Written

Report in
UCSP
Title: Economic Institutions

Name of Leader: James Mark Bandico

Members:
Isley Miles V. Cordova
Mark Jaffet Gas
Ana Rosales
Nicky Sales
Arlene Jarito
Submitted to: Mr. Casino
Date Submitted: October 14, 2019
Table of Contents
 Economic Institutions
A company or an organization that deals with money or with managing the distribution of money,
goods, and services in an economy. Banks, government organizations, and investment funds are all
economic institutions.

Economics
Economics is the social science that studies the production, distribution, and consumption of goods and
services. Economics focuses on the behaviour and interactions of economic agent and how economies
work. Microeconomics analyzes basic elements in the economy, including individual agents and
markets, their interactions, and the outcomes of interactions. Individual agents may include, for
example, households, firms, buyers, and sellers. Macroeconomics analyzes the entire economy
(meaning aggregated production, consumption, saving, and investment) and issues affecting it,
including unemployment of resources (labour, capital, and land), inflation, economic growth, and the
public policies that address these issues (monetary, fiscal, and other policies).
https://en.wikipedia.org/wiki/Economics

Reciprocity
Reciprocity is a social norm that involves in-kind exchanges between people—responding to another’s
action with another equivalent action. It is usually positive (e.g. returning a favor), but it can also be
negative (e.g. punishing a negative action). Reciprocity is an interesting concept from the perspective
of behavioral economics, because it does not involve an economic exchange, and it has been studied by
means of experimental games. Organizations often apply reciprocity norms in practice. Charities take
advantage of reciprocity if they include small gifts in solicitation letters, while hospitals may ask
former patients for donations.

Reciprocity is also used as a social influence tool in the form of ‘reciprocal concessions’, an approach
also known as the ‘door-in-the-face’ technique. It occurs when a person makes an initial large request
(e.g. to buy an expensive product), followed up by a smaller request (e.g. a less expensive option), if
the initial request is denied by the responder. The responder then feels obligated to ‘return the favor’ by
agreeing to the conceded request.

https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/reciprocity/

Reciprocity is a direct exchange of goods or services. There are three types of reciprocity: generalized,
balanced, and negative.
Generalized reciprocity refers to an exchange that incurs no calculation of value or immediate
repayment of the goods or services. This usually happens among close kin and friends. For example,
Kung hunters sharing meat with other members of the family or buying a cup of coffee for a friend. It
acts as a form of social security among kin—sharing with family ensures that they in turn will share
with you. Generalized reciprocity has an element of altruism to it. Think about a person who makes a
bunch of sandwiches and then hands them out to the homeless. That person is distributing food without
expectation of repayment.
Balanced reciprocity involves calculation of value and repayment of the goods or services within a
specified time frame. Some foragers will exchange wild game for modern hunting implements such as
metal knives. Horticulturalists may exchange some of their product for machetes. Storeowners may
exchange goods for services of skilled tradesmen. Gift giving in modern society is another example of
balanced reciprocity. As adults, when gifts are given there is an expectation that we will receive a gift
of equal value in return at a fixed point in the future. For instance, if we receive a birthday gift from a
friend, it is expected that we will give that friend a gift of similar value on their birthday.
Negative reciprocity occurs when one party attempts to get more out of the exchange than the other
party. This can happen through hard-bargaining, deception, stealing, or even selling food at an inflated
price because there is no other option; e.g., vendors at special events.
https://courses.lumenlearning.com/culturalanthropology/chapter/economic-organization-distribution-2/

Transfers
A transfer involves movement of an asset or monetary funds and/or ownership rights from one account
to another. A transfer may require an exchange of funds when it involves a change in ownership, such
as when an investor sells a real estate holding. In this case, there is a transfer of title from the seller to
the buyer and a simultaneous transfer of funds, equal to the negotiated price, from the buyer to the
seller.

In economics, a transfer payment is a redistribution of icome and wealth by means of the government
making a payment, without goods or services being received in return. These payments are considered
to be non-exhaustive because they do not directly absorb resources or create output. Examples of
transfer payments include welfare, financial aid, social security, and government making subsidies for
certain businesses.

https://en.wikipedia.org/wiki/Transfer_payment

Redistribution
Redistribution refers to the movement of goods or services to and from a central authority. The
authority may be a single individual, e.g., a chief, or a group of people, e.g., temple priests. The central
authority may not be interested in accumulating wealth for themselves, but use the distribution of goods
and services to create interdependence among the parties involved. In industrial societies, progressive
income taxes are an example of redistribution—taxes are collected from individuals dependent on their
personal income and then that money is distributed to other members of society through various
government programs. Charitable donations function similarly. A better, far more humane example of
redistributionism is the democratic socialism of several North European countries, such as Sweden and
the Netherlands. These countries, which are known for high taxes, are simultaneously well-known for
their high standard of livability and humane political practices, achieved in part by a tax system which
supports a social safety net. But perhaps they were able to achieve this way of life only by mixing
redistributionism with capitalism.

