managerial economics ~ government & business
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8/7/2019 Managerial Economics ~ Government & Business
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Things to Ponder
If you are a business
man, do you think that
there are somegovernment policies that
seem to kill your
business?
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Things to Ponder
If you are in the
government, how will you
effectively implement apolicy that seemed to get
more objections than
acceptance?
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Managerial Economics:Managerial Economics:Government and BusinessGovernment and BusinessLynette B. Ysalina
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Topics for discussion:
1. What is the role of the
Government in the two systems
of economy?
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Topics for discussion:
2. How does the Philippine
Government carry out the three
categories of planning?
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Topics for discussion:
3. How public control techniques
help attain the government¶s
goals of exercising somemeans of control on industries?
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THE ROLE OF THE
GOVERNMENT IN THE
TWO SYSTEMS OFECONOM Y
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Systems of Economy
Free-Market
Centrally
Planned
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The Centr ally Planned Economy
is a system in which thecentral governmentcontrols industry such thatit makes major decisionsregarding the production
and distribution of goodsand services
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Centr ally Planned Economy
Advantages
it is stable and safe for
investors all individual efforts are
focused towards acertain goal
long term financial
projects andinfrastructure can bemade without the fear of market downturn
Disadvantages
cannot manage
production accordingly. slow decision making,
less progressing, andprone to corruption
there is surplus labor
and materials there is not much room
for innovation
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The Free Market Economy
is a system in whichthere is no economicintervention andregulation by the state,except to enforce privatecontracts and theownership of property
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The Free Market Economy
The fall of Communismclearly signals the rise of anera where market economy
dominates the manner of allocating resources.
Note
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The Free Market Economy
Through free competitionbetween vendors for theprovision of products and
services, prices tend todecrease, and quality tendsto increase.
Theory
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Things to Ponder
Did the Free Market
Economy System helped?
Or did it harass thePhilippine businessmen?
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Some Government Efforts
Improve transportation
network & facilities in
order to facilitate the flowof goods and services.
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Some Government Efforts
Implemented monetary,
fiscal and foreign policies
that remove wild swingsin income and
employment and
moderate the pace of
inflation.
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THE PHILIPPINE
GOVERNMENT & THE
THREE CATEGORIESOF PLANNING
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3 Planning Categories
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Rationalistic Management
Is the future-oriented calculation
and decision-making in which every
prudent individual or organizationengages;
the nature of planning used by
NEDA together with the variousgovernment agencies
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Rationalistic Management
Through rationalistic
planning, businesses todayassume the continuation of certain economic policies for
longer periods of time,whether or not they supportsuch policies (e.g. taxation)
Note
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Market Improvement & Replacement
Planning Used to help the government control
the tendencies of monopolies thru:
Policies that will improve theperformance of the market; and
Replacement of the market byoutright government take-over
or price deregulations.
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Public Control Techniques
Taxation;
Franchises &
Licenses; Codes;
Inspections; and
Investigation &Publicity
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Technical or Natur al Monopoly
arises where the largest supplier in an
industry, often the first supplier in a
market, has an overwhelming cost
advantage over other actual and
potential competitors.
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Things to Ponder
What should be done with
technical monopolies?
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Two Alternatives
Outright
governmentownership of industries
Public
regulation of privateindustries
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Things to Ponder
Why is it wrong to always
apply the profitability
criterion (usually appliedto private firms) on
government-run
companies?
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Things to Ponder
Cite instances wherein
the government prices its
service below the averagecost. How does it recover
the losses incurred?
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The Anti-Trust Laws
A legislation enacted by the
government to regulate tr ade and
commerce by preventingunlawful restr aints, price-fixing,
and monopolies
It seeks to make businessescompete f air ly
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The Anti-Trust Laws
Promotes
Competition
Controls
Monopoly
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Neighbourhood Effects
Arise when certain goods or
services are produced in such a
way that they benefit or prejudiceother individuals who cannot be
charged or recompensed for the
benefit or harm
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Goods & Services w/
Neighbourhood Effects
Public Works
o
RoadsoBridges
oPorts & Harbours
oNational & Public Recreation Parks Education, etc.
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Neighbourhood Effects in Education
An Educated Person
Better paying jobs
Provides more congenial company
Less prone to commit offenses
Helps promote socio-economic progress
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Neighbourhood Effects in Education
Beneficial Effects to
the Individual
EDUCATION
Beneficial Effects tothe Society
Sub-standard
ProfitOriented
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Neighbourhood Effects in Education
POLICYPOLICY
Non-stock
Non-Profit
GOV¶T. POLICY
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Neighbourhood Effects in Education
Beneficial Effects to
the Individual
EDUCATION
Beneficial Effects tothe Society
GOV¶T. POLICY
Non-stock
Non-Profit
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Summary
In the Philippines, an individual has
the right to own capital goods or
means of production; However, private ownership of
capital goods is not an unlimited
right; it can be subject to stateregulation;
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Summary
Only when there is clear evidence
of the inability of private business
groups to promote the commongood is the State justified in
engaging in business operation;
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Summary
Every business activity has social
implications, and therefore must be
subject to some form of control tomake sure that its effects on society
are not harmful;
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Summary
There are some categories of
industries in which the government
has to take a very active, if notexclusive, role;
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Summary
These industries cannot operate
under competitive conditions
because uncontrolled competitionwould result in misallocation of
resources; and
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End of presentation . . .
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