ECONOMIC DEVELOPMENT

Lesson 2: Poverty and Income

Poverty Incidence – percentage of families or individuals with per
According to Amartya Sen, a Nobel prize Winner in Economics, capita income or expenditure less than the per capita poverty
Poverty threshold to the total number of families or individuals.
 is a complex, multifaceted world that requires a clear Lorenz Curve
analysis in all of its dimension.  was developed by American economist Max O. Lorenz in
 Represents earning o living off of less money than 1905
adequate, as deemed by a particular country or region  Economic Theory of Railroad Rates
  A curve showing the relationship between the population in
2 Main Assets that the poor derive their income from: percentile ranking and the national income.
1. Largely unskilled labor
2. Agricultural Land Gini Coefficient
 in a curve line, inequality gap
Absolute Poverty – incidence as those levels of incomes and  a scalar metric of inequality that was introduced by
expenditures that fall below a fixed, popularly known as the poverty Corrado Gini (Italian statistician and demographer) who
line, nominal value of which is adjusted to hold a fixed value of a further discussed the Lorenz Curve.
purchasing power.
Poverty Reduction
Relative Poverty (inequality) – comparison of the incomes and 1. Cash Transfers
expenditures of the poor with reference to the rich or some other  Latin American and African countries have
groups. Conditional Cash Transfer (CCT) programs to aid
families who are poor
Industrial revolution  In Philippines, Pantawid Pilipino Program (4Ps),
 created great deal of inequality between countries. aimed to help the poorest of the poor to improve
 It intensifies the gap between poor and rich. health, nutrition, and education pf the children
Asian Development Bank published in 2009 in the Philippines, aged 0-18 by giving monetary support and social
studies that there is a population explosion in the urbanized areas, development programs to break the poverty
where labor-intensive work is in high demand. cycles.
Poverty is relative to the standard of living. 2. In-Kind Transfers
 Directly provides goods and services as social
Extreme poverty is characterized by those disadvantage in basic safety nets
living conditions, such as food, water, housing good health, etc.  Social pension for indigenous, senior citizens,
supplementary feeding programs, temporal
In the data 2019 data by UN Department of Social and Economic shelter for the homeless
Affairs, young workers are twice as possible to live in extreme 3. Work Incentives
poverty as compared to adult workers.  Commonly happen when natural disasters occur
and those who are displaced in the workplaces
The First Sustainable Development Goal adopted by all member  Help rebuild the place of adversity in exchange
states of the United Nations aims to “end poverty in all its forms for reasonable wage.
everywhere.” 4. Minimum Wage Law
 An act of Congress or the Senate to ensure that
Its 7 associated targets aim:
a reasonable amount of income is provided
1. To eradicate women, and children in all ages living in
 Believe that this alleviates the condition of the
poverty
poor with little no cost to government.
2. Implement nationally appropriate social protections
5. Adjust Tax Code
systems and measures for all, including floors
 Intended not to collect any form of tax from
3. By 2030, achieve substantial coverage of the poor and the
individuals who earn a specific amount or less in
vulnerable
one year, reflected on a graduated income tax
MEASURING POVERTY
 Collect more taxes from those who are earning
Poverty Rate
more, as the basis of the computation of the tax
 most common measure of poverty
is the net income.
 relative to poverty line
6. Sustainable Development Goals
 proportion of the population that is below the poverty line
 The UN Social Development Goals include these
priority actions to be taken as addressed in the
Poverty Line
Johannesburg Plan of Implementation in 2002,
 is set by the government as the threshold to which the
prioritizing poverty as top global challenge
absolute value of income and expenses is compared to
 Improves access to sustainable livelihoods,
consider a family to be in poverty
entrepreneurial opportunities, and productive
 is adjusted to hold the real purchase power given changing
resources
price levels
 Providing universal access to basic social
services
Subsistence Incidence
 Progressively developing social protection
 below the poverty line suffering from hunger
systems to support those who cannot support
themselves to poverty reduction
Inequality is oftentimes associated with poverty.
 Empowering people living in poverty and their
organizations
There are 2 major types of inequality:
 Addressing the disproportionate impact of
1. Wealth Inequality – uneven distribution of accumulated
poverty on women
assets after deducting the liabilities.
2. Income Inequality – income distributed in an uneven  Working with interested donors and recipients to
manner. allocate increased shares of the Official
development Assistance (PDA)
 Intensifying international cooperation for poverty
eradication
 Lesson 3: A Nation’s Wealth
CHAPTER 3: NATION’S WEALTH

