APPLIED

ECONOMICS
 “CHOICE AND
DECISION MAKING”
TERMS TO REMEMBER:

ECONOMICS
SCARCITY
SOCIAL SCIENCE
MACROECONOMICS
 MICROECONOMICS
 OPPORTUNITY COST
ECONOMIC RESOURCES
LAND LABOR
 CAPITAL
 ECONOMIC SYSTEM
 TRADITIONAL ECONOMY
COMMAND ECONOMY
MARKET ECONOMY
 POSITIVE ECONOMICS NORMATIVE
ECONOMICS
EVERYBODY GOES THROUGH A DAY
FACED WITH CONSTRAINTS OR
LIMITATIONS:MOTORISTS COMPLAIN
OF HIGH GASOLINE PRICES,TIMES
WHEN PEOPLE SUFFER DUE TO
SHORTAGE OF CHICKEN IN THE
MARKET;
 INSUFFICIENT ALLOWANCE FOR A
STUDENT WHO NEEDS TO BUY
BOOKS AND SCHOOL SUPPLIES. THIS
IS THE EXISTENCE OR SCARCITY.
ECONOMICS – A SCIENCE
CONCERNED WITH THE
PROCESS OR SYSTEM BY
WHICH GOODS AND SERVICES
ARE PRODUCED, SOLD,AND
BOUGHT.
SCARCITY – IS A CONDITION
WHERE THERE ARE INSUFFICIENT
RESOURCES TO SATISFY ALL THE
NEEDS AND WANTS OF A
POPULATION. SCARCITY MAY BE
 RELATIVE SCARCITY – IS WHEN A
GOOD IS SCARCE COMPARED TO ITS
DEMAND.
EXAMPLE/S:
 COCONUTS – ABUNDANT IN THE
PHILIPPINES,SINCE IT IS EASILY GROW IN OUR
SOIL AND CLIMATE.
SCARCE SUPPLY NOT SUFFICIENT TO MEET THE
NEEDS OF THE PEOPLE.
 BANANA – ALL REGIONS AVAILABLE
-SCARCE TYPHOON
 ABSOLUTE SCARCITY - IS
WHEN A SUPPLY IS LIMITED.

EXAMPLE;
 OIL – SCARCE SINCE WE HAVE NO
OIL WELLS.
 CHERRIES – NO RIGHT CLIMATE
 CHOICE AND DECISION MAKING

BECAUSE OF THE PRESENCE OF

SCARCITY, THERE IS A NEED FOR MAN
TO MAKE DECISIONS IN CHOOSING
HOW TO MAXIMIZE THE USE OF
SCARCE RESOURCES TO SATISFY AS
MANY WANTS AS POSIBLE.
OPPORTUNITY COST – REFERS TO THE
VALUE OF THE BEST FOREGOTTEN
ALTERNATIVE.
 WHEN LAND IS DEVOTED EXCLUSIVELY TO
THE CULTIVATION OF RICE, WE GIVE UP
BANANAS/MANGOES.
 LEATHER INTO SHOES GIVE UP BAGS.
 TEACHER RESIGNED TAKE UP
MASTERS/DOCTORATE DEGREE
 ECONOMIC RESOURCES
AKA FACTORS OF PRODUCTION, ARE
THE RESOURCES USED TO PRODUCE
GOODS AND SERVICES. THESE
RESOURCES ARE, LIMITED AND
THEREFORE, COMMAND A PAYMENT
THAT BECOMES THE INCOME OF THE
RESOURCE OWNER.
 LAND – SOIL AND NATURAL
RESOURCES THAT ARE FOUND IN
NATURE AND ARE NOT MAN-
MADE. OWNERS OF LANDS
RECIEVES PAYMENT KNOWN AS
RENT.
 LABOR – PHYSICAL AND HUMAN
EFFORT EXERTED IN PRODUCTION(WAGE)
 CONSTRUCTION WORKERS
 MACHINE OPERATORS
NURSES
LAWYERS DOCTORS
DRIVERS
FARMERS
FISHERMAN
 CAPITAL – MAN-MADE
RESOURCES USED IN THE
PRODUCTION OF GOODS AND
SERVICES, WHICH INCLUDE
MACHINERIES AND EQUIPMENT.
THE OWNER OF CAPITAL EARNS AN
INCOME CALLED INTEREST.
ECONOMICS AS A SOCIAL SCIENCE
- IT STUDIES HUMAN BEHAVIOUR JUST LIKE
PSYCHOLOGY AND SOCIOLOGY.
- STUDY SOCIETY HOW PEOPLE BEHAVES AND
INFLUENCE THE WORLD AROUND THEM.
- HOW INDIVIDUALS MAKE CHOICES IN
ALLOCATING SCARCE RESOURCES TO SATISFY
THEIR UNLIMITED WANTS.
TWO BRANCHES OF ECONOMICS:
 MACROECONOMICS –
DIVISION OF ECONOMICS THAT IS
CONCERNED WITH THE OVERALL
PERFORMANCE OF THE ENTIRE
ECONOMY.
( OVERALL)
MICROECOMICS –
IS CONCERNED WITH THE
BEHAVIOUR OF INDIVIDUAL
ENTITIES SUCH AS COSTUMER,THE
PRODUCER AND THE RESOURCE
OWNER.
SEATWORK
A. WRITE MIC(MICROECONOMICS)
MAC(MACROECONOMICS)

