DISTRIBUTION

Chapter 4

FACTOR PRICES AND INCOME DISTRIBUTION

Lesson 1

Distribution of the National Income

1. Personal Distribution

- is the distribution of the National Income among the persons or households which produced the aggregative product of society.

Lorenz Curve

2. Functional Distribution

- distributes income according to one’s function or role in society.

Functional Distribution of the Country’s Output

FACTOR PAYMENTS AND ITS RELATED CONCEPTS

Lesson 2

Rent (Upa)

Payment, usually monthly, for use of space or property.

Wage (pasahod)

Price paid for human exertion or effort. Or called payment for manual labor and usually paid in money.

Classifications of Wages

1. Time wages

-It has the basis of length of the time during which the laborer renders his services.

Classifications of Wages

2. Piece wages-wages paid according to the amount of

work labor performs.

3. Fees-wages paid to professionals.

Classifications of Wages

4. Commissions

- based on the percentage of the total sales of products or goods by memebers of the labor force.

Classifications of Wages

5. Extra wages-wages in addition to the regular

salaries and income of workers.

6. Wages-in-kind-non-monetary wages paid to labor.

Two kinds of labor

1. Physical labor(Skilled labor, semi-skilled labor, unskilled labor)

2.Mental labor(Professional labor, labor of administration and supervision, labor of invention and creation)

Theories of wages

1. Subsistence theory of wages 2. Minimum wage theory 3. Wage fund doctrine

4. Marginal productivity theory of labor and wages

Theories of wages

5. Demand and supply of labor theory

6. Bargaining theory 7. Business cycle theory

Labor theory of value

-wage paid to labor is equal to the amount of work applied to produced a commodity or its cost.

Demand for labor

-the firm hires more labor when the demand for its product goes up.

Labor productivity and labor mobility

- the expected productivity of the workers lies behind the demand for labor.

-labor mobility is the ability of labor to move from one place industry or sector of economy to another

Supply of labor

-in determining the amount of the labor supplied to an industry or firm the supply curves of all factors tend to be upward-sloping in the short-run.

Interest

-a person usually receives income in the form of money.

Interest rates vary among financial instruments because of differences :

1. Risk

2. Maturity

3. Liquidity

Theories of interest

Agio or premium theory

-future goods are important

Abstinence theory

-income not consumed

Marginal productivity theory

-capital + interest

Theories of interest

Supply and demand theory

-supply, demand and price go together

Government policies and interest rates

-loan paid in long period of time with low interest.

PROFIT -entrepreneurs income

ENTREPRENEURIAL PROFITS-Profits are rewards of the

entrepreneur for his labor.

• Functional return• Residual return

TYPES OF PROFIT

A. GROSS VIS-AS- VIS NET OR PURE-Remuneration vs. Contractual cost

B. NORMAL VIS-AVIS EXCESS-Gain profit vs . Profit + excess profit

THE MEASURE OF PROFITS-The amount of profit made.

GENERATION OF PROFITS-Contineous profit.

RESULT OF MONOPOLY-The goods are unique.

LABOR EXPLOITATION-Give what is due to caesar.

PROFIT AND INNOVATION-Innovators introduce the newest goods

and services.

RISK AND PROFIT-Positive notion prosper.

ORGANIZATION OF PRODUCERS-Unity is the best policy.

COLLECTIVE BARGAINING-Working condition must be observed.

EFFECTS OF UNIONS-Strong union and fair competition.

BUSINESS CARTELS-Learn,study and create.

LAND REFORM VIS-À-VIS AGRARIAN REFORM

Lesson 3

1.The difference between land reform and agrarian reform.

2.The difference between unemployment and underemployment

3.The types of unemployment

4. Philippine unemployment rate

5. The Philippines’ rank regarding world poverty

Land Reform

-The distribution of land from the landlords to the tenant farmers in order to improve the plight of these tenant farmers

Agrarian Reform

-Is not a distribution land but goes beyond the question of land rights.

-Promote social justice

Unemployment and Poverty

Unemployment- without jobs and actively looked for

work within four weeks

Underemployment- employed in a job but not within his

field of specialization; receiving less payment for his work

Types of Unemployment

Seasonal Frictional Structural Cyclical Real Wage

Unemployment rate- the level of unemployment divided by

the labor force

Labor force- the number of people employed and

unemployed but finding work

7.1%-rate of unemployment in the Philippines in July of 2011(www.dole.gov.ph)

No.70 among 141 countries all over the world on a Population Below poverty line research