6. Industrial sector
•Expansionary in nature
•Motive: to maximize
profit by charging a
price higher than
the wages
•Industrial wages serve
as incentives for labors
to migrate
7.
8. PRODUCT POSSIBILTIES FRONTIER
- is an economic model used to illustrate
how people and nations should decide
WHAT, HOW MUCH, and FOR WHOM.
PRODUCT POSSIBILTIES CURVE
- illustrates all the possible combinations
of how we can produce these two goods
given the constraints
9.
10. - Is the maximum amount
that can possibly be
produced of both goods
given the level of
resources.
- An economy that
operates at the frontier
has the highest standard
of living it can achieve. It
is producing as much as
it can using the same
resources.
12. SHIFT OUTWARDS
- when economy GROWS,
ceteris paribus, we can
produce more
- increased output
SHIFT INWARDS
- when economy SHRINKS,
ceteris paribus, we can
produce more
- decreased output
13. BASIC IDEA
- anything that causes
economic output to
increase or decrease will
shift this curve.
MAJOR GOAL: GROWTH
- producing increasing
amounts of the goods
and services that
consumers demand.
14. The Production Possibility Frontier Concept
•Land is a precious commodity that can only
expand through conversion of natural
resources (forests and mountains, and
coastlines)
15. The Production Possibility Frontier Concept
The advantages:
•Maximize the use of
resources
•Expansion of the
Frontier
•Employment
Generation
16. The Production Possibility Frontier Concept
The disadvantages:
•Environmental Issues
(forest destruction,
floods, and pollution)
•The Economic Cost of
Development both
on government & social
(very substantial)
17. The Production Possibility Frontier
•Food shortages
- the Metro Manila Urban
Development
- Cebu Urban Development
- Davao Urban Development
18. The Production Possibility Frontier
Social Effect in these three
Urban Centers
•Traffic
•Floods
•Housing
•Increase in the Prices
of Land
19. The Production Possibility Frontier
•Government’s
Budget
•Urban Centers get
a substantial
budget allocation
due to its
population
20. The Production Possibility Frontier
•Metro Manila Population
as of 2016
• 2015 Census P12.8
Million (this swells to
about 15M in
daytime); world’s most
densely populated city
with 42,857 people per
square kilometer
21. Production Possibility Frontier (continued)
• Cebu Estimates for 2018
• 2018 estimates 958,225 from
922,600 from 2015
• Cebu City 922,600; Lapu-Lapu
408,112 and 362,654 Mandaue
City
Total Population (excluding other
cities and municipalities in Metro
Cebu) is 1,693,366
22. Production Possibility Frontier (continued)
• Davao Estimates for 2018
• 2018 estimates 1,754,203
• Population density is
593/sq. km. (Davao city is
the largest city in the world
in terms of land area)
• The 3 Urban Centers has a
population of 18,447,569
(estimate)
23. How Does Government Address The Problem
Government concerns
in the Urban Centers
are As Follows:
• Infrastructure (due to
the high population in
the urban centers,
people demand better
facilities to decongest
over crowded
infrastructure.)
24. How Does Government Address The Problem
Government concerns in the Urban
Centers are As Follows:
• To avoid social issues, government
need to budget a chunk of
government expenditures to the
urban centers (the build build and
build program’s main focus) in
Metro Manila, to decongest traffic
and to improve port and airport
facilities
25. How Does Government Address The Problem
Government concerns in the
Urban Centers are as follows:
• As government continue to
spend in Urban Centers, work
opportunities are available
and people from the
provinces migrate to the
Urban Centers.
26. How Does Government Address The Problem
Government concerns in the Urban Centers are As
Follows:
•To facilitate migration from the provinces, more and
more agricultural lands are converted to subdivisions
27. How Does Government Address The Problem
• Land conversions become
attractive to the landowners
as earnings resulting from
the conversion is
substantially higher than
agriculture activities (rice
and other products)
• This is reflected in the
Production Possibility
Frontier concept
28. How Does Government Address The Problem
• In the Southern Luzon and Northern Luzon, lands are being
converted into subdivisions and commercial establishments;
this is the same situation in Cebu, Davao and even Negros
Occidental
• This phenomenon further results to Urban Migration
29. How Does Government Address The Problem
•In Negros Occidental the land
conversion has resulted to:
• Scarcity of farm laborers in the
sugar industry
• Lower sugar production every
year for the last 4 years
30. How Does Government Address The Problem
•In Negros Occidental
the land conversion
has resulted to:
•Over crowding in
the Urban Centers
as workers migrate
to Bacolod.
31. How Does Government Address The Problem
•In Negros Occidental the land
conversion has resulted to:
•Rice Production has
declined as a result of the
conversion
•Squatter areas emerge due
to the lack of affordable
housing
•The social problems
continue to rise
32. The Structural Change Model
• GROWTH of a DEVELOPING COUNTRY in terms of
LABOR TRANSITION and between 2 SECTORS
(dual economy).
35. Industrial sector
•Expansionary in nature
•Motive: to maximize
profit by charging a
price higher than
the wages
•Industrial wages serve
as incentives for labors
to migrate
“Two Truths and a Dream Wish.” – An interesting variation of Two Truths and a Lie is “Two Truths and a Dream Wish.” Instead of telling a lie, a person says a wish. That is, something that is not true — yet something that the person wishes to be true.
My name is Aira
I hate cats
I love dogs
The theory focuses on the mechanism by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanized and more industrially diverse manufacturing and service economies.
The assumption that productive resource such as land is limited
As a result, the use of land should be maximized to the highest returns that it could give to the owner and the community as a whole
Surplus of profit generated will be reinvested to be used as capital so there will be capital accumulation.
NEXT SLIDE: let us first review the PPF before going deeper.