Market Transaction

A market is any place where two or more parties can meet to engage in an economic transaction—even
those that don't involve legal tender. A market transaction may involve goods, services, information,
currency, or any combination of these that pass from one party to another. Markets may be represented
by physical locations where transaction are made. These include retail stores and other similar
businesses that sell individual items to wholesale markets selling goods to other distributors. Or they
may be virtual. Internet-based stores and auction sites such as Amazon and Ebay examples of markets
where transactions can take place entirely online and the parties involved never connect physically.
https://www.investopedia.com/terms/m/market.asp

Barter
A barter economy is a cashless economic system in which services and goods are traded at negotiated
rates. A barter is a system under which goods and services are exchanged instead of currency, or the
actual goods or services that are being exchanged.
Barter-based economies are one of the earliest, predating monetary systems and even recorded history.
People can successfully use barter in many almost any field. Informally, people often participate in
barter and other reciprocal systems without really ever thinking about it as such -- for example,
providing web design or tech support for a farmer or baker and receiving vegetables or baked goods in
return. Strictly Internet-based exchanges are common as well, for example exchanging content creation
for research.
Because barter is based on reciprocity, it requires a mutual coincidence of wants between traders. This
requirement complicates barter, but in a sufficiently large system traders can be found to supply most
wants. According to proponents, the mutuality fosters a sense of connectedness and community among
traders.
In recent years, barter has enjoyed a resurgence as a means of countering economic insecurity,
unemployment and worker exploitation. The nature of modern-day work, the pervasiveness of the
Internet and the rise of social networking have all contributed to its spread. Other examples of
alternative economic systems include gift economies, sharing economies and time banks.
These alternative systems are not mutually exclusive, and all can operate within a predominantly
capitalist system. However, because these systems operate in terms of reciprocity rather than profit and
growth, there are concerns (or hopes) that they could undermine the current economic system.

https://whatis.techtarget.com/definition/barter-economy
Expound
1. Contrast economic institution with financial institution.
An economic institution is a company or an organization that deals with money or
with managing the distribution of money, goods, and services in an economy. Banks,
government organizations, and investment funds are all economic institutions: Technical
assistance will be needed to rebuild essential economic institutions after this upheaval while the
financial institution (FI) is a company engaged in the business of dealing with financial and
monetary transactions such as deposits, loans, investments, and currency exchange. Financial
institutions encompass a broad range of business operations within the financial services sector
including banks, trust companies, insurance companies, brokerage firms, and investment
dealers. Virtually everyone living in a developed economy has an ongoing or at least periodic
need for the services of financial institutions.
2. Draw a distinction betwwen barter and gift exchange. Explain.
Barter System:

Gift System:
 In this picture it explains that a barter system is an old method of exchange. This system has
been used for centuries and long before money was invented. People exchanged services and
goods for other services and goods in return. Today, bartering has made a comeback using
techniques that are more sophisticated to aid in trading; for instance, the Internet. In ancient
times, this system involved people in the same area, however today bartering is global while the
gift exchange is also called ceremonial exchange, the transfer of goods or services that,
although regarded as voluntary by the people involved, is part of the expected social behavior.
Gift exchange may be distinguished from other types of exchange in several respects: the first
offering is made in a generous manner and there is no haggling between donor and recipient;
the exchange is an expression of an existing social relationship or of the establishment of a new
one that differs from impersonal market relationships; and the profit in gift exchange may be in
the sphere of social relationships and prestige rather than in material advantage.

3. “Redistribution can help to promote social justice.” Justify.

Redistribution is done as an adherence to the principle of distributive justice which stats that money
and resources ought to be distributed in such and way as to lead to a socially just and more or less
financially eligitarian society. Organizing a society in a manner that the least advantaged is benefited is
seen as a moral obligation. For this reason, the shifting of wealth from a rich minority to a poor
majority has been a goal of social reformers and international development efforts.
4. How does state affect markets? Discuss.
State affects market through its regulations. A regulation is a legal norm intended to shape conduct,
prescribe or proscribe behavior, adjust incentives, or monitor and enforce existing rules. Regulation
form, limit, or constrain a right, creeate or regulate a duty, or distribute a responsibility. State also
dictates the types of markets that legally exist in a territory. As the government determines the nation's
economic system, it thus defines what to produce and offer in the market, how to prodyce, and for
whom to produce.
 Economic Flow Chart
The circular flow of income or circular flow is a model of the economy in which the major exchanges
are represented as flows of money, goods and services, etc. between economic agents. The flows of
money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.
The circular-flow diagram (or circular-flow model) is a graphical representation of the flows of goods
and money between two distinct parts of the economy:

-market for goods and services, where households purchase goods and services from firms in exchange
for money;

-market for factors of production (such as labour or capital), where firms purchase factors of production
from households in exchange for money.

The market for goods and services is the place where households spend their money buying goods and
services produced by firms. In other words, is the place where firms sell the goods and services they
have produced, receiving a revenue paid by households.

This market represents the place where money and goods are exchanged. In this case, the flow of
money (green arrow in the diagram below) goes from households to firms, in exchange for finished
products, which flow from firms to households (red arrow).

The market for factors of production is the place where households offer their labour, capital and other
factors such as land, receiving an income for their use. Firms use these factors in their production.
 In this case, money flows from firms to households (green arrow in the diagram below) in the form of
wages in exchange for labour, interests for capital and rent for the use of land. Factors of production
flow form households (red arrow) to firms, so they can produce more goods and services.

When we combine both diagrams, we get the circular-flow diagram, as shown below. The exchanges
made in the economy imply a redistribution of rent according to the diagram, and the creation of value
makes the economy grow.

It’s worth mentioning that, as usually, diagrams do not shown how the economy actually works. There
are a few things that are not showed in this diagram that must be taken into account to really
understand how the economy of a country works. For instance, take government intervention. Things
such as government spending (in the form of unemployment benefits, for example) or government
income (taxes) are not shown in the diagram.

However, this diagram introduces a clear view of how the economy works. The way of measuring all
these flows of money is the gross domestic product (GDP). It can be estimated using one of three
methods: looking at total expenditure, at total income or using the production approach.

https://policonomics.com/circular-flow-diagram/