Adam Smith
 The Father of Economics Transfer Payments 64
 Published a paper titled, “An Inquiry to the Nature and Interest Income 160
Causes of the Wealth of the Nations” (1776) or more simply Depreciation 26
“The Wealth of the Nations” Wages 77
Gross Private Investments 134
Gross Domestic Product (GDP) Business Profits 210
 Considered by the economists as a major measurement of Indirect business taxes 84
a nation’s income at a given time and place Rental Income 85
Net exports 28
 Is the peso value of all final goods and services that are
Net Foreign Factor Income 22
produced in one country a year.
Government Purchases 166
Household Consumption 314
COMPONENTS OF GROSS DOMESTIC PRODUCT
Using the expenditure approach,
Two methods of calculating the GDP:
GDP=C+G+I+(X-M)
1. Income Approach – summarizes the compensation of
Household Consumption ( C ) 314
employees, net interest, rental income, corporate profits,
Government Purchases (G) 166
and income Gross Private Investment (I) 134
2. Expenditure Approach - – summarizes the total expenses Net Exports (X-M) 28
to buy final goods and services by a households, firms, and GDP (Expenditure Approach) 642
government.

Formula Computing the GDP using Expenditure Approach Using the income approach
GDP = NI + T + D
GDP = C+I+D+G+(X-M) Where: NI = W+R+I+(X-M)

Where: Net income = wages, 77 + Rental income, 85 + Interest Income, 160

GDP – Gross Domestic Product + Business Profit, 210 = 532
C – Total spending on consumption good and services Net Income 532
I – Purchase of plants, building, and equipment (investments) Indirect business taxes 84
G – Government spending on goods and services Depreciation 26
(X-M) – Net Exports or exports less the imports GDP (Income Approach) 642

Consumer spending Uses of Gross Domestic Product

 is the peso value that households are spending for final We can summarize the use of the GDP in three ways:
goods and services in a year 1. we can compare the economic performance on an annual
Example: supplies used at home, food restaurant spending, and basis by determining the growth to help us understand
many more. where the economy stands.
Example: We want to know the percentage increase or
Government Spending decrease of GDP before the pandemic in 2019 and during
 includes both national and local government units’ the pandemic in 2020.
spending to acquire goods and services are used for public
facilities Percentage Change Increase/Decrease in GDP =
Example: government hires private contractors to build bridges, GDPCurrent −GDP Previous
hospitals, and the like. 362.248−376.88
¿
Net Exports
376.88
 difference between the final goods and services derived
from importations from exportations. The answer is a percentage decrease of approximately
3.86%.
Formula for computing the GDP for Income Approach 2. To assess the efficiency and effectiveness of government
policies, GDP is an indication of a positive or negative
GDP = Total National Income + Sales Taxes + Depreciation + Net effect of the policy as an indicator of its success or failure
Foreign Factor Income extent of how the economy is helped or hurt by this policy.
3. To compare the GDP with that of other countries. A higher
Where: GDP growth means a better quality of life and higher
Total National Income standard of living, in general.
 is the sum of all wages, rent, interest, and profits
Sales Taxes
 is the tax imposed on consumers for the sale of goods and
Real Versus Nominal GDP
services
Depreciation Take a look at this example of mangoes and guyabanos. Let us
 is the cost allocated to capital assets over an estimated assume that these are only two products that the country produced
useful life from 2017 to 2021.
Net Foreign Factor Income
 is income that citizens make while abroad, less the income
generated by foreigners in the country

For example: A country has the following data for the year 2022 (in
billions of dollars). We determine the gross domestic product in both
the expenditure and the income approaches:
 Other Measurements of a Nation’s Income/Wealth

Nominal GDP

To compute the nominal GDP: current prices are used to multiply the
volume of production given in a period of time.

