REPUBLIC OF THE PHILIPPINES

UNIVERSITY OF SOUTHEASTERN PHILIPPINES

A.Y. 2023-2024

Presented to

Marie Anne How, PhD

University of Southeastern Philippines

College of Business Administration
Obrero, Davao City

In Partial Fulfillment of the Requirements for Managerial Economics

Masters in Business Administration

GLEM T. CANILLO
October 31, 2023
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1. Discuss Macro and Micro Economics. Cite the difference.

Micro and Macro economics are related yet different from each other.
Macro Economics looks and focuses on the economy in a larger scale. It
looks at the regional, national, continental or even global. It looks at a
broader perspective of Nation’s situation in the like of Fiscal Policy, Inflation
Rate, GDP growth, unemployment rate. Micro economics on the other hand
is concerned on looking at the economic behavior of individuals, households
and companies. It looks at the behavior of the small unit of the economy. An
example to it is the study of the balance of supply and demand in the
individual market, the behavior of the individual customers and workforce
demand, how individual companies determine wages for their workforce.
Micro and Macro economics are related to each other. An example to this is
when the National Government craft a National Policy on increasing taxes in
a certain product or commodity (Macro economics), say tax increase on
tobacco products or beverages or luxury car taxes. An individual store
owner will increase the price of the product which will also impact on the
decision of the buying customers with regards to the new price of the
product. The two field of economics are related to one another yet different
in relation to the perspective they’re focusing with.

2. Why is Managerial Economics important to learn? How would this

help business students?

“Managerial economics involves the use of economic theories and

principles to make decisions regarding the allocation of scarce resources. It
guides managers in making decisions relating to the company's customers,
competitors, suppliers, and internal operations.” It provides framework for
decision making and forward-looking planning of the management through
economics theories and concepts. It helps managers make proper and
economic allocation of the available resources of the company thus aiming
to establish business efficiency in all aspects of the business. It helps the
company make rational, progressive decision by analyzing problem both
from macro and micro level perspective.
Every organization and manager must see to it that every decision is
for the optimization of the business or organization. Managerial economics
provides guidance to the organization to make strategic decisions through
the lens of economic concepts, principles and theories.
Every organization experience simple and often times complex issues
and concern across all departments. Through Managerial Economics these
issues and concerns will be addressed scientifically, thus helping the
organization a chance to optimize its profit perhaps and allocate its scarce
 BA 2004 – MANAGERIAL ECONOMICS

resources well, thus improving its efficiency and counter act the
unproductive decisions of the organization.
Learning Managerial Economics is learning the art and science of
management decision making in the organization. Seeing effective business
solutions amidst diverse and complex issues and concern.
As a student of business administration, I am excited to learn these
theories and principles that will help my existing business become more
productive in its operations and management. To encounter varied issues
and concern in business is normal but to approach, analyze and solve them
in a more scientific and systematic way is different as most of business
owners made their decision through experience, gut and intuition. There’s
nothing wrong with using the experience, gut and intuition in business
decision making but it would be more efficient and productive in business if
science and art are applied through economic frameworks. This is where
managerial economics would come in. This subject will really help me a lot
in the management of my own business.

3. Discuss Adam Smith’s Theory of Wealth of Nations.

Adam Smith’s theory on Wealth of the Nation talks about how a nation
can accumulate wealth through a free trade economy. It talks about how
freedom and security to work, trade, save and invest promotes prosperity
with minimal Government intervention.

It starts with the idea production and exchange, the stream of goods
and services produce by a country (which we call now as GDP) as the main
contributory to the National Income. Division of labor through Specialization
plays an important role to boost human productivity. Developing specialized
skills and talent can optimize production. This way the private company will
have more savings and use this savings to employ labor-saving machineries
that helps boost capital accumulation thus, creating more wealth in the
future. This wealth should be guarded against theft. This is where the role
of the Government comes in.

The role of the Government is crucial in the free market economy but
should be limited so as not to interfere the free trade and to serve the best
interest of the people. Government’s role should be confined through these
functions: maintaining defense, keeping order, building infrastructure and
promoting education. To function well and deliver the benefits of a market
economy the Government must see to it that rules are observed, properties
are secured, contracts are honored, maintain justice and the rule of law.
Tax should be raised in proportion to the ability of the people to pay. The
Government furthermore, should avoid taxing the capital.
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Adam Smith’s Wealth of the Nation is the cornerstone of Capitalism. I

believe in free trade and specialization. But I don’t agree on the idea of
limiting the roles of the government to give way for the build up of more
capital. The Government should strictly oversee how these capitalists run
the economy and employ policies that will benefit the capitalists, their
workers, the government and the Nation as a whole. The Government
should be the guardian and supporter of the nations and its economy.

4. What do you think of Philippine economy at this stage of

development?

I will look at the Philippine economy at this stage of development from

these three perspectives: infrastructure development, trade relations and
exchange rates.