1. The inflation rate in the

Philippines in the last quarter
0f 2013 was 4.8%.
2. Prices of Toyota vehicles
are predicted to go up in
December.
3. Rental on land could not
be increased by landowners
because of the Rent Control
Law.
4. Prices of apples and grapes
tend to increase during
Christmas season.
5. Philippine congress passed
the VAT Law to strengthen the
Philippine tax system.
B. Identify which resources is referred
to by the following words.

1. Forests
2. Teachers
3. Engineers
4. Production Equipment
5. Business proprietor
assignment
1. Why is economics deeply
rooted in the concept of scarcity?
2. In what way is applied
economics important in tackling
economic issues or problems of
the country?
BASIC ECONOMIC PROBLEMS OF
SOCIETY

ALL SOCIETIES ARE FACED WITH BASIC

QUESTIONS IN THE ECONOMY THAT HAVE TO
BE ANSWERED IN ORDER TO COPE WITH
CONSTRAINTS AND LIMITATIONS. THESE
ARE :
1. WHAT TO PRODUCE AND HOW
MUCH
-SOCIETY MUST DECIDE
WHAT GOODS AND SERVICES
SHOULD BE PRODUCED IN THE
ECONOMY. HAVING DECIDED ON
THE NATURE OF GOODS THAT
WILL BE PRODUCED, THE
QUANTITY OF THESE GOODS
SHOULD ALSO BE DECIDED ON.
2. HOW TO PRODUCE - IS A
QUESTION ON THE PRODUCTION
METHOD THAT WILL BE USED TO
PRODUCE THE GOODS AND SERVICES.
THIS REFERS TO THE RESOURCE MIX
AND TECHNOLOGY THAT WILL BE
APPLIED IN THE PRODUCTION.
3. FOR WHOM TO PRODUCE –
IS ABOUT THE MARKET FOR THE
GOODS. FOR WHOM WILL BE THE
GOODS AND SERVICES BE
PRODUCED? THE YOUNG OR OLD,
THE MALE OR FEMALE MARKET, THE
LOW-INCOME OR THE HIGH-INCOME
GROUPS?
 ECONOMIC SYSTEM
1. TRADITIONAL ECONOMY

DECISIONS ARE BASED ON

TRADITIONS AND PRACTICES UPHELD
OVER THE YEARS AND PASSED ON FROM
GENERATION TO GENERATION.
METHODS ARE STAGNANT AND
THEREFORE NOT PROGRESSIVE.
2. COMMAND ECONOMY

THIS IS THE AUTHORITATIVE

SYSTEM WHEREIN DECISION-MAKING
IS CENTRALIZED IN THE
GOVERNMNENT OR A PLANNING
COMMITTEE.
3. MARKET ECONOMY

- MOST DEMOCRATIC FORM OF

ECONOMIC SYSTEM.
- BASED ON THE WORKINGS OF
DEMANDS AND SUPPLY, DECISIONS
ARE MADE ON WHAT GOODS AND
SERVICES TO PRODUCE.
 -PEOPLE’S PREFERENCES ARE
REFLECTED IN THE PRICES THEY ARE
WILLING TO PAY IN THE MARKET AND
ARE THEREFORE THE BASIS OF THE
PRODUCERS’ DECISIONS ON WHAT
GOODS TO PRODUCE.
 ASSESSMENT/SEATWORK
A. Identify which resources is referred to by the
following words.