Gross National Product

 Is the sum of all finished goods and services produced by

the citizens of a country overseas and domestically

Net National Product

 Is the sum of all finished goods and services produced by

the citizens of a country overseas and domestically less
depreciation.
GDP DEFLATOR
National Revenue
Implicit Price Deflator or GDP Deflator
 This is part of the national budget of a country that is
 is a metric used by economists to understand the changes composed of all revenue sources to be used in national
in prices of products that are produced in one country. expenditures.
 Some economists believe that this measurement is more
reliable than the Consumer Price Index (CPI) which only Personal Revenue
relies on the basket of goods and services when it comes
 Is the sum of an individual’s or citizen’s earnings from
to gross effect of inflation.
salary, wages and investment during a period of time.
 CPI is a measure of the average change in the prices paid
over time by urban households for a market basket of Disposable Personal Revenue
goods and services.
 Is the sum of an individual’s or citizen’s earnings from
Nominal GDP salary, wages, investment during a period of time less
GDP Deflator= x 100 current individual taxes.
Real GDP
Gross National Happiness

Kingdom of Bhutan is known for its application of a unique metric for

the nation’s wealth and well-being – the Gross National Happiness
(GNH)

Buthan

 believes that the GNH is more important tool to use than

GDP
 believe that happiness is living in harmony with nature
while serving the people, including the economic inputs.

Gross Domestic Product and Inflation Domain of GNH

Two methods of calculating GDP: 1. Psychological Well-being

2. Health
1. Expenditure Approach 3. Education
 the sum of all expenditures to purchase final 4. Time Use
goods and services by consumers, businesses, 5. Cultural Diversity and Resilience
and government. 6. Good Governance
2. Income Approach 7. Community Vitality
 adds the compensation of employees, net 8. Ecological Diversity and Resilience
interest, rental income, corporate profits, and 9. Living Standards
proprietor’s income
Gross National Happiness
Inflation exists when there is sustained increase in the price
level.  Is founded on the basics
that happy people live
Price level is the average level of prices. longer and thus will need
less public health funding
Inflation rate is computed as follows:
 Reflects normative values
of culture and traditions.

Genuine Progress Indicator (GPI)

 Alternative metric
 Founded on the index of sustainable economic welfare and
growth
 GDP is the gross revenue
  GPI is said to be the net revenue when all negative impacts
of environmental and social externalities are considered
Nominal GDP vs Real GDP
 Uses the data derived from GDP, just adding the good and
bad effects of production and consumption like pollution  Nominal GDP – current prices
and social impacts like poverty and attempts to internalize  Real GDP (Best GDP) – base price
those externalities, like the costs to repair and control
poverty and pollution. GDP Deflator
 Both GDP and the GPI are measured in terms of monetary
 Nominal GDP/Real GDP
value
GDP Per Capita
GDP GPI
Capital is included just once Non material aspects such as  Know the population
environmental damage,
depletion of non-renewable GDP in Numbers
resources, dependence on
foreign aid, and crime rate
In, computation, it takes into
consideration the ongoing Other Measurements
effect of the use of capital 1. Net National Product (NNP)
Uses subjective data, can be 2. Gross National Product (GDP)
biased and may not represent
3. National revenue
the entire economy
4. Personal Revenue
More expensive and time
consuming 5. Disposable Personal Revenue (DPR)
It needs to survey households, 6. Gross National Happiness (GNH)
firms, etc.  Unhappy
 Narrowly happy
 Extensively happy
 Deeply happy
 Positive externalities
 Negative externalities
7. Genuine Progress Indicator (GPI)
 Positive externalities
 Negative externalities

Chapter 4: Cost of Living

Philippine Statistics Authority (PSA)

 conducts a Commodity and Outlet Survey (COS)(the last

survey was 2007-2008)
 To understand that each household in the country
purchases and consumes, and the type of channels in the
country wherein these are available.

Consumer Price Index (CPI)

 is a statistic used to measure the total goods and services

SUMMARY purchased and consumed by a household compared to
A Nation’s Wealth base year.

