ECONOMIC

INSTITUTIONS
 How do we interact
with each other in the
domain of production
and the exchange of
goods and services?

What are the

impacts of these on our
lives as members of
society?
ECONOMIC INSTITUTIONS
As individuals interacting in a social community,
the process of production distribution, and
consumption is manifested in economic institutions,
which refer to the processes where we engage with
each other as producers and consumers of goods and
services. It is therefore important to understand these
economic institutions.
A company or an organization that deals with
money or with managing the distribution of money,
goods, and services in an economy. Examples are
banks, government organizations, and investment funds
A. NONMARKET INSTITUTIONS
Refers to internal and
external organizing and
correcting factors that
provide order to market and
other types of societal
institutions and
organizations—economic,
political, social, and
cultural—so that they may
function efficiently and
effectively as well as repair
their failures.
 In social psychology,
1.RECIPROCITY reciprocity is
a social rule that says people
should repay, in kind, what
another person has provided
for them; that is, people give
back (reciprocate) the kind of
treatment they have received
from another.

By virtue of the rule of

reciprocity, people are
obligated to repay favors, gifts,
invitations, etc. in the future.
 This sense of future obligation
associated with reciprocity makes it
possible to build continuing
relationships and exchanges.
Reciprocal actions of this nature
are important to social psychology
as they can help explain the
maintenance of social norms.
 2.TRANSFER
1. Banking: Moving funds among
two or more accounts held by the
same or different entities.
2. Real estate: Conveyance of
title to a property from the seller
to the buyer through a deed of
transfer, following payment of
the price.
3. Securities trading: Delivery
of a stock (share) certificate
by the seller's broker to the
buyer's broker followed by
conveyance of the title by
recording the change in the
stock (share) register.
3. REDISTRIBUTION
Can be considered as
combination of the features of
transfer and reciprocity.
In Economics the theory,
policy, or practice of lessening
or reducing inequalities
Income for example through
such measures like
progressive taxation and anti
poverty programs
B. MARKET INSTITUTIONS
Is one of the
many varieties of
systems,
procedures, social
relations and
infrastructures
whereby parties
engage in
exchange.
1. 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.
 Another principle
associated with the
market system,
integrates both
idea of self-interest
and competition in
the market place.
3. SPECIALIZATION
Is another
requirement for a
market economy,
ability to produce
goods and
services
efficiently.
 4. MARKET
TRANSACTIONS
Involves parties who sell their
goods and services in exchange for
cash from consumers.
The exchange of goods and
services through a market. The set of
market transactions taking place in
the economy is most important in
terms of measuring gross domestic
product (GDP).
Market transactions provide the
basic data used at the Bureau of
Economic Analysis to begin the
estimation of GDP.
 C. STATE-MARKET
RELATIONSHIPS
Call for a holistic view
of the relationship
between the material
and relational dynamics
of society,
On the one hand, and
between these dynamics
and institutional
dynamics on the other.
 The state contains mechanisms
that are essential to the existence of
markets themselves, and these
mechanisms are not “natural” given.
Economies are actually
institutional production systems
wherein the material density of the
state both as organization and
administration is of relevance.
D. INTERNATIONAL TRADE
Economic institutions are
not only confined to one
specific territory or
geographic location.
International trade
benefits nations because it
enables economies to employ
its resources in ways that
increase its total output.
 The imposition of trade
barriers by one nation may also
result in retaliation of trade
barriers of its own by another
nation.
GATT General Agreements
on Tariffs and Trade
WTO World Trade
Organization
I. KNOWLEDGE QUIZ #4
COMPLETE THE CROSSWORD PUZZLE BELOW.
Across
2. An economic system that allows the free
flow of goods between and among private
individuals and firms with very limited
government participation
5. A type of economic system where the
government takes over the functions of the
market in producing and disturbing essential
goods and services
6. Tax on imported goods
7. The granting of mutual concessions among
different countries with respect to
commercial trade restrictions
9. The limit set on the quantity of imported
goods
10. A political body that exercises legitimate
control over the use of form within its
territory
Down
1. A signaling device that indicates the value of the
good or service of both buyers and sellers
3. Government spending on the private sector that
does not require the absorption or utilization of
economic resources
4. Normally levied on workers’ income, business
profits, and consumption of goods and services in
order to raise revenues
8. Retaliatory escalation of traffics and quotas that
reduce the world total output.