1. Call centre agents

2. Production equipment
3. Marine resources
4. Entertainers
5. Technology
B. Described the type of economic system
characterized in each of the ff. Sentences.

1. Prices are based on the demand and supply.

2. Economy is stagnant, making use of practices in
the olden times.
3. It exist in primitive and backward civilizations.
4. It is the most democratic form of economic
system.
5. People have no freedom of choice in arriving at
decisions on what to buy.
C. Essay

As a student, what
is/are the importance,
why do we need to study
economics?
 CRITERIA
POINTS

CONTENT
7
CONCISENES/CLARITY
5
NEATNESS
3

TOTAL
15
 Why economics is important?

Economics will help the

students why there is a need for
everybody, including the
government, to budget and
properly allocate the use of
whatever resources are available.
 It will help one
understand how to make
more rational decisions in
spending money, saving
part of it, and even
investing some it.
 On the national level, economics
will enable the students to take a look
on how the economy operates and to
decide for themselves if the
government officials and leaders are
effective in trying to shape the
economy and formulate policies for
the good of the nation.
 SCIENTIFIC APPROACH IN THE
EMPIRICAL TESTING OF AN
ECONOMIC THEORY
Economics is the study that
attempts to explain how an
economy operates and how
the consumer attempts to
maximize his her wants
within limited means.
Using tools such as Logic, Mathematics,
and Statistics, the student needs to
approach the empirical testing of an
economic theory in a scientific matter.

1.State the propositions or conditions

that are taken as given and do not
need further investigation, as the
basic starting point of investigation.
2. Observed facts in connection with
the activity that we want to theorize.
3. Apply the rules of logic to the
observed facts to the determine
causal relationships between
observed factors and to eliminate
facts that are unnecessary and
irrelevant.
4. Establish a set of principles such
that formulated hypotheses may
be tested as to whether they are
valid or not.
5. Use statistics and econometrics
as empirical proof in testing the
hypotheses.
 Positive economics vs. Normative
economics
POSITIVE ECONOMICS
- deals with what is
 things that are actually happening such as
the current inflation rate, the number of
employed labor, and the level of GNP.
 is an overview of what is happening in the
economy that is possibly far from what is
ideal.
NORMATIVE ECONOMICS
refers to what should be
 that which embodies the ideal such
as the ideal rate of population growth
or the most effective tax system.
 focuses on policy formulation that
will help to attain the ideal situation
 Measuring the economy
GNP = C + I + G + ( X-M)
C – HOUSEHOLD AND INDIVUAL
CONSUMPTION
G – GOV’T EXPENDITURE ON GOODS
AND SERVICES INCLUDING LABOR
X - EXPORTS
I – INVESTMENTS
M - IMPORTS
Economics as an Applied Science

Applied Economics is the

application of economic theory and
econometrics in specific settings
with the goal of analyzing potential
outcomes. As one of the two sets of
fields of economics
( the other set being the core)
 it is typically characterized by the
application of the core, referring to
economic theory and econometrics, as a
means of dealing practical issues in fields
that include demographic economics,
labor economics, business economics,
agri. economics, dev’t economics,
education economics, health economics,
monetary economics, economic history
and many others.
 John Neville Keynes is
attributed to be the first to use
the phrase “ applied economics”
to designate the application of
economic theory to the
interpretation and explanation of
particular economic phenomena.
 We should be able to improve human
welfare among Filipinos by the investigation
and analysis of economic problems in the real
world.
Applying economic theory in our lives means
trying to address actual economic issues and
be able to do something about it.
The concept of scarcity and choice should
encourage us as individuals to help in our own
way to provide solutions to the country’s
economic problems.
Applied economics in relation to the Philippines
economic problems
A solid understanding of economic
principles and how they are applied in
real-life situations can serve as
significant tools to help address the
country’s economic problem.
 Understanding the existence of
scarcity can help Economics
students analyze how to maximize
the use of available resources in
order to overcome scarcity.
 Knowledge of economic
theories such as the Law of
Supply and Demand can help in
analyzing why prices are high and
what the government can do to
help bring down prices.
activity
1. Using a pie chart, show your regular
allowance for the week and how you
budget this for your school and personal
expenses.
2. If you were to advise the President of
the Philippines on how to cope up with
the issues on poverty and
unemployment to improve the lives of
the Filipino people, what would you tell
him and why?
 Sample weekly consumption

foods 1000

load 30

gas 250
19%

foods
load
gas
personal ( shampoo, deodorant,
colonged
16%

63% personal
( shampoo,
2% deodorant,
colonged 300

1580
 Assignment ( experiential activity)

Visit an area in your neighborhood

where mostly poor people live. This
should be people with incomes of 5,000
or less per month. Interview a family
about their weekly or daily expenses.
Identify what basic needs these people
normally cannot afford to buy.
( documented & recorded)
newspaper 1
each
APPLICATION OF DEMAND AND
SUPPLY