 Standard of living According to Encyclopedia of American Government and Civics:

 Quality of Living CPI is a measure of the average change in the prices paid over time
by urban households for a market basket of goods and services.
Gross Domestic Product (GDP)
(2007)
 Best measure of economic wellbeing
 mainly for determining inflation and the purchasing power
 Peso value of all Final goods and services produced in one
if the country’s currency to allow adjustments to the
country in one year
economic policies
Components of GDP
First step in computing the CPI:
1. Expenditures
 collect price quotations under the categories in the basket
 Consumption
of goods and services
 Investments
 Government spending Consumer price index = (price of goods and services in a year/ price
 Net Exports of basket of goods and services in the base year) x 100
2. Income
Inflation rate in year x = (CPI in year X – CPI in Year X-1 / CPI in Year
 Net income
X-1) x 100
 Sales taxes
 Depreciation
 Net Foreign factor Income

Uses of GDP

 Comparison in periods
 Efficiency of government policies
 Comparison between nations
  Measure used to measure income inequality with the use
of Lorenz Curve
 A zero Gini Index would mean that the income is extremely
6 mangoes and 4 guyabanos are bought in a period of time: dispersed
 Index of 1 or 100% would mean that the income is perfectly
Price 2019 2020 2021 equal
Mangoes 11 13 15
Guyabano 30 35 42

Compute the yearly basket of goods:

2019 2020 2021

( 11 x 6) + (30 x 4) ( 13 x 6) + ( 35 x 4) ( 15x6) + (42x4)
186 per basket 218 per basket 258 per basket

CPI from 2019 to 2021:

2019 2020 2021

(186/186) x 100 (218/186) x 100 (258/186) x 100
100 117 139

Inflation rates for 2020 and 2021:

2020 2021
(117 – 100)/100 x (139 – 117)/117 x
100 100
17% 19%

Hyperinflation – monthly inflation rate increases 50% or around 13,

000% per year

Great Depression

 USA experienced in 1930’s, which started in 1929

 There were more workers but fewer jobs, a lots of outputs
but no buyers

According to USA National Bureau of Economic Research,

Recession – as three consecutive quarters of falling real GDP, while

depression includes a 10% decrease in per capita GDP

Stagflation – condition when production of goods and services slows

down or is put or a halt or simply stagnates while the prices are rising

Cost of Living Allowance

 An adjustment applied to an income received by the

employees to sustain the standard living due to inevitable
rising prices or inflation
 Is used to counteract the effect of inflation

Standard of Living

 Level of material well-being enjoyed by an individual or a

group, is measured by the collective cost of goods and
services considered to be essential to all society members.

Big Mac Index

 Metric used that is based on the concept of purchasing

power parity (PPP), currency exchange of equalizing prices
of products in various countries in the long run.
 An idea of an identical basket of goods and services in
different countries, based on PPP theory

Lorenz Curve (Marx Lorenz, 1905)

 One method that is used is the analysis of the income

percentages in relation to the percentage of the population,
normally spread in percentile ranking
 Commonly used to understand inequality in a country
 Horizontal axis is the cumulative percentage of the
population
 Vertical Axis cumulative percentage change in income

Gini Index (1912) or Gini Coefficient

 PURPOSIVE COMMUNICATION

It’s estimated that up to 7,000 different languages are spoken around “Is a process of sharing and conveying messages or information from
the world. 90% of these languages are used by less one person to another within and across channels, contexts, media
than 100,000 people. Over a million people converse in 150-200 and cultures”
languages and 46 languages have just a single speaker! - Mclornack 2014