The key pillar to economic growth and the forefront of Philippine

economy is the construction industry through infrastructure development
across the nation. Though our country is endowed with natural and human
resources, there has been insufficient infrastructure development that failed
to address the rapid population growth and urbanization. President Duterte
had already started the rapid infrastructure development through his Build
Build program but still our government finds it lacking to get the support
and trust of the people. What hampers the infrastructure development are
“poor business environment, weakness in planning, coordination and
financing, decrease in private sector’s involvement in infrastructure
provision.” Philippines is way behind in terms of infrastructure development
compared to other Asian countries. It is very evident in the way our
transport system is planned and constructed. Traffics everywhere. Our
government has failed the address the issue on traffic congestion specially
in Metro Manila. We are still on our way there. The present government has
a lot of construction plans and proposals to ease the burden of traffic
congestion, facilitates both national and international businesses coming in
and provide a quality and sustainable life for the people. We are there but
not yet. “The Philippines needs to achieve a gradual increase in
infrastructure investment to at least 5% of GDP and increase the efficiency
of spending.” Our country needs to build more roads, bridges, ports,
irrigation and drinking water system, schools, hospitals, transportation and
other public facilities, power plants etc.

Philippines is doing well in terms of trade relations. We have good trade

relationship with the ASEAN (Association of South East Asin Nations),
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BIMP-EAGA(Brunie Darussalam-Indonesia-Malaysia-Philippine East ASEAN

Growth Area. We also have EU-Philippine Free Trade Agreement that
converted to 18.4 Billion Euro in 2022 from trade in goods. “The EU’s
foreign direct investment stock in the Philippines reached 13.7 Billion Euro
in the same year.” (policy.trade.ec.europa.eu). USA and Philippines has also
bilateral Economic relations. In 2020, 18.9Billion Dollars resulted in trade
of goods between the two countries. USA is Philippines third largest foreign
investors. China, United Kingdom, Singapore and Japan are traditionally
the main investors of our country with Singapore as the leading investor
amounting to 131 Billion Pesos in 2022.(www.lloydsbanktrade.com)

Exchange rate tells us about country’s economic well-being. It

determines how much one country’s currency is worth in comparison to
another’s.(instarem.com/blog). There are seven factors that affect exchange
rates of our country: 1. Interest and inflation rates 2. Current accounts
deficit 3. Government Debt 4.Terms of trade 5.Economic performance 6.
Recession 7. Speculation. As of today dollar versus Philippine peso is valued
at 56.904, Euro 59.599, British pound 68.760,Canadian 41.567,Singapore
41.418,Japanese yen 0.379, Swiss Franc 61.955.

These data and information as a whole indicate that our country is

relatively doing well in one aspect and coping with the other aspect of the
economy. Our leaders need to improve our fiscal policy and governance in
terms of managing our resources both natural and human. We need to
attract more foreign investors, businesses and untighten our foreign policy
regulations. Our government must also continue the build build program
and craft a law on Comprehensive Master Plan for Infrastructure
Development that will serve as the blueprint or roadmap of our country’s
long-term plan infrastructure projects. This is to give way for more
infrastructures across the country, to support businesses, trading,
transportations and other human activities that helps build and shape our
economy.

5. Discuss your understanding of inflation, GDP and Monetary

Policy.

Inflation represents the rate of increase of the prices of goods and

services or the prices of the cost of living over a period of time. When the
interest rate of a country is low, people tend to borrow more money which
consequently increases spending. When spending power of people increases,
prices of goods and services also increases. This results to inflation. Is
Inflation bad or good. Some economists believed that a steady small amount
 BA 2004 – MANAGERIAL ECONOMICS

of inflation can help drive economic growth while high inflation is harmful
and damages our economy.

Gross Domestic Product (GDP) is the total monetary or market value of

all the finished goods and services produced within a country’s borders in a
specific time period. As a broad measure of overall domestic production, it
functions as a comprehensive scorecard of a given country’s economic
health. What causes GDP to grow are infrastructure development, foreign
trading (export), foreign investment and businesses, good education system,
adequate housing and agriculture production, power plants etc. Our
country experiences low GDP growth in the 2 nd quarter of 2023 to 4.3% from
7.5 in 2022. This means slowing down our economic growth for the time
being. Our Government is positive that we would end up an increase up to
6% at the end of this year and rise a little bit next year.

Monetary Policy refers to the steps taken by a country’s central bank to

control the money supply for economic stability. When spending is too high,
Central Bank implements tightened money supply through higher interest
rates. This is done to control inflation. During economic slowdown where
people has difficulty to cope with the demands of living, Central Bank
implements various expansionary policies like lowering interest rates or
decreasing bank’s reserve requirements. This is to uplift money supply and
enhance spending power of the people. This will fuel the economy again and
may result to inflation due to spending capacity of the people and the cycle
goes on and on.