THE MARKET

A market is an interaction
between buyers and sellers of
trading or exchange.
It is where consumer buys and
the seller sells.
The goods market
is the most common type of market
because it is where we buy consumer
goods.

The labor market

is where workers offer services and
look for jobs, and where employers look
for workers to hire.
 There is also the financial
market which includes the stock
market where securities of
corporation are traded.
DEMAND
IS THE WILLINGNESS OF A
CONSUMER TO BUY A COMMODITY
AT A GIVEN PRICE. A DEMAND
SCHEDULE SHOWS THE VARIOUS
QUANTITIES THE CONSUMER IS
WILLING TO BUY AT VARIOUS PRICES.
SEASONS
WEATHER
CLIMATE
 Qd = 6 – P/2
Hypothetical Demand Schedule of Martha for
Vinegar( in bottles)

Price per bottle Number of Bottles

0 6

2 5

4 4

6 3

8 2

10 1
Income effect
is felt when a change in the
price of a good changes
consumers real income or
purchasing power, which is the
capacity to buy with a given
income.
 If the good become more
expensive, real income
decreases and the consumer
can only buy less goods and
services with the same amount
of money income.
Substitute effect
is felt when a change in the price of
a good changes demand due to
alternative consumption of substitute
goods.
The Law of Demand
Using the assumption “ ceteris
paribus,” which means all other
related variables except those are
being studied at the moment and are
held constant,
there is inverse relationship
between the price of a good and the
quantity demanded for that goods.
Non – Price Determinants of Demand

If the ceteris paribus

assumption is dropped, non-
price variables that also affect
demand are now allowed to
influence demand.
 These non-price factors include
income, taste, expectations, prices of
related goods, and population.

D = f ( P,T,Y,E,PR,NC)
P- PRICE
T-TASTE
Y-INCOME
E- EXPECTATIONS
PR – PRICE RELATED GOODS
 NC - # OF CONSUMERS

If consumer income
decreases, the capacity to buy
decreases and the demand will
also decrease even when price
does remain the same.
Improved taste
for a product will cause consumer
to buy more of that good even if its
price does not change.
Expectations
anticipate changes in the price of a
good.
Gasoline prices
Prices of related goods
as substitutes or complements also
determine demand.
complements are goods that are
used together.
Number of Consumers

is also an important determinant

that will affect market demand for a
good.
Price of Fish(per Kilo) Supply( in kilos)

20 200

40 300

60 400

80 500

100 600
SUPPLY
refers to the quantity of goods that
a seller is willing to offer for sale.The
supply schedule shows the different
the seller is willing to sell at various
prices.

Qs = 100 + 5P
Price of Fish( per kilo) Supply (in kilos)
20 200
40 300
60 400
80 500
100 600
The Law of Supply
Using the assumption” ceteris
paribus” ( other things constant)
there is a direct relationship between
the price of a good and the quantity
supplied of that good.
Shifts of the Supply Curved.

S =f(P, C ,T , AR)
P –price
C – cost
T- technology
AR- raw materials and resources
 Prices of Basic Commodities
Why is a kilogram of fruit
sold in the public market
typically cheaper than a
kilogram of the same fruit sold
at the supermarket?
What is commodity?

- this term as used in

economics pertains to a
homogenous good that
commands a price.
 Example would be grains such as rice,
corn; utilities such as electricity.

A commodity is characterized by its

uniformity across the market. For
instance it is hard to distinguish rice
grains that were harvested by a Farmer in
Isabela from grains that were produced
by a farmer in Davao.
 This is in contrast to branded products,
which can be highly differentiated. For
instance, one brand of hand soap may
differ from another in terms of ;

size, sent, ingredients and packaging.

