The document discusses economic institutions from two perspectives - functionalist and conflict. It defines economic institutions as networks that determine how goods/services are produced, distributed, and purchased. The functionalist view sees institutions as vital for meeting societal needs, while the conflict view argues they benefit ruling classes. The document also outlines different types of economic institutions like non-market institutions based on reciprocity and redistribution, market institutions relying on private property and competition, the relationship between states and markets, and international trade.

1. ECONOMIC
INSTITUTIONS

2. ECONOMIC INSTITUTIONS
 Refers to a network of commercial
organizations that determine how goods
and services are produced, generated,
distributed, and purchased.

3. Two ways value and purpose of
Economic Institutions
 Functionalist Perspective
 Conflict Perspective

4. FUNCTIONALIST PERSPECTIVE
 views economic institutions as vital components of
society because they are involved in production,
distribution and purchasing of goods and services
that are essential for survival.
 it refers to systems, agencies, and organizations,
both in public and private sector.

5. FUNCTIONALIST PERSPECTIVE
 involved in the production of food, clothing, and
other material items that people need and want.
 in general, it is the economic system that
provides the institutional arrangement and
coordinating mechanism of the different activities
that take place in the economy.

6. CONFLICT PERSPECTIVE
 argues that economic institutions emerged in
order to benefit the ruling classes or groups .
 a major proponent of this perspective is Karl
Marx.

7. CONFLICT PERSPECTIVE
 identifies the capitalists as one who
perpetuate income inequality
 deprive the proletariats or the working class
access to a decent quality of life

8. ECONOMIC INSTITUTIONS
a. Nonmarket institution
b. Market institutions
c. State-Market relationship
d. International trade

9. A. NONMARKET INSTITUTIONS
 Do not entail the exchange of cash for
the rendering of service and provision
of goods.
 Reciprocity, Transfer, Redistribution

10. 1. RECIPROCITY
 Exists when there is an exchange of goods or labor
between individuals in a community.
 Includes direct barter or simultaneous exchange of
goods or gift exchange where the return of goods
given or labor rendered is delayed.
 Gift exchange is different from true gift-giving
where no return is expected.

11. RECIPROCITY
 Neighbors exchange food for labor rendered
 Farmers rotate among their farms to help in
cultivating the land

12. 2. TRANSFER
 Redistribution of income that is not matched
by actual exchange of goods and services.
 Transfer Payments – transfer of productive
assets due to inheritance

13. TRANSFER
 Donation or financial assistance from a richer
relative
 Farm subsidies given to farmers by the
government

14. 3. REDISTRIBUTION
 Combination of the features of transfer and
reciprocity, where the economic exchange
involves the collection of goods from
members.

15. B. MARKET INSTITUTIONS
 Market System – is 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.

16. MARKET INSTITUTIONS
Key Features:
 Private property
 Freedom of Enterprise and Choice
 Self-interest and Competition
 Markets and Prices

17. MARKET INSTITUTIONS
Key Features:
 Reliance on Technology and Capital
goods
 Specialization
 Use of Money
 An active but limited government

18. 1. Private Property/Ownership
 Own most of the factors of production
like land and capital.
 Encourages investments, innovation,
and efficient use of the factors of
production

19. Private Property/Ownership
 Does not just refer to real property but
also to intellectual property like patents and
copyrights
 Encourages the efficient use of the factors
of production so as to raise the level of
productivity derived from the use of said
resources

20. 2. Freedom of Enterprise and Choice
 Allows all economic actors whether an
entrepreneur, a worker or a consumer
to pursue activities that will yield the
most benefits for as long as the
activities are within legal limits.

21. Freedom of Enterprise and Choice
 For Entrepreneur – this means the
freedom to access and utilize the
different economic resources to
produce their choice of goods and
services and sell them to their target
markets.

22. Freedom of Enterprise and Choice
 For Workers – this means the freedom
to pursue economic opportunities for
which they are qualified.

23. Freedom of Enterprise and Choice
 For Consumers – this means the
freedom to buy goods and services that
gives the highest level of satisfaction.

24. 3. Self-interest and Competition
 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.

25. Self-interest and Competition
 For the Producers – this means the
production a variety of goods and services
desired by the consumers and using
methods of production that are cost
effective.

26. Self-interest and Competition
 For the Consumers – this means buying
goods and services that provides the
highest level of satisfaction at the lowest
price available.

27. 4. Markets and Prices
 Market – is a mechanism and not
necessarily a place brings buyers and sellers
together for desired transaction.
 Prices – serve as signaling device to
indicate the value of a good or service to
both the buyers and the sellers

28. 5. Reliance on Technology and Capital
goods
 The market system rewards technological
innovation by bringing more profits to
whomever the idea of a new product or
production technique came from.

29. 6. Specialization
 Human specialization – is called the
division of labor.
 contributes to efficiency by taking
advantage of the differences in each and
every person’s abilities.

30. Specialization
 saves time by allowing individuals to
concentrate all their mental and physical
faculties on a single task and voiding loss of
time which takes place with the shifting
from one job to another.

