981  50 million
 As of May 2000 – 76.5 million
 Projected Population by 2008 – 90.4 million
 2.36 percent average annual growth rate in
the 1995-2000 period
 If the average annual growth rate continues,
the population of the Philippines is expected
to double in 29 years.
Table A. Population Distribution by Region: 2000
 

Source: NSO, Various Censuses of Population and Housing

 Table B. Top Ten Provinces
with More Than One Million Population: 2000
 
            Province                     Population        
              Rank            
     
  
1 Pangasinan 2,434,086
2 Cebu* 2,377,588
3 Bulacan 2,234,088
4 Negros Occidental* 2,136,647
5 Cavite 2,063,161
6 Laguna 1,965,872
7 Batangas 1,905,348
8 Rizal 1,707,218
9 Nueva Ecija 1,659,883
10 Pampanga* 1,614,168
 Quezon City (2.17 million)
 Manila (1.58 million)
 Caloocan City (1.18 million).
 Half of the population were below 21 years
◦ The Philippine population had a median age of 21
years, same as the median age five years ago. This
meant that half of the population were below 21 years
old.
 Sex ratio was 101.43
◦ Of the total population in 2000, about 38.5 million or
50.36 percent were males while 38.0 million or 49.64
percent were females.
◦ Males outnumbered their female counterparts with
sex ratio of 101.43 males for every 100 females. Sex
ratio in 1995 was recorded at 101.4. There were more
males than females in the age groups 0-19 and 25-
54 years.
◦ On the other hand, females dominated in the rest of
the age groups.
 Dependency ratio down to 69.04
 The age structure of Philippine population was a
typical broad base at the bottom consisting of
large numbers of children and a narrow top made
up of relatively small number of elderly. Young
dependents belonging to age group 0 to 14 years
comprised 37.01 percent. The old dependents
(65 years and over) accounted for 3.83 percent,
while 59.16 percent comprised the economically
active population (15 to 64 years).
 The 2000 dependency ratio was 69.04. This
meant that for every 100 persons in the working
age group (15-64 years), they had to support
about 63 young dependents and about 6 old
dependents. .
 With the growing population, there is greater
need for more food, clothes, shelter,
education, health services etc.
 Need to plan to successfully meet the present
and future needs.
 Depends on how we view population growth
◦ Positive
◦ Negative
 As we increase our income, our needs
increase.
 Engel’s Law (Ernst Engel)

◦ Relationship between income and the demand

for certain products
◦ “As income increases, the percentage of income
spent on food decreases while the percentage
spent on non – food items increases.”
◦ The applicability depends on the income bracket
to which one belongs.
 Case No. 1 = Assuming a family earns
10,000 monthly.
◦ 5,000 / 50% is allocated to food
◦ If family income increases to 12K, it need not
allocate more pesos to food expenditures.
◦ A slight increase in in food budget – 5,500
 Case No. 2 = Assuming a family earns
5K/m
◦ 2500/50% to food but not enough
◦ If income increases to 6K, budget for food
becomes 3,500.
• Rural and urban communities
• In 2000, 40% of the workers are in
agriculture. They contribute only some
20% of the national income.
• Low productivity of farm workers.
• National consumption patterns are
gradually being affected by the tendency
of persons to troop to the cities.
• When people migrate to the urban areas,
they require a new set of wants and
demands.
 Public wants refer to the needs of the
population which cannot be effectively be
satisfied by private business firms.
 Public wants compete with the private wants

which are normally satisfied through the

production of goods and services by the
private sector.