In these distinctions that influence the
price of the product.
 Additionally,
Commodities are often used as
raw materials or inputs to
produce another good
( secondary products).
For example,
Wheat is used to make bread and
beer.
Inferior Goods – are goods that are bought
when incomes are low, because low incomes
prevent the consumers from buying higher
priced goods.

Normal Goods – is a good which a consumer

tends to buy more of when income increases.
Substitute Goods – are those which are used in
place of each other.
Complementary Goods – are goods
which are used together/ consumed
together.
- coffee & creamer
Luxury Goods -
Identify which of the ff. Goods are commodities(C) and which are the
secondary products(S). Write C or S.

1. Sugar
2. coffee
3. plastic
4. rubber cement
5. flour
6. timber
7. textile
8. corn
9. diesel fuel
10. gravel
____1. car and gas
____2. lemon and calamnsi a. Substitutes
____3. canned goods b. normal goods
____4. organic food c. complementary goods
____5. designer bags d. inferior goods
____6. generic supermarket e. luxury goods
products
____7. whole wheat pasta
____8. printer and ink cartridges
____9. margarine and butter
____10. vintage sports car
Elasticity of Demand and
Supply

the degree of their response to

change.
Elasticity
is a measure of how much buyers
and sellers respond to change in
market condition.
In terms of how responsive demand and supply
are, degrees of elasticity may either be:
1. Elastic – a change in determinant will
lead to a proportionately greater
change in demand or supply.
2. Inelastic – a change in a determinant
will lead to a proportionately lesser
change in demand or supply.
3. Unitary Elastic -a change in
determinant will lead to a
proportionately equal change in
demand or supply.
TAXES

TO REQUIRE A LOT
FROM( SOMETHING OR SOMEONE) :
TO PUT DEMANDS ON
( SOMETHING OR SOMEONE)
 TAX REVENUE AS % GDP
18
16.5
16.1
16
14.4
14 13.8
12.9

12

10
TAX REVENUE AS % GDP
8

0
KOREA SINGAPORE MALAYSIA THAILAND PHILIPPINES
ECONOMIC ICON

ALFRED MARSHALL ( July 26, 1842 – July 13,

1924) was one of the most influential
economist of his time.

He demonstrated an aptitude in mathematics

but experienced a mental crisis that led him
to abandon physics and switch to philosophy.
Indicate the effects of the given
statements on the demand and
supply of a good based on the
following outcomes.
a. Shift to the right
b. Shift to the left
c. No change
1. Well – received market innovation of a new cell phone;
Demand for cell pones ___________
Supply of cell phones ____________

2. Decrease in the price of good X;

Demand for good X ___________
Supply of good X _____________

3. Anticipated increase in general price level of basic commodities;

Demand for basic commodities ___________
Supply of basic commodities _____________
4. Government increases workers’ wages;
Demand for basic commodities _________
Supply for basic commodities __________

5. Increase in death rates due to calamities;

Demand for basic commodities _________
Supply for basic commodities _________

6. Migration of Filipinos to first world countries;

Demand for basic commodities _________
Supply of basic commodities ___________
7. New investments in the manufacturing of shoes;
Demand of shoes ________
Supply of shoes _________

8. New discovery of gold mines in the country;

Demand of gold ________
Supply of gold _________

9. Entry of sellers in the market for electronic gadgets;

Demand of electronic gadgets ________
Supply of electronic gadgets ________
10. Improved technology in the manufacture of appliances;
Demand of appliances _________
Supply of appliances __________
Contemporary Economic Issues facing the
Filipino Entrepreneur

Three factors of production;

 land
 Labor
 capital
 Entrepreneurship
Jean-Baptiste Say (1767 – 1832) , a
French economist, who came up
the word entrepreneur. He is
better known for his theory, the
Say’s law of demand, which states
that production drives demand.
 There is an ongoing debate
whether entrepreneurship
should be considered as a
factor of production?
 Some would argue that is a
subset of Labor or an example of
human capital.

For instance, entrep. Includes

more than providing work and
getting compensated with it.
 Whereas the return on
land is rent,
labor is wage,
capital is interest ;
and entrepreneurship is
profit.
What is the difference
between a
entrepreneurship to a
business owner?
For instance,
take the case of sole proprietors,
who are considered business owners.

While entrepreneurs can be sole

proprietors, not all sole proprietors
are technically entrepreneurs.
In addition;

- focus on spotting a gap in the

market or a business opportunity
and think of ways to exploit it.
INNOVATORS
 Entrepreneur tries to
come up with a new
product or service/s.

