ECONOMICS IN A NUTSHELL
by Kim Angelo
Economy is something that we should give a very serious
attention in order to facilitate our resources. It can be as simple as
budgeting your daily allowance to survive the whole day and can be as
complicated as budgeting government’s funds for our country’s development.
General understanding about economics will introduce us to
the DEMAND and SUPPLY. The law of demand states that when the price increases,
the demand decreases, and all else constant (ceteris
paribus – there are other variables that affects the demand like income, tastes
and preferences, expectation on future prices, prices of substitute goods, etc.).
The law of supply states that order things assumed as constant, price and
quantity supplied are directly proportional. Eventually, the laws of demand and
supply were combined as proposed by the British economist, Alfred Marshall –
this is the birth of the Market Equilibrium.
With the use of Market Equilibrium, the graph of demand and
supply becomes the basis of analyzing the production and consumption of the
products. This is the point of the graph wherein the demand and supply curves
intersect with each other. It determines the amount of products to be produced
and for how much people are willing to buy such. In the consumers’ side,
quantity demanded that were not satisfied due to lack of supply falls under the
‘excess demand’. For the suppliers, the
excess of production, supplies that were not bought will be placed under the
‘surplus supply’.
Aling Nena is used to buying rice in the price of 30 pesos
per kilo. However, the supply for that rice that she is demanding is not
sufficient and so it was sold out before she intends to buy it. Now, there are
higher quality of rice originally priced at 55 pesos per kilo – there’s a huge
supply for this class of rice because not too many are getting it due to the higher
price. It reached the surplus point and the producer decided to sell it in the
surplus price of 40 pesos per kilo. Definitely, AlingNena will consider buying
this as an alternative. She will consider buying this out of no other option.
It’s a win-win situation for both the seller and the buyer because of the
following reasons:
1.
Suppliers/Seller will be able to sell their
excess stocks by introducing the surplus price. This will help them avoid
losses for the threat of spoilage of their stocks.
2.
Consumers will be given an alternative for their
‘sold out’ commodities.
The Circular Flow of
Economics: INFLOW and OUTFLOW
In economics, we call the money that goes into the flow of
economic activity as “INFLOW”. On the other hand, the money that goes out of
the economic activity is called “OUTFLOW”. By determining the economic activity
of our country and labeling each transaction whether it is an inflow or outflow
will help us understand why our country’s economy is fluctuating and most of
the time, weak.
OUTFLOW
TAXES
According to Atty. Allan Liquigan, my business taxation
professor, “there are only two certain
things in life, DEATH and TAXES”. Even before we receive our income, it is
already deducted by a gruesome percentage of tax. If for example a regular
employee earning 500 per day and after taxes it will be down to 350 pesos per day.
Instead of this employee being able to spend all that 500 pesos for his
consumptions, only 350 pesos is the potential amount to circulate in our
economy. It constitutes as an outflow because it lessens the economic activity
of that employee.
SAVINGS
However, that 350 pesos income per day will not be fully
spent. The employee aims to save some amount from his earnings for his future
use. He will then save 100 pesos per day and that amount is considered as our 2nd
outflow.
IMPORTS
Colonial mentality is prevalent and considerably a part of
our Filipino brand. Our country tends to import and allow foreign investors to
invade our country to satisfy people’s demand for foreign products that our
country can’t produce. The money we use to buy foreign products (imports) will
flow NOT in OUR OWN ECONOMIC CYCLE but in foreign countries’, from whom we
purchased the imports. In addition, as we import, we pay taxes to those
countries where those imported products came from. Imports + taxes that goes to
other countries will definitely lessen our economic activity.
In order to siphon back the outflows – our government should
take action to make INFLOWS. Otherwise, we will experience a continuous
recession if the government fails to balance the economic activities.
INFLOW
For TAXES
The collected taxes should not be accumulated and make huge
government savings. The money collected from taxes should be diversified into
purposeful expenditures
like funding social services, education, infrastructure, and
others. As the government defray for such expenses, it will give an opportunity
to put the money back into the economic cycle.
For SAVINGS
The money spared for savings will go to the banks as
deposits. Now, the role of the banks is to equalize the economic activity by
means of investments. Banks will not keep the money being deposited to them
idle – they will use the money to provide investment opportunity to business
sectors.
For IMPORTS
As we buy products from other countries, we need to
encourage them to reciprocate our purchases. Our government should make sure
that we export products as much as we import so that we are getting back the
money into our country’s economic cycle.
POLICIES
In order to adjust the economic activity of our country,
government should facilitate the process by implementing the proper policies.
With the use of the policies, the government will be able to
manipulate the inflows and outflows.
It is given that the outflow is difficult to manipulate
because the control is in the hands of the consumers/households. Inflow is the
right leverage to maintain the balance in our economic cycle. The government
should encourage exports, investments and increase in governmental expenditures
to put the money back into the cycle.
·
Monetary policy is the one that moderates the
savings and investments.
·
Fiscal policy controls taxes and government
expenditures.
·
Trade policy affects the country’s imports and
exports.
Author’s Note:
After writing down all above information that intends to
give the very essence of economics, I was able to come up with my personal
analysis on why is our country’s
economy fluctuating and most of the time, weak.
If there is one thing that our country is abundant of,
there’s nothing else I can suggest but CORRUPTION. Like evil, it comes in many
faces – from simple to complex. It can be as complex as the ‘napoles scam’,
‘PDAF’, Binay’s issue, etc.. And it
can be as simple as a teacher not giving the knowledge that
are due for his students whilst he is having a full enjoyment of his salary –
that’s an absolute corruption.
One major factor that ruined the economic cycle of the
Philippines is the corrupt officials who only think about themselves. My idea
is that when they are opening swiss accounts (the intention is to safeguard
their money due to a much stricter bank secrecy law), they are putting a
whopping amount of money to other country’s economic cycle just to hide their
ill-gotten wealth. Also, these officials are eluding taxes and the tax burden
is being passed on to poor people – this is exactly where the famous
candidates’ spill is derived from “Angmgamayayaman
ay lalongyumayamansamantalangangmahihirap ay lalo pang humihirap”
Second is that our government’s failure to fix the imbalance
of import and export. We export terribly less than what we import. The invasion
of foreign products that are selling more than our local products also hurts
the economic activity of our own country.
Third is the poor budgeting of the Bureau of Internal
Revenue. They have collected more than enough taxes but they are not spreading
out the money through different government expenditures. Our government has
admitted that they are under-spending and that’s an indication that they are
not increasing the level of economic activity.
Fourth is the MONOPOLY – large business corporations are
taking away the opportunity to earn from small businesses. Imagine the small
bakeries out there that cannot compete to larger businesses like Pande Manila,
French Baker, Bread Talk, etc. Also, the public markets wherein local products
are diverging to make them available for public consumption but being rivaled
by business magnates. SM supermarkets, PureGold, Shopwise, etc. are hindering
the earning abilities of those small businessmen in the public market.
In conclusion, there’s an uncountable reason why
our economy is dropping so low but it all boils down to our government’s
incompetence to facilitate the country’s inflow and outflow.