31. 7. The Use of Money
 facilitates an easier exchange between
transacting parties.
 Prior to its invention, barter, or the
swapping of goods for goods, is the
traditional means of exchange.

32. The Use of Money
 Barter – is difficult to carry out because the
presence of ‘mutual coincidence of wants‘
or transacting parties finding and having
each other’s desires.
 Money – becomes a very convenient
means of standardizing values.

33. 8. An Active but Limited Government
 A market system promotes efficiency but it
is not a perfect system.
 Government is needed to carry out
interventions to promote the welfare of all
segments of the economy.

34. B. MARKET INSTITUTIONS
 Market Transaction – involves parties who sell
their goods and services in exchange for cash
from consumers.
 Market Economy – is one where the
production, distribution, and consumption of
goods and services operate through market
transaction.

35. B. MARKET INSTITUTIONS
 Type of Market
1. Free market economy
2. Perfectly competitive economy

36. Free Market Economy
 is one where the price of a good or
service is determined by the forces of
supply and demand.

37. Free market economy
 Supply – the available level of products
or services provided by producers or
sellers.
 Demand – the level of willingness of
consumers to purchase.

38. Perfectly Competitive Economy
 where there are many completing sellers,
and that consumers are well-informed of
their options of where to buy.

39. Perfectly Competitive Economy
 Market price – is estimated to be that price
where supply equals demand.
 Rational price – the price where the
willingness of sellers to sell coincides with the
willingness of the consumers to buy.

40. Perfectly Competitive Economy
 Surplus – happens when supply is higher
than demand.
 Shortage – happens when demand is higher
than supply.

41. Perfectly Competitive Economy
 Oligopoly – only a few seller or producer.
Ex: Mobile phone service industry and airline
industry
 Monopoly – only one seller.
Ex: Power industry (Meralco)

42. C. STATE-MARKET RELATIONSHIP
 The state plays an important role in the
market through the government.
STATE = GOVERNMENT

43. C. STATE-MARKET RELATIONSHIP
 Regulate the price to protect the
consuming public.
 Basic commodities (food) are subject to
price ceiling or maximum prices.

44. C. STATE-MARKET RELATIONSHIP
 The prices of electricity and mobile
services are subjected to government
regulation (Energy Regulatory Board)

45. C. STATE-MARKET RELATIONSHIP
 Labor markets, the government set
price floors in the form of minimum
wages.

46. Keynesian Theorist in Economics
 Government interventions in
economic institution is warranted to
protect the interest of consumers and
workers.

47. Keynesian Theorist in Economics
 It is also advocated to correct the
tendency of the private sector to
make decisions that are detrimental
to economy.

48. Keynesian Theorist in Economics
 Monetary policy – reduction in
interest rates so to encourage
investors to borrow money and invest
in business to spur production.

49. Keynesian Theorist in Economics
 Fiscal policy – encourage to increase
their public spending on
infrastructures to further spur
economic activity.

50. Government
 Acts as an agent of the state tasked
to supervise and make decisions on
the production and allocation of
essential economic resources.

51. State
 Social thinker (Max Weber)
 Is a political body that exercises
monopoly of violence or legitimate
control over the use of force within its
territory.

52. When government takes over the
functions of the market in producing and
distributing essentials goods and
services, this is called a command
economy or a socialist economy.

53. Command Economy
 an economy in which production,
investment, prices, and incomes are
determined centrally by the
government.

54. Profit Motive
 Means of exploiting labor which is
also rejected in socialist system.
Ex: Wages are kept low to increase
the profits of the capitalist

55. Socialist Economy
 the primary motivation in economic
activities is the pursuit of collective
goals like a higher standard of living
for all the citizens.

56. Income
 Larger incomes – accrue to those whose
labor is marked with innovation,
creativity, and industry.
 Income redistributions – a process that
corrects the imbalance in the access of
goods and services.

57. Income
 Tax – the primary instrument used by
the government to redistribute income.

58. Transfer Payments
 A payment made or income received in
which no goods or services are being
paid for, such as a benefit or subsidy.

59. Transfer Payments
 Social security benefits – transfer of
income between the old and the young.
 Unemployment benefits – transfer of
income between the employed and the
unemployed.

60. Transfer Payments
 Agricultural price support – transfer of
income between farmers and the
consumers.

61. D. INTERNATIONAL TRADE
 Economic institutions are not only
confined to one specific territory or
geographic location.
 Enables economies to employ its
resources in ways that increase its total
output.

62. D. INTERNATIONAL TRADE
 Sovereign nations – stand to gain from
international trade by specializing in
the production of commodities

63. D. INTERNATIONAL TRADE
 Tariffs – are taxes on imported goods.
 Quotas – are the limits set on quantity
of imported goods that can enter a
domestic company.

64. D. INTERNATIONAL TRADE
 General Agreement on Tariffs and Trade
(GATT) – is a multilateral platform of
negotiation among participating
nations

65. D. INTERNATIONAL TRADE
 World Trade Organization (WTO)
 Reciprocal Trade Agreements Act of
1934 – serve as the foundation for the
greater economic integration.