VISIONARIES
 Following on a trend and
creating a product similar to
an existing one typically
describes a business owner.
 ENTREPRENEURSHIP

Define entrepreneurship in your

own words.

Differentiate an entrepreneur
from an employee.
 Innovation Strategies of
Entrepreneurship
1. Creation of a new product or
service in response to a consumer
need.
2. Improvement of an existing
product
to keep up with evolving
consumer needs and preferences
while at the same time a new
market is created.(TV,CP etc...)
 Entrepreneurs do not only focus on
end consumers. Innovations can also
target businesses.

 business –to- business(B2B)

 business –to- consumers (B2C)
 Given a chance to put up
your own business, which
segment do you wish to
cater to: B2B or B2C?
Why?
 Disruptive Innovation
In a nutshell, innovation is the
core of successful
entrepreneurship. It is about
finding a niche market and
creating a product or service that
addresses a costumer need or
problem.
Innovations can further be
classified based on their impact.
 Revolutionary
 Disruptive Innovation
- which includes products and
ideas that totally break existing
market structures.
DISRUPTIVE INNOVATION
is defined as a process that, as
the name implies “ disrupts” or
change the structure of the
existing market. It creates a new
industry rather than just compete
with an existing one.
Analyze whether each of the ff. Items is
considered a disruptive innovation.

1.Digital Camera
2. Automobile
3. Credit card
4. Online shopping
5. Flash drive.
The Filipino Entrepreneur

DREAM..\..\..\..\..\Downloads\Ladder of Success - Motivational Video.mp4

FAIL
 Failure in any form is
never easy to accept. Some
have described the feeling
of failure from being
slapped in the face to
getting stabbed in the gut.
It is very painful feeling that
leaves even the most
powerful men helpless and
stripped of dignity.
 However, the ones who succeed are the
once who persevere. They acknowledge failure
not as a termination point but an educational
experience. It is a wake up call on what needs
to get done.
These entrepreneurs had three choices to make:

-fight
- Flight
- - freeze
F - FIRST
A - ATTEPMT
I - IN
L - LEARNING
 If you believe in your
dream, FIGHT for it.
If you believe in your vision,
FIGHT for it.
If you believe that success
is just around the corner,
FIGHT for it.
 Deciding to become an
entrepreneur is not enough.
You have to commit to it.
Whatever you do from that
moment on will have
repercussions on your life and
on those you love.
IMPOSIBLE!!!

I’M POSIBLE!
Ask yourself: Is your
life worth fighting
for?
We’ve been there before;
that stolen moment in a day when
we find ourselves daydreaming of
owning a business. Perhaps we were
motivated by an epiphany that
whatever we do, we’ll always be
wage earners. Our boss will always
make more money than us.
 Regardless of the reason, everyone
wants to own a business. However, not
everyone is willing to put in the time,
resources, and effort to manage one.
Once a daydreaming starts and the
reality of business and its inherent risks
hits home, most budding entrepreneurs
remains as they were: daydreamers.
 Entrepreneurship requires
special kind of person;
someone who is willing to risk
it all for the fulfilment of a
dream, risk takers.
They want to be in the
driver’s seat all the time.
They take chances but do not
mistake their risk-taking nature
as that of gamblers.

Difference between gamblers

and Entrepreneurs?
Entrepreneurs take calculated
and educated chances.
Gamblers are reckless, have no
discipline, and usually give to
their weaknesses.
 If an entrepreneur is a
special kind person, what then
is a successful entrepreneur?
 Blessed?
 Lucky?
 Kissed by God?
A successful entrepreneur is all
that and more!

