7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 1/13

 

An Analysis of Average Propensity to Consume and Average

Propensity to Save of Household Families in Region II (Cagayan

Valley) from year 2000 to 2009

An Undergraduate Research Paper

Presented to

Professor Nicetas Sison

Prepared by:

BSPE II-1

Peñamante, Russel R.

Robles, Marielle Shaira

August 2013

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 2/13

CHAPTER 1

INTRODUCTION

The average propensity to consume (APC) refers to the percentage of income that is spent

on goods and services rather than on savings. The average propensity to save (APS), also known

as the savings ratio, refers to the proportion of  income which is saved, usually expressed for 

household savings as a percentage of total household disposable income. 

The families in Region II, to be described later on, is the subject of this paper upon

getting the Average Propensity to Consume and Average Propensity to Save. For instances, we

know that income, at the end of the day, is either spent or saved. With this paper, we will figure

out how the flow of income of Region II family circulates.

Description.

Cagayan Valley (Filipino: Lambak ng Cagayan ) is a region of the Philippines (also designated

as Region II or Region 02). It is composed of five provinces: Batanes, Cagayan, Isabela, Nueva

Vizcaya, and Quirino. It has four cities: industrial center  Cauayan City, its regional center Tuguegarao, its investment hub Ilagan City and its Premier City Santiago City.  It has 90

municipalities and 2,311 barangays spread over 26,837.6 square kilometer land area.

Most of the region lies in a large valley in northeastern Luzon, between the Cordilleras and the

Sierra Madre mountain ranges. The eponymous Cagayan River, the country's longest, runs

through its center and flows out to the Luzon Strait in the north, at the town of Aparri, Cagayan. The Babuyan and Batanes island groups that lie in the Luzon Strait belong to the region.

Cagayan Valley is the second largest region of the Philippines in terms of land area. It is thelarge mass of land in the northeastern region of  Luzon, comprising today the provinces of 

Cagayan,  Isabela,  Nueva Vizcaya and Quirino. It is bounded to the west by the Cordillera

Mountain Range, to the east by the Sierra Madre Mountain Range, and bounded by the Babuyan

Island, where the waters of the Pacific Ocean in the east and the South China Sea in the westmeet.

Cagayan Valley contains two landlocked provinces, Quirino and Nueva Vizcaya. Both are

relatively small in size (3057 km2

for Quirino, 4081 km2

for Nueva Vizcaya) and population

(147,000 and 365,000, respectively, by the 2000 census). They are ruggedly mountainous and

heavily forested. Nueva Vizcaya is the remnant of the southern province created when CagayanProvince was divided in two in 1839. They are ethnically and linguistically diverse, with a

substrate of Agtas, Negritos who are food-gatherers with no fixed abodes, overlaid by Ilongots

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 3/13

and others in a number of tribes, some of whom were fierce head-hunters (they have given up the

 practice), with the latest bout largest element of the population being Ilokano.

 Nueva Vizcaya comprises 15 towns; Bayombong is the capital. Agriculture in both has until

recently consisted of slash-and-burn cultivation of corn and maize, though more stable

cultivation of vegetables and fruits are becoming established. They produce logs and are tryingto manage their forest resources so that production can be sustained indefinitely. They have

deposits of gold, silver, copper, iron. Nueva Vizcaya has sand and clay.

The province of Isabela is the richest in Cagayan Valley. It was the Top 10 Richest Province in

the Philippines in 2011, being the only province of Northern Luzon to be included in the list.

Cagayan has much to offer visitors: beaches, swimming, snorkeling, skin-diving, and fishing in

the river and the sea, hiking in primeval forest, mountain-climbing, archaeological sites, the

remarkable collection of the provincial museum, the Callao Caves, and many fine churches.Even here there are fortifications built to protect the inhabitants from raids by the Mara.

On January 11, 2008, the Cagayan Bureau of Fisheries and Aquatic Resources (BFAR) statedthat tilapia (species of  cichlid fishes from the tilapiine cichlid tribe) production grew and

Cagayan Valley is now the Philippines’  tilapia capital (Saint Peter ’s fish). Production supply

grew 37.25% since 2003, with 14,000 metric tons (MT) in 2007. The recent aquaculture congressfound that the growth of tilapia production was due to government interventions: provision of fast-growing species, accreditation of private hatcheries to ensure supply of quality fingerlings,

establishment of demonstration farms, providing free fingerlings to newly constructed fishponds,

and the dissemination of tilapia to  Nueva Vizcaya (in Diadi town). Former cycling championLupo Alava is a multi-awarded tilapia raiser in Bagabag, Nueva Vizcaya

Objective of the Study.

The general objective of this research it to satisfy the intellectual orgasm of the

researchers which ought to be future political economists, by means of calculating and analyzing

the percentage of income that is spent on goods and services or the Average Propensity toConsume (APC) and the portion of income that is saved rather than spent or the Average

Propensity to Save (APS) of a particular region which is Region II using the data of year 2000,

2003, 2006 and 2009 at constant price 2000 that will help to determine our objectives.

