Economic Relevance

A. Poverty and Affluence

• Poverty in the midst of affluence is the basic structure for most third world countries.
• An introductory course on Economics must constantly deal changes in its concepts and theories to suit the current situation. Insights on origins, results and solution are primary concerns.

B. P & A as a basic structural problem

• In third world countries, only a small percentage of the population hold most of the wealth and power, while the rest are deprived of resources essential for human development.
• Poverty has a dehumanizing effect on people: inadequate healthcare, deprivation of clothing and shelter, poor education and lowlife expectancy.
• The problem of poverty gets more acute when it coexists side-by-side with obvious wealth within a smaller given vicinity.
• Questions can therefore arise in such a situation:

1. How can wealth coexist with poverty?
2. How are economic wants translated into production of goods and services?
3. Who decides what to be produced?
4. On what basis are they distributed?
5. Why do some get so much and while most get so little?

C. Income Inequality and Poverty

• It is important to know the distribution of income within the population
• Determine the gap between the rich and the poor

1. Get the mean income of both extremes of the social ladder (the richest vs. the poorest)
2. Find out the percentage of difference between two figures and calculate how much will the poor need to equalize the income of the rich.

• Upper Quintile vs. Lower Quintile Ratio (UQ:LQ)

Definition: A quintile is 1/5 of a given population, or 20% The UQ:LQ ratio is the ratio of mean income of the top 20% to the mean income of the poorest 20%

• Poverty Thresholds

1. Measures the percentage of the population whose incomes are able to meet their basic needs (food, clothing, shelter, etc…).
2. Food threshold is the cost families are willing to spend on food
3. Total poverty threshold is the percentage of the food threshold in the total budget.

D. Significance of Third World Economics

• Economics is the study of how to fully utilize scarce resources to produce goods and services.
• Political Economy takes into account the institutional processes by which scarce resources are used to produce the goods and services.

E. Reasons for Studying Economics

• To find explanations and possible solutions to the developmental problems plaguing a certain region.
• To learn the inner workings of money within the society.

Further Reading

• Economics lesson plans were based and adopted from Fr. Roberto Yap's economics notes found in the Tulong Dunong Sourcebook and Michael P. Todaro: Economics for a Developing World