Functionalist Perspective

- views economic institutions as vital

component of society because it is involved in the
production, distribution, and purchasing of goods
and services that are essential for survival.
Conflict Perspective
- on the other hand, argues that economic
institutions emerged in order to benefit the ruling
classes group.
Nonmarket Institution

Reciprocity
- exist when there is an exchange of goods
or labor between individuals in a community.
Transfer
- on the other hand, entails a
redistribution of income that is not matched
by actual exchange of goods and service.
 Redistribution
- can be considered as combination of the
features of transfer and reciprocity, where the
economic exchange involves the collection of
goods from members, the pooling of these goods,
and then the redistribution of these good among
the same members.
 Market Institution
Market System
- a type of economic system that allows the
free flow of goods between and among private
individuals and firms with very limited
participation from the government.
Invisible hand
- integrates both the idea of self-interest and
competition in the market place, which brings
about a socially optimum result even in the
absence of government intervention.
 Market
- is a mechanism and not necessarily a place
which brings buyers and sellers together for a
desired transaction.
Specialization
- is another requirement for a market economy.
State-Market Relationship

State
- plays an important role in the market.
- through government, it comes in to
regulate the prices to protect the interest of
the consuming public.
Labor
- termed as a producer good, since it is an
input to the production of goods and service.
 Command economy or Socialist economy
- it is when the government takes over the
functions of the market in producing and
distributing essential goods and service.

The profit motive is also rejected in a socialist

system. It is seen as a means of exploiting labor.
 Tax
- the primary instruments used by governments
to redistribution income.
Transfer Payments
- are government spending on the private sector
that does not require the absorption or utilization
of economic resources.
International Trade

Sovereign nations
- stand to gain from international trade by
specializing in the production of commodities
they can produce with relative efficiency, and
by trading with other countries for the goods
and commodities that they cannot produce
as efficiently.
 Tariffs
- taxes on imported goods.
Qoutas
- the limits set on the quantity of imported
goods that can enter a domestic economy.
 General Agreements on Tariffs and Trade (GATT)
- is a multilateral platform of negotiation
among participating nations, which embrace the
principles of equal, non-discriminatory trade
treatment for all member nations, the reduction
of tariffs, and the elimination of all import
quotas.
World Trade Organization
- oversees trade agreements undertaken by its
member nations and also resolves trade disputes
among them.