The production possibilities frontier (PPF) is an economic model used to illustrate how people and nations should decide what goods to produce, how much to produce, and for whom they should produce it. It's a model and a concept that looks at only two goods at a time.
The production possibilities curve illustrates all the possible combinations of how we can produce these two goods given the constraints we have, including the fact that resources are scarce. The question we're answering in this lesson is, 'What causes the production possibilities curve to shift?'
Shape: All the points in between are a trade-off of some combination of the two goods. An economy operates more efficiently by producing that mix.
How it affects the economy: The curve does not tell decision-makers how much of each good the economy should produce. It only tells them how much of each good they must give up if they are to produce more of the other good. It is up to them to decide where the sweet spot is.
Let’s differentiate:
The production possibilities frontier (PPF) is an economic model used to illustrate how people and nations should decide what goods to produce, how much to produce, and for whom they should produce it. It's a model and a concept that looks at only two goods at a time.
The production possibilities curve illustrates all the possible combinations of how we can produce these two goods given the constraints we have, including the fact that resources are scarce.
Example:
Shape: All the points in between are a trade-off of some combination of the two goods. An economy operates more efficiently by producing that mix.
How it affects the economy: The curve does not tell decision-makers how much of each good the economy should produce. It only tells them how much of each good they must give up if they are to produce more of the other good. It is up to them to decide where the sweet spot is.
Let’s go back to the definition
Other definition: The production possibilities frontier shows the productive capabilities of a country. A production possibility curve even shows the basic economic problem of a country having limited resources, facing opportunity costs and scarcity in the economy.
it’s production possibilities frontier shows the situation in which a company is producing goods/services most efficiently to use resources the best possible way, in light of limited production capabilities. This allows the country’s limited resources to be allocated most efficiently and completely.
In other words…
Scarcity, choice and opportunity cost in one picture.
Selecting 1 alternative over the other is opportunity cost. Economists use PPF to illustrate the trade-offs that arise from scarcity.
The next question is, 'What causes the production possibilities curve to shift?'
Given the fact that resources are scarce, we have constraints, which is what the curve shows us.
When the economy grows and all other things remain constant, we can produce more, so this will cause a shift in the production possibilities curve outward, or to the right. If the economy were to shrink, then, of course, the curve would shift to the left.
When the curve shifts outward, or to the right, that means output is increasing. When the curve shifts inward, or to the left, that means output is decreasing.
Shifts in the production possibilities curve are caused by changes in these things:
• Advances in technology
• Changes in resources
• More education or training (that's what we call human capital)
• Changes in the labor force
The basic idea is that anything that causes economic output to increase or decrease will shift this curve. In any economy, the major goal that you're trying to achieve is growth, which is to say, producing increasing amounts of the goods and services that consumers demand.
The basic idea is that anything that causes economic output to increase or decrease will shift this curve. In any economy, the major goal that you're trying to achieve is growth, which is to say, producing increasing amounts of the goods and services that consumers demand.
Lets apply further…
The crucial question is whether the push for more infrastructure will raise economic growth and people’s well-being.
It could—but only if the focus is on quality and impact and not on the quantity and volume of investment.
Economic policymakers assume that infrastructure—energy, transport, communication, irrigation, and water supply— propels economic output.
The direct effect is raising the productivity of land, labor, and other physical capital. For example, steady supply of electricity reduces disruptions and time wasted at the work place.
It complements the contributions of education, health, marketing, and finance.
Rural-urban migration
In developed countries like UK, France or Germany, that migration started in the 19th century during the Industrial Revolution
Camella
Rural-urban migration
Migration puts an unavoidable strain on urban land, housing and other civic amenities, and will eventually lead to growth of slums.
Studies have concluded that rising migration is likely to result in unplanned growth in cities and towns of both states and called for developing and strengthening support infrastructure and services.
Migrants will face risks created y weak institutional governance and will be at the mercy of the local administration or their employers for sustaining a livelihood in urban areas.
The DAR noted that Negros Occidental and Misamis Oriental, known for vast sugarcane and coconut plantations, respectively, were among the top 10 provinces with the biggest number of conversions.
If not properly addressed, the rapid urbanization across the country could pose major challenges to land management and economic growth.
This could lead to “congestion diseconomies” in which a lack of coordination between urban growth and land development could drive prices of land and demand for housing higher, according to a study on urban land constraints by Makiko Watanabe, senior social development specialist at the World Bank.
Watanabe presented the study at a conference on sustainable land governance in Manila on Feb. 8.
The theory focuses on the mechanism by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanized and more industrially diverse manufacturing and service economies.
The assumption that productive resource such as land is limited
As a result, the use of land should be maximized to the highest returns that it could give to the owner and the community as a whole
Surplus of profit generated will be reinvested to be used as capital so there will be capital accumulation.
NEXT SLIDE: let us first review the PPF before going deeper.
COMPLICATED VERSION
Simple version
TP will increase because:
More capital – hire more laborers
More capital – will increase labor productivity
If shown in graph:
-Marginal product of labor = LINE
-2 wage rate = W, W1
What stimulates owners to reinvest?
-it comes from thra rate of profit that increases ver time with the assumption that wage rate remains constant
Find
Profit
Wages
Total Product of Labor
REVIEW:
Perfectly elastic – any decrease in product price would immediately cause the supply to shift to 0.
Algebraically - % change of Q / % change or P = infinity
Example: Labor Market for fast food restaurants
All fast food restos hire with a minimum wage. So each individual resto would be facing a perfectly elastic labor supply curve.
If 1 resto decides to to hire below min wage, nobody is going to apply
If 1 resto decides to to hire above min wage, there will be an influx of applicants given the same skills are required for all restos.
