ABM 007 Applied Economics

Day 11
Labor: Amount
-physical
-mental
-social

Labor supply: Number of hours

8 hours- Normal
9 above - overtime

Population growth
A. Increase in population, increase in supply of labor

Labor supply
A. Increase in supply of labor, surplus of worker at the original wage

Wage
A. Decrease in supply of labor, shortage of workers at the original wage

Day 12
International Labor migration
- permanent residency
- temporary labor migration

Origin - Philippines
Destination - Abroad
OFW by the numbers 2015
2,400,000 OFW
97.1% with existing contract
Saudi Arabia - Top destination

Top 3 share of OFW

Calabarzon 17.9%
Central Luzon 15.1%
NCR 11%

183 Billion Remittances sent by OFW (Apr-Sep 2015)

Filipino laborers had begun much earlier, as early as the 1900s when Filipino agricultural
workers were recruited to Hawaii to fill temporary labor needs in the agricultural sector
Filipino laborers later moved to other parts of the US to work in downtown hotels and
restaurants, sawmills and railroads construction, in California's agricultural plantations, and in
Alaska's canning industry

When the second world war ended in 1945, some Filipino military servicemen became American
citizens after serving in the US army. Many medical professionals, nurses, accountants,
engineers and other technical workers also began migrating to the US after the war

In the 1950s to the 60s, non-professional contact workers went to neighboring Asian countries as
artists, barbers, and musicians in East Asia and loggers in Kalimantan, Indonesia. However, the
active and systematic migration of Filipinos for temporary work came in the 60s when the US
government and contractors of US military and civilian agencies recruited Filipinos to work for
construction and service-related jobs in certain areas of the Pacific and Southeast Asia such as in
Vietnam, Thailand, Japan, Wake Island and Guam
Later more Filipino medical workers, physicians and nurses sought employment in the US,
Canada and Australia, prompting the Philippine government to issue the new labor code in 1974
that covered Filipinos working overseas

Filipino engineers and skilled construction workers were recruited by multinational companies
with projects in the oil-rich countries in the middle east which experienced an economic boom at
that time. This organized system for migration of Filipino workers paved the way for the
deployment of millions of Filipinos all over the world up to the present time

Activity
A. Loss of highly trained people
B. Developing countries benefit from remittances (payment sent home by migrants)

Day 13
Currency - Generally accepted form of money
Exchange rate - value of one currency to another

Appreciation - increase
Depreciation - decrease

Example
Lower increase in prices of goods - appreciation

Appreciation of currency is the rise in market value of that currency over time relative to its
historical value or other currency

Depreciation of currency is the decrease in market value of that currency over time relative to its
historical value or other currency

This value of Philippine peso affects our purchasing power in relation to other currencies
Purchasing power measures, the value of goods that can be bought with a specific amount of a
currency

As one nation's currency devalues against another, goods in the second country will be higher in
the first country's currency. This fact in itself does not necessary affect purchasing power for
domestic purchases, but businesses that rely on suppliers in the second country can experience
dramatic price increases for imported goods
These businesses may pass their higher costs on to consumers, contributing to inflation (rise in
prices of goods) and diminished domestic purchasing power

Here are the factors that influence fluctuations on exchange rates

 Inflation
 Interest rates
 Speculation
 Change in competitiveness
 Relative strength of other currencies
 Balance of payments
 Government debt
 Government intervention

Day 14
Economic rent is an excess payment made or to or for a factor of production over the amount
required by the property owner to proceed with a deal. For example, a buyer, working to attain a
good or service that is considered exclusive, makes an offer prior to hearing what a seller
considers an acceptable price

Housing storage is present when there is insufficient housing to accommodate the population in
an area, when the supply of houses cannot meet the demand

Supply < demand

Four common types of houses in PH

Bungalow is a single-story home means that living area, dining area, kitchen, bedroom,
bathroom is all on the same floor

Multi story house a structure with two or more floors

Townhouse - sometimes referred to as an apartment; is a part of row of other townhouses. It can

sometimes share a common roof, wall, parking area, and other outdoor spaces with other
townhouses

Condo unit - a home within a mid-rise or high-rise residential building usually found in big cities

Title to real estate normally includes title to air rights, mineral rights and surface rights which
can be bought, leased, sold or transferred together or separately. Also called real property

