MACROECONOMICS
GROUP 1
SABIOR, ALVIN
ABUNADO, MARIAH JULIA M.
CABALLERO, MAHRIEL L.
GUANGCO, JANE KATHLYN P.

INTRODUCTION
BASIC TERMS IN ECONOMICS
➔ It is essential that the student be familiar with the terms that will be used in the
study.
➔ A Good is anything which yields satisfaction to someone.
➔ Goods may also classified according to use.
- Consumer Goods
- Capital Goods
- Essentials
- Luxury Goods
- Economic Goods

ECONOMIC RESOURCES
- The things which are needed to carry on the production of goods and services are
called Economic resources or factor of production.
- These resources are
- Land - refers to all natural resources.
- Labor - is any form of human effort exerted in the production of goods and
services.
- Capital- refers to man-made goods used in the production of goods and
services.
- Entrepreneur - the entrepreneur is not presented as a separate factor of
production, but is classified as part of labor.

THE NEED TO CHOOSE
SCARCITY - refers to the limitations that exist in obtaining all the goods and
services that people want.
ECONOMIC PROBLEMS:
1. What to produce and how much?
2. How shall goods be produced?
3. For whom shall goods be produced?

TYPES OF ECONOMIC SYSTEM
1. THE TRADITIONAL ECONOMY - This is basically a subsistence economy.
2. THE COMMAND ECONOMY - In this type of economy, the means of
production are owned by the government.
3. THE MARKET ECONOMY - The basic characteristics of this economy is that
resources are privately owned and decisions are made by the people
themselves.

Demand for goods and GOODS MARKET Supply of goods and services
Services
Peso Votes What? Cost of Production
Consumers How? Producers
Resources Owner For Whom?
CApital Capital
Labor Resource Market Labor
Land LAnd
Resource
Market

THE MIXED ECONOMY
- It is seldom that an economic system exists in pure form.
OPPORTUNITY COST
- When one makes a choice, there is always an alternative that has to be given
up.

Let us study a graphical presentation of this concept.
Let us say that you as a student have a weekly food allowance ₱
300.00. You decide this week to spend it on a combinations of
cola’s and sandwiches. In the school canteen, a chicken sandwich
costs ₱ 30.00 and a cola ₱10.00, giving you the following
alternatives.

Combinations of Colas and Sandwiches
Number of Colas Number of Chicken Sandwiches
0
3
6
9
12
15
18
21
24
27
30
10
9
8
7
6
5
4
3
2
1
0

SOCIETY’S TECHNOLOGICAL POSSIBILITIES
- Since a nation has limited resources, it has to cope by choosing different
potential bundles of goods.
- Existing technology is used to combine these different inputs.
Inputs consisted of
- LAND
- LABOR
- CAPITAL
- OUTPUTS
- refers to useful goods and services resulting from the
production process.

THE PRODUCTION POSSIBILITIES FRONTIER
- Since society faces limitations due to scarcity of resources, it has to
decide on the combinations of goods that are to be produced using a
given amount of input.
Let us use the following example to illustrate this.
Ten (10) units of capital can be used to produce Goods X and Y. Possible
output levels are as follows :

THE TOOLS OF ECONOMICS
- Economics is a positive science that means it deals with what it is. This is in
contrast to normative economics which deals with what should be.
- This scientific approach can be outlined in the following stages:
1. Observation - An analyst should be able to recognize conditions, behaviors,
and events in the environment.
2. Definitions and Assumptions - The analyst should describe the specific uses
of the study and the peripheral conditions which affect the economic
behaviors which are being studied.
3. Deductions - These are hypothesis or Theories presented for empirical
validation.
4. Empirical Texting- Deductions have to be tested as to their validity and
correctness.

MACROECONOMICS AND MICROECONOMICS
Macroeconomics - is the division of economics that deals with
aggregates.
Microeconomics - is the division of economics that studies the
economy in parts.