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 4/13

 

Definition of Terms.

Income - the sum of all a household's wages, salaries, profits, interest payments, rents, and other 

forms of earnings in a given period of time. It is a flow measure. Consumption- is the total valueof goods and services that a household consumes in a given period.

Saving - is the flow that affects the stock of wealth.

Average Propensity to Consume or APC - refers to the percentage of income that is spent ongoods and services rather than savings.

Average Propensity to Save or APS - is an economic term that refers to the proportion of income that is saved rather than spent on goods and services.

Family Income and Expenditure Survey or FIES - is a nationwide survey of householdsundertaken every three by the NSO. It is the main source of data on family income and

expenditure, which include among others level of consumption by item of expenditure as well as

source of income in cash and in kind.

Scope & Limitations.

This research focus on the APS and APC of the household families that living inRegion II and also we looked on how greater they spend and saved. We used the source

coming from NSO as our primary data, on year 2000-2009.

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 5/13

CHAPTER 2

RESEARCH METHODOLOGY

We used the descriptive method and analysis to achieve the objectives of the study. This

method is designed for the researcher to describe and evaluate the family income, consumption,expenditure and saving from the archives of FIES on National Statistics Office Website. This

method also seeks to describe and determine the sources of data which in this study is a region

 particularly Region II (Cagayan Valley) which in this study were the Average Propensity to

Consume (APC) and Average Propensity to Save (APS).

DATA GATHERING

The data gathered were secondary data; we used the Family Income and Expenditure

Survey (FIES) from National Statistics Office because of its validity and reliability. FIES is a

nationwide survey conducted every three years which aims to gather data on family income and

family living expenditure and related information affecting income and expenditure levels and

 patterns in the Philippines. Since the study is limited to Region II (Cagayan Valley) only, we

used the table of Total Income, Expenditure and Savings of Families by Region and At Constant

2000 Prices for best measurement. A copy of the data gathered is presented below:

Total Family Income and Expenditures at 2000 Prices,

 by Region: 2000 and 2003

(in Billion Pesos)

====================================================================== === Expenditures | Income

-------------------------------------------------

Region 2000 | 2003 | 2000 | 2003

-------------------------------------------------

Total | Total | Total | Total

-------------------------------------------------------------------------

Philippines 1,791,133 1,791,275 2,187,250 2,141,696

National Capital Region 534,561 436,552 657,268 533,589

Cordillera Administrative

Region 30,351 30,548 38,404 36,765

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 6/13

I - Ilocos 77,324 79,454 97,628 96,249

II - Cagayan Valley 50,240 51,945 61,445 66,188

III - Central Luzon 185,505 224,122 233,724 259,500

IVA - Calabarzon 268,005 300,960 319,975 350,480

IVB - Mimaropa 35,721 37,301 44,470 45,804

V - Bicol 74,064 78,769 85,693 91,162

VI - Western Visayas 114,756 108,911 132,806 124,162VII - Central Visayas 92,426 103,342 109,981 123,131

VIII - Eastern Visayas 53,116 56,630 67,432 69,123

IX – Zamboanga Peninsula  38,465 40,180 47,913 49,747

X - Northern Mindanao 57,326 59,134 74,688 70,772

XI - Davao 65,462 71,884 78,107 84,512

XII - Soccsksargen 2 53,168 54,054 66,759 72,007

XIII - Caraga 29,477 28,994 33,324 33,370

Autonomous Region in Muslim

Mindanao 3 31,165 29,542 37,633 36,468

--------------------------------------------------------------------------

Source:   2003 Family Income and Expenditure Survey Final Results, National Statistics Office.

 Page last updated: September 14, 2007 

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 7/13

Formula and Variables

Variables:

Y - Personal Disposable Income

C - Personal Consumption Expenditure

S - Personal Saving

APC - Average Propensity to Consume

APS - Average Propensity to Save

Formulas:

For Personal Disposable Income: Y = C+S

For Personal Consumption Expenditure: C = Y-S

For Personal Savings: S = Y-C

For Average Propensity to Consume: APC =

 

For Average Propensity to Save APS =

 

Since Y=C + S,

+

= 1, hence APC + APS = 1

From these Formulas, the researchers can determine the Average Propensity to Consume and

the Average Propensity to save.

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 8/13

CHAPTER 3

PRESENTATION, ANALYSIS AND PRESENTATION OF DATA

Table 1: The Cagayan Valley Region: in year 2000, 82 % of their total income goes to

consumption and the remaining 16% goes to savings. In year 2003, their consumption decreases

 by 3% and savings increases by 3% that is why 79% was consumed and 21% was saved. In year 

2006, the region’s consumption goes up by 3% and their saving decreases by 3% and their consumption and saving is the same as year 2000. In year 2009, the r egion’s consumption againdecreases by 5% - from 82% to 77% and their savings increases by 5% from 18% to 23%.