Be inspired to the stories from

t10 of the most successful
entrepreneur of the
Philippines.
1.Whose story inspired you the most?
Why?
2.What common traits of the successful
Filipino entrepreneurs did you
observe?
3.Identify the type of market
structure( perfect, monopolistic,
oligopolistic, monopoly) of each of the
business ventures.
 Government and Support
The DTI governs entrepreneurship and
business in the Philippines. The agency is in
charge of business registrations and policies. It
regularly hosts programs on regional and
national levels that aim to educate and
encourage Filipinos to put up a business.
Republic Act # 10679, aka the Youth
Entrepreneurship Act, was passed July
2015.
The act aims to support the development
of young individuals
( 18 to 30 yrs old) in the fields of finance
and entrepreneurship by integrating
financial literacy and entrepreneurship
programs in education curriculums.
 The Philippine Centre for
Entrepreneurship (PCE) is a non profit
organization that advocates
entrepreneurship in the country. It is more
commonly known its program called”
GoNegosyo.” Like the DTI, the PCE
organizes events and seminars that target
current and potential entrepreneurs and
provide support to business ventures with
high potential.
Types of Business Structures
 Sole proprietors
- refers to a business having a single
owner. The owner and the business
are taken as the same entity, which
means the profit of the business is
also the income owner.
 Partnership
- refers to a business having
more than one owner. The
owners and the business are also
considered as one entity, but the
profit of the business is divided
among the partners.
 Corporation
- refers to a business type where
the owner and the business are
considered as separate entities.
Because the ownership varies, the
profit of the business is not
equivalent to the owner’s income.
The owners f the publicly traded
corporation are its stockholders.
 Additionally, a conglomerate
refers to two or more
corporations under the same
ownership or parent company.
 New Business Registration

DTI – Register business name

Barangay – Secure Barangay clearance
Municipality – Get a business permit
BIR – Apply for tax(TIN)
SSS – Apply self employed owner
Issues and Challenges Facing the
Filipino Entrepreneur

INVESTMENTS
INTEREST
FINANCING
Financing a business idea is a common issue
that hinders individuals from taking the
entrepreneurial route. Where will they get
money to make a prototype and conduct
research and experiments?

Grants and loans may be awarded to qualified

individuals under the Youth Entrepreneurship
Act. But for those who are ineligible, an
entrepreneur has to decide how to finance his
or her idea.
An entrepreneur can choose from two sources
of financing.
 The first options is to personally bankroll the
idea or use one’s own funds.

The fund may came from the entrepreneurs

saving, loans from family members or personal
securities investsments.
This includes taking out personal loans from
banks.
The second option open to
entrepreneurs is through external
financing.

External financing refers to sourcing

funds from third party investors who
are willing to provide the required
capital in exchange for a share in the
ownership of the idea.
Crowdsourcing – is a term that
describes solicitation of funds
and outsourcing services or
ideas to people via Internet.
Rent
- For business that require a physical store,
rent is one of the highest costs that drive down
the operating income.
Business rent is driven by several factors such
as ever- increasing real estate prices, location,
foot traffic among others.
Entrepreneur must decide on the most
strategic location to put up his or her business
to maximize potential returns.
Minimum wage
- Another factor that drives up a
business’ operating expense is wage.
Higher wage rates translate to lower profit
because the companies have to pay
workers more.
Taxes

How does tax affect entrepreneur?

In the financing stage, a higher income tax means

less disposable income available for the business. Then
once a business is in operation, there are local and
national taxes to settle.

Local taxes are typically paid at the city or municipality

of operation, while capital gains tax is paid in the
regional district office of BIR.
The most common business taxes
paid by entrepreneurs are:

 percentage tax
VAT
 capital gains tax
 income tax
 Percentage tax
is paid by entities that are exempt
from VAT, with gross annual sales not
exceeding a limit prescribed by the
BIR, and subject to additional
guidelines. Specific industries and
businesses have varying percentage
tax rates that range from 3% to 15%.
VAT
is a tax on sale, lease, and importation
of goods and services and is subject to
additional guidelines. The VAT rate is
currently at 12%. Businesses are required
to disclose VAT breakdown of purchases
so you will see this on official receipts.
Capital gains tax
is imposed on the sale of
capital assets such a real estate
properties and stocks. Real
estate tax is at 6% while tax on
gains from the sale of stocks
rates range 55 to 10%.
Income tax
is the most common tax filled by
employed and self employed
individuals or those who derive
their income from business or
professional practices. Income tax
rates 5% to 32%.
BIR Computation
GOODS

VAT
(Gross/1.12) x 5% = tax
( Gross/1.12) x 1% =tax
 Non-Vat
(Gross/1.12) x 3% = tax
( Gross/1.12) x 1% =tax
SERVICES

 VAT
(Gross/1.12) x 5% = tax
( Gross/1.12) x 2% =tax

 Non-Vat

(Gross/1.12) x 3% = tax
( Gross/1.12) x 1% =tax
Reflection

How do you feel about the tax

system in the Philippines?
What do you think could be
improved on the system?
How do you propose to improve
it?
 Factors of Production

