2. * Know the Meaning of Economics;
* Evaluate the Great Economist Definition of Economics;
* Identify the different branches of Economics ;
* Describe the Aims of Economics;
* Determine the Problem of Scarcity;
* Identify Economic Resources;
* Characterize the Different Economic System models; and
* Determine the basis for proper allocation of resources
through :
1. Opportunity Cost;
2. Production Possibilities curvec;
3. Production Possibilities Cost.
3. Simple buy and sell in a store or in a market is
actually demand and supply transaction. People buy
and order to satisfy their wants but at the times the
satisfaction is not fully maximized due to lack of