Table 1. Total Income, Expenditure and Savings of Families of Region II (Cagayan Valley)

Annual 2000 to 2009. At Constant 2000 Prices

Unit: In Billion Pesos

CONSUMPTION SCHEDULE

YEAR Y C APC S APS

2000 61 50 0.82 11 0.18

2003 66 52 0.79 14 0.21

2006 67 55 0.82 12 0.18

2009 75 58 0.77 17 0.23

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 9/13

 

18% of 

incomegoes to

savings

88% of 

the Total

Income

goes to

Consum

ption

Year 2000

Savings (S) Consumption (C)

21% of 

incomegoes to

savings

79% of 

the Total

Income

goes to

Consum

ption

Year 2003

Savings (S) Consumption (C)

18% of 

income

goes to

savings

88% of 

the Total

Income

goes to

Consump

tion

Year 2006

Savings (S) Consumption (C)

23% of 

income

goes tosavings

77% of 

the Total

Income

goes to

Consump

tion

Year 2009

Savings (S) Consumption (C)

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 10/13

Table 2

Table 2. From year 2000 to 2009, the total income of families of Region II increases by

approximately 14 billion and from year2006 to 2009 it reaches its highest income rate.  In termsof Consumption, from year 2000 to 2009 the region’s total consumption increase by

approximately 8 billion and from year 2006 to 2009 it reaches its highest consumption rate. From

year 2000 to 2003, the personal savings of the families of Region II increases by approximately 3

 billion and decreases by approximately 2 billion from 2003 to 2006 but increase by almost 5

 billion in 2006-2009. 

61

66 67

75

5052

5558

1114

12

17

0

10

20

30

40

50

60

70

80

2000 2003 2006 2009

Y,C,S

YEAR

Family Disposable Income

Consumption Expenditure

Personal Savings

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 11/13

Table 3

Table 3. Base on the graph, in the years 2000 and 2009 takes place the highest percentage

rate of consumption of 82% but lowest percentage rate of saving from their total income of 18%

while year 2009 has the lowest percentage rate of consumption of 77% but highest percentagerate of savings of 23 %.

0.82 0.79 0.82

0.77

0.180.21

0.18

0.23

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2000 2003 2006 2009

APC,APS

YEAR

Average Propensity to

Consume

Average Propensity to

Save

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 12/13

IV. CONCLUSION

After interpreting and analyzing the data the following conclusions are drawn out:

1.)  From year 2000 to year 2009 at constant 2000 prices, 77% to 82 % of total personal

disposable income of the household families in Region II goes to consumption and

11% to 16% of their total personal disposable income goes to savings meaning as the

consumption increases the savings decreases.

2.)  We can determine the behavior of household families of Region 2 (Cagayan Valley)on how their personal disposable income affects their personal consumption and

 personal savings through the use of average propensity to consume and average

 propensity to save.

3.)  Even the family disposable income and consumption expenditure increases their 

 personal savings are not constantly or gradually increasing because the increase in

income and consumption are not proportion to each other.

4.)  The data about the household families of region 2 shows that not all income are

consumed but instead saved.

5.)  In the years 2000 and 2006 has the same Average Propensity to Consume and

Average Propensity to Save but differ in personal disposable income, consumption

expenditure and personal saving by 1% meaning if the interval in change of income

and consumption is closely the same the result will be same Average Propensity to

Consume and Average Propensity to Save.

7/27/2019 For Final Editing1

http://slidepdf.com/reader/full/for-final-editing1 13/13

 

V. BIBLIOGRAPHY

Ericta, Carmelita N.. "Total Income, Expenditure and Savings of Families By Region:2006 and

2009." National Statistics Office. Press Release, n.d. Web. 22 Aug 2013. <http://www.census.gov.ph/old/ data/sectordata/2009/ iefr09tab2b.pdf>.

http://en.wikipedia.org/wiki/Cagayan_Valley

Investopedia contributors."Terms".Dictionary.August

2013.Web.<http://www.investopedia.com/Terms.asp>.

Pascua, Melissa C. Philippine Government. National Statistical Coordination Board. Some Notes

om the Questions Asked in the Family Income and Expenditure Survey (FIES). Technical Notes,2003. Web. <http:// www.nscb.gov.ph/ technotes/poverty/partii/ annex5_2.asp>.

Philippine Government.National Statistical Coordination Board.Family

Income.Web.<http://www.nscb.gov.ph/secstat/d_income.asp>

Philippine Government. National Statistics Office. Family Income and Expenditure Survey(FIES). 2011. Web. <http:// www.census.gov.ph/ content/family-income- and-expenditure-

survey- fies>.

Statistics Office conducts the 2012 Family Income and Expenditure Survey. Press Release, 2012.

Web. <http://www.nscb.gov.ph/ pressreleases/2012/ PR-201207_PP1_08.fies.asp>.