2. Efficient allocation of the scarce means of production
toward satisfaction of human needs and wants.
Came from two Greek words: “oikos” (household)
and “nomus” (system or management).
“Oikonomia” “oikonomus” therefore means the
management of household.
ECONOMICS
3. Limitedness of resources.
The limited availability of economic resources relative
to man’s or society’s unlimited demand for goods and
services.
The basic and central economic problem confronting
every man and society.
SCARCITY
4. LAND- The soil or the ground surface together with all
the natural resources; the compensation for use of
land called rent.
LABOR- Any form of human effort exerted in the
production of goods and services. The compensation
for labor rendered is called salary (annual or monthly
basis) or wage (hourly or daily compensation).
CAPITAL- Man-made goods used in production of
other goods and services.
ENTREPRENEURSHIP- The person who manages all
the factors of production.
FACTORS OF PRODUCTION
5.
6. RESOURCE MARKET- the place where resources or
services of resource supplier are bought and sold.
PRODUCT MARKET- the place where goods and
services produced by businesses are bought by and
sold to the households.
BUSINESS- buys resources and sell the products.
HOUSEHOLD- buys products and sell resources.
CIRCULAR FLOW MODEL
7. Refers to the foregone value of the next best
alternative.
Expressed in relative price. This means that
the price of one item should be relative to the
price of another.
OPPORTUNITY COST
8. CONSUMPTION- The society decides the goods and
services they want to consume and utilize.
PRODUCTION- The producers determine the consumer’s
demands and decides how to allocate resources to meet
them.
DISTRIBUTION- Proper allocation of all the resources for
the benefit of the whole society.
GROWTH OVER TIME- All problems of choice have to be
seen in the context of future events.
BASIC DECISION PROBLEMS
9. What to produce?
How to produce?
How much to produce?
For whom to produce?
FOUR BASIC ECONOMIC QUESTIONS
10. EFFICIENCY- refers to productivity and proper
allocation of economic resources.
EFFECTIVENESS- Attainment of goals and objectives.
EQUITY- Justice and fairness.
3E’S IN ECONOMICS
11. POSITIVE ECONOMICS- An economic analysis that
considers economic conditions “as they are” or “as it
is”
NORMATIVE ECONOMICS- An economic analysis
which judges economic conditions “as it should be”
POSITIVE AND NORMATIVE
ECONOMICS
12. “All things are held constant or else equal.”
Used as device to analyze the relationship between
two variables while the other factors are held
unchanged.
CETERIS PARIBUS ASSUMPTION
13. MICROECONOMICS- Individual decision, focuses on
two main players- the buyer and the seller.
MACROECONOMICS- It seeks to understand the
behavior of the economy as a whole.
BRANCHES OF ECONOMICS
14. TRADITONAL ECONOMY- basically a subsistence
economy
COMMAND ECONOMY- production is dictated by the
government.
MARKET ECONOMY- resources are privately owned.
SOCIALISM- owned by the state.
MIXED ECONOMY-mixture of market and command.
TYPES OF ECONOMIC SYSTEM
15. WEALTH- anything that has functional value.
CONSUMPTION- usage of the available goods and
services by the buyer or consumer.
PRODUCTION- creation of firms by an output.
EXCHANGE- process of trading or buying and selling
goods or services for money.
DISTRIBUTION- process of allocating or apportioning
scarce resources to be utilized.
IMPORTANT ECONOMIC TERMS
16. Adam Smith- known as the “Father of Economics”, wrote
the “Wealth of the Nations” known as the bible in
economics.
Karl Marx- wrote “Das Kapital”
Alfred Marshall- wrote “Principle in Economics” and
developed the analysis of equilibrium and the concept of
marginalism.
John Maynard Keynes- wrote “The General Theory of
Employment, Interest and Money”
John Hicks- recognized for his analysis of IS-LM model.
NOTABLE ECONOMISTS AND THEIR
CONTRIBUTIONS