Circular flow diagram

Is an economic model that
illustrates the flow of factors of
production in the economy.
 Basic Circular Flow Diagram

Factor Income

Factor input

Firms
Households

Goods& Services

Payments(profit)
 Households provide factor
inputs to firms in exchange in the
form of wages, rent and
dividends.
Firms provides goods and
services to households in
exchange for profit in the form of
payments for the goods and
services
The production possibility frontier or
PPF( also called production possibility
curve) is an application of the
concept of allocation of resources
and factors of production.
 Production Possibility Frontier

D
A
Consumer Goods

B
C
PPF
PPF

Capital Goods
 Points along PPF(points A and B)
signify efficient allocation of available
resources. Any point inside the curve(
point C0 means inefficient use of
resources and any point outside the
curve (point D) signifies economic
situation because resources are
insufficient
 Methods Used in Economic Analyses

Qualitative approach
- to economic data analysis focuses on
directional relationship of different economic
variables.
- this is often used interchangeably with
descriptive analysis.
An example is;
Interest and price relationship
 when economists say that interest
rate is inversely related to price, they
are citing an example of descriptive
analysis.
This statement shows whether
there is a correlation between
variables, but it does not provide the
exact degree of correlation.
Quantitative Approach
- on the other hand, involves
mathematical and statistical
analysis of economic data.

-It complements qualitative

analysis by providing the figures
that support the descriptive
findings.
 - Qualitative analysis is used in
different tools used extensively in the
study of economics are variables,
equations and functions and graphs.
- These tools are used to illustrate
economic theories and support
economic models.
 Quantitative analysis is used in
different disciplines such as physics
and finance. The mathematical and
statistical analysis of economic data is
sometimes referred to as
ECONOMETRICS
 In terms of judgement, economics can
be categorized into either normative
or positive.

Normative economics
- evaluates economics
decisions, policies, or outcomes
as good or bad.
 It is based on opinions and is
subjective. For instance, asking
you to provide your opinion on
whether the Philippine
economy is doing good or not is
normative economics.
Positive Economics
- on the other hand, evaluates
economics scenarios and policies based
on qualitative and quantitative analysis.
- This makes positive economics factual
and objective. An example is observing
Philippine economic growth based on
data for the past three quarters
Analyze and evaluate the statements, N if
Normative and P if Positive economics.

1. Low income class should receive free

hospital care.
2. Lowering the cost of borrowing will
encourage people to borrow.
3. Employees should pay less in taxes.
 MACROENVIRONMENT ANALYSIS
What is Macro environment Analysis?

- deals with factors that may affect

several or all industries in the
economy.
- while industry analysis deals with
factors that may impact only in the
industry under study.
 Many factors impact the success
of a business. Organizations that
understand these factors can take
actions to minimize their negative
effects and take advantage of
potential opportunities.
 All external forces that influence
organizations are referred to as macro
environmental factors. These are the
events which firms in industries have
no control over.
In contrast to macro environment
forces, internal factors impact only a
certain industry.
 Industry analysis tools are widely
used by businesses to strategize
and gain competitive edge over
their competitors.
Industry analysis is the focus of
the next module.
Tools in Macro environment Analysis and
Business Opportunity Identification

Macro environment factors are

further categorized into one of the
following: political, economic,
social, technological, legal and
environmental factors.
 These categories make up the PESTLE approach to macro
environment analysis.

P Political Tax Laws; fiscal policy; other gov’t rules and actions

E Economic GDP; inflation and prices; interest rate; forex; other economic
indicators

S Social Demography; lifestyle change and other trends

T Technological Technological advances; research and new development ; new

processes

L Legal New and updated business requirements

E Environmental Environment regulations; resource constraints; climate change

Political Factor
-pertains to government rules, laws,
and fiscal and policy changes that
influence an industry or organization.
- some government regulations
directly restrict an industry or a
business operation.
 Common political forces that
influence the macro environment
of an industry or a business include
tax reforms and other fiscal
policies, trade agreements, political
stability, new government
regulations, among others.
Tax Reforms
refer to revisions on the implementation and
collection of taxes. These include increasing and
lowering of existing tax rates as well as
implementation of new ones.
more concrete example of a tax reform is the
implementation of sin taxes in the Philippines.
Sin tax is an example of excise tax imposed on
goods considered as vices such as alcohol and
tobacco.