The Philippines has a chronic housing storage. The rapid increase in the urban population
produces an enormous demand for shelter and tenure security. But with prohibitively expensive
lands and high rents in urban areas amidst stagnating real incomes, it is not unusual for cities to
have huge numbers of families living in various types of unauthorized housing units with
insecure tenure. Market values of residential lands in metro Manila, for example, range from
php3,000 to as high as php42,000 per square meter, far beyond the incomes earned by the
majority of the urban poor. But because people need to live in areas where economic
opportunities, including formal activities, are present, it becomes expedient for most of them to
occupy idle lands owned by government or the private sector

This housing problem is being addressed through many separate government initiatives, the most
recent of which is the development of "social housing" these are low-cost housing targeted at low
income groups and built for private ownership. Floor areas in this type of housing are in the 20-
25 sqm range and construction costs are budgeted at php 450,000 per unit in areas with higher
land values and php 250,000 per unit in areas with low land values
Philippines has a chronic housing shortage
 Rapid increase in the urban population
 Stagnating real incomes
 Far beyond the incomes

Housing shortage - insufficient housing

Consumer goods
Goods that are used by the end user for consumption is called consumer goods
Bought for personal consumption
Consumer

Capital goods
Goods that are deployed to produce consumer goods is called capital goods
Bought for making other products
Manufacturers

Capital goods and investment goods are the same

The interest rates measure the percentage of reward a lender receives for deferring the
consumption of resources until a future date. Correspondingly, it measures the price a borrower
pays to have resources now.

Investment can be in either

Physical capital - machines, plant
Human capital- better education to increase labor productivity
Significance of investment
Domestic expenditure
Enlarges the production base
Modernizes
Reduces, higher productivity
New and improved products
Incorporates

Day 15

Ambitious - vision
Self-confidence - believe
Adoptable - think
Humble - ego
Hardworking - long hours
Persuasive - sell
Comfortable with risks - making decisions
Unwavering passion - tough days but keep on going

 Responsibility
 Insights
 Safety
 Knowledge

Business man is someone who sets in a business with an existing idea offering product and
service to the customers
 Less
 Traditional
 Very high
An entrepreneur is a person who starts an enterprise with a new idea or concept, undertaking
commercial activities
 Comparatively high
 Creative
 Low

In economics, the entrepreneur is considered as the most important factor of production, which
assembles and mobilizes the other three factors of production i.e. land, labor and capital. In the
long run, these entrepreneurs become a businessman

Risk implies future uncertainty about deviation from expected earnings or expected outcome.

10 types of risk every entrepreneur must battle

 Competitive risk- the risk of a business facing competition from its rivals
 Technological risk - includes change in technology that are taking place at a rapid pace.
 Political and legal risk - includes the changing political scenario including the changes in
laws and regulations
 Economical risk - includes the changes in the cycle that includes periods of high
prosperity and recession
 Financial risk - the risk of a business running out of finances
 Employee risk - risk of a key employee deciding to switch or not reporting to work on an
important day
 Strategic risk - the risk of strategy failing
 Health and safety risk - it is the duty of the businessperson to provide the right
environment to its employees so that they do not have to face any kind of health hazard
 Environmental risk - include natural disasters like flood and drought
 Operational risk - the risk associated with administrative procedures

Characteristics of an entrepreneur
 Strong need to achieve and seek personal accomplishment
 Accept personal responsibility for successes and failures
 Believes in ability to achieve goals
 Self-confident and self-reliant
 High drive and energy levels
 Strong sense of commitment
 Willing to take calculated risks
  Innovative, creative and versatile
 Hardworking and energetic
 Tolerates uncertainty
 Spirit of adventure
 Independent
 Responsible
 Goal oriented
 Persistent
 Positive attitude
 Takes initiative

Day 17
Consumer goods
 Goods that are used by the end user for consumption is called consumer goods
 Bought for personal consumption
 Consumer

Capital goods
 Goods that are deployed to produce consumer goods is called capital goods
 Bought for making other products
 Manufacturers

Capital goods and investment goods are the same

The interest rates measure the percentage of reward a lender receives for deferring the
consumption of resources until a future date. Correspondingly, it measures the price a borrower
pays to have resources now.

Investment can be in either

 Physical capital - machines, plant
 Human capital- better education to increase labor productivity
Significance of investment
 Domestic expenditure
 Enlarges the production base
 Modernizes
 Reduces, higher productivity
 New and improved products
 Incorporates