Basic Economics with Taxation and Agrarian Reform STEP 2: Apply the relevant economic model.

(SOCSCI 4)
HANDOUT NO.2 14
I. Basic Economics 12
CHAPTER 1: INTRODUCTION TO ECONOMICS
E. THE ECONOMIC METHOD 10
8
6
Scientific Policy 4
Method Analysis 2
0
Category 1 Category 2 Category 3 Category 4

ECONOMIC METHOD
A standard method used Category 1: Income Tax on Upper Income Earner contributed 4% tax on
for analysis in economics nation’s economic wealth on Year 2015.

Category 2: Sin Tax on Tobacco products contributed 6% on Year 2015.

STEPS:
Category 3: Income Tax on Upper Income Earner contributed 8% tax on
1. State the problem
nation’s economic wealth on Year 2016.
2. Apply the relevant economic model.
3. Identify the solutions. Category 4: Sin Tax on Tobacco products contributed 12% on Year 2016.
4. Evaluate the solutions.
5. Select and implement a solution.

STEP 1: State the problem STEP 3: Identify the solution.

Main Issue: Congress debates on dealing with the budget deficit. 1. Impose higher rate on Sin Tax.
Resolution: Increase the imposition of a specific tax. 2. *Committee Hearing with the BIR Personnel for information of other
taxes proposed to be increased.
Question: What kind of tax shall be increased?
 CHAPTER 2: The Central Concept of Economics
STEP 4: Evaluate the solutions. A. The Central Concept of Economics

- Weigh the pros and cons. The Central Concept of Economics: SCARCITY
- Apply the positive and normative analysis/economics.
- If Sin Tax on Tobacco Products (Cigarettes) are increased:  SCARCITY is defined as the state of being scarce. 1
A. On Positive Analysis/Economics:  SCARCE means very small in amount or number.
To put it in proper terms, it means deficient in number or quantity.2
1. Cigarette prices and sales.
2. Company Profits SCARCITY
3. Amount of tax revenue collected by the government.
B. On Normative Analysis/ Economics: It does not only pertain to resources that are used to produce goods and
services but covers financial resources such as capital for business
Possible benefits on raising cigarette- sin taxes enterprises and daily or monthly limited allowances of students and even
unemployment rate of jobseekers.
1. Better public health.
2. Lower health care cost. SCARCITY -----Goods and services
3. Productive work force. ----- Financial Resources (i.e. capital for business enterprise,
Daily/monthly limited allowances for students)
STEP 5: Select and implement a solution.
The Policy Maker is the one tasked to select and implement a solution. ----- Scarcity of jobs for Job seekers.

Michael Todaro, a Developmental Economist, forecasted in the early 1990s

that if the world had 5 billion (5 B) people in 1990, given a steady population
REFERENCE: growth rate, the world population would double in (50) years. As of October
2000, UN made an official statement that the world has officially surpassed the
Henderson, J. Vernon and Poole, William. 1991. Principles of Economics, D.C. Heath (6 B) mark. By the end of the current decade, the world is expected to have (7
and Company. B) seven billion human inhabitants, eight billion (8 B) by 2020, and ten billion
(10 B) by 2040.

There is only a limited amount of resources that could be offered at this time
while human wants and needs continue to grow.3

Hence, scarcity forces people to make choices. They must select alternative
uses of resources in trying to maximize the satisfaction of their wants.4
 transcendental importance with intergenerational implications. Such right
Managing Scarcity carries with it the correlative duty to refrain from impairing the environment.

Illustration:
The said case of Oposa vs. Factoran, a remarkable jurisprudence such that
Scarce Key Use(s) of this Substitute Alternative the Supreme Court applied the same ruling for cases which called for the
Resource Scarce Resources Resources that Measures to same issues.
that is may be used better Manage
needed to the resources End Notes:
be
managed 1 Merriam-Webster’s Dictionary

Fossil a. Transportation a. Biogas a. Energy-saving 2 same

Fuels b.Manufacturing b.Solar Energy devices
(crude oil, plants c.Wind Power b.Daylight saving 3 Azarcon, et.al. Principles of Economics with Taxation and Agrarian Reform,
coal) c.Electric Power device 2nd Edition
c.Energy-saving
4 Gordon, Sanford G. and Dawson, George G. Introductory Economics, 5th Edition
practices

The Role of the State in Protecting Our Natural Resources

One of the measures implemented by the State in better managing our

resources particularly natural resources is to protect and preserve the latter
because that is where we usually get our raw materials for production
purposes. Hence, as enshrined in the 1987 Philippine Constitution, the State
shall protect and advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature.

In the case of Oposa vs. Factoran, July 30, 1993, the DENR Secretary
continued to issue Timber License Agreements for commercial logging
purposes to a logging company despite the objections of minors. Thus, the
minors filed a case with the court. The Supreme Court granted the case in
favor of the minors. The court held that the cause focuses on a fundamental
legal right: the right to a balanced and healthful ecology. The right to a
balanced and healthful ecology need not even be written in the Constitution for
it is assumed, like other civil and political rights guaranteed in the Bill of
Rights, to exist from the inception of mankind and it is an issue of