Language Process of Communication

 means of communication 1. The speaker generates idea.
 structured system of communication used by humans, 2. The speaker encodes an idea or converts idea into words
based on speech and gestures, sign or often writing and actions.
3. The speaker transmits or sends out message.
Language is Arbitrary 4. The receiver gets the message.
 The relationship between a vocal symbol (form) and the 5. The receiver sends or provides feedback.
entity, state, event, or action (meaning) of the vocal symbol
cannot be proved logically. Message
 Considered as the heart of the communication process.
Language is Social  Information conveyed through words (speech, symbols,
 is a set of conventional communicative signals used by signs, pictures or write-up) by the sender.
humans for communication in a community.
 exists in society; it is a means of nourishing and developing Sender/Speaker/Encoder/Information Source
culture and establishing human relations.  A sender can send a message in multiple different ways: it
may be orally (through spoken word), in writing, through
Language is symbolic body language, music, etc.
 consists of various sound symbols and their graphological  Each speaker creates meaning based on his personal
counterparts that are employed to denote some objects, experiences.
occurrences or meaning.
 uses words essentially as symbols for the concept Receiver/Decoder
represented by them.  It is the destination of the message by the sender which
would be the person who is being called.
Language is systematic
 its symbols are arranged in a particular system. Channels
 phonological and grammatical systems, and within a  Communication channels can refer to the methods we use
system there are several sub-systems. to communicate as well as the specific tools we use in the
communication process.
Language is Vocal  can be categorized into three principal channels: (1) verbal,
 primarily made up of vocal sounds only produced by (2) written, and (3) non-verbal.
physiological articulatory mechanism in the human body.  A channel of communication shapes the way we respond to
 Writing is the graphic representation of the sounds of the the message we received.
language.  These channels have altered the meanings of messages
that are sent and received.
Language is Non-Instinctive, Conventional
 the outcome of evolution and convention. Oral Communication
 Like human institutions languages also change and die,  Anything that comes from the mouth
grow and expand. Features:
 non-instinctive because it is acquired by human beings.  Two-way process
 Nobody gets a language in heritage; he acquires it  Presence of sender and receiver
because he has innate ability.  It cannot be erased or mended

Language is Productive and Creative Written Communication

 The structural elements of human language can be  Communication that can be expressed in written words of
combined to produce new utterances, which neither the any language.
speaker nor his hearers may ever have made or heard Advantages:
before, yet both sides understand without difficulty.  Ready reference
 Legal defence
Lesson 2: Communication Process and Models  Promotes uniformity
 Mass access
Communication is one of the more essential human activities that 
enable us to make connections, create meanings, and nurture Non-Verbal Communication
understanding.  Communication which does not involve words.
 It is the wordless message received through the medium of
gestures, signs, body movements, facial expressions, etc.
 Example: A pair of trousers (not trouser) lies (not
lie) on the bed.
11. Hdbjh
12. Infinitive as subject
 When the subject is To + verb is singular
SUBJECT-VERB AGRREMENT Example: To sing is my favorite activity.
1. Subject and verb concord 13. Gerund as a subject
2. Co-ordinate concord  Gerund ( ends in “ing”), verb is singular
 Two or more nouns Example: Singing is my hobby.
 Connected by “and”
14. Accompaniment Concord
3. Subject and object concord 
 No one, everything, neither, each, everybody 15.
 Object must be singular
Example: Each of the participants was willing to
be recorded.

4. One subject, multiple verb

 One subject but more than one verb
 Must agree with the subjects
 If the subject is singular, then the verb is singular
 Example: Interviews are one way to collect data
and allow researchers to gain an in-depth
understanding of participants.

5. Mandative Subjunctive Concord

 If the words are suggested, recommended, wish,
demand
 The verb always singular, whether the subject is
singular or plural
 Example: I pray that God help me on my
upcoming examination.

6. Parenthesis
 An additional statement
 The verb will not depend on the preceded
sentence or word, which is the additional
statement, so they will depend on the subject.
 Example: Strategies that the teacher uses to
encourage classroom participation include using
small groups and clarifying expectations.

7. The Principle of Proximity

 Choose the nearest noun regardless of the 2 or
more than that, then you will choose the right
verb for it.
 Example: If James fails his examination, his
teachers, his parents, his friends, or John is to be
blame.

8. Definite and Indefinite Quantifiers

 Fractions, percentages, and indefinite quantifiers
 Non-count or singular/plural subject - Verb
agrees in preceding nouns
 Example: Fifty percent of the job is routine.

 Collective noun – use either singular or plural

 Example: Ten percent of the population is/are
bilingual.

9. Majority and Minority in various ways

 Unspecified number more or less than 50%, use
singular verb
Example: The majority holds no strong views.
 Minority/majority mean specific percentage, use
either singular or plural verb
Example: A 75% majority have/has voted against
the measure.
 When minority/majority specified set of persons,
use plural verb.
Example: A majority of Canadians have voted for
change.
10. A Pair of Concord
 When the word “pair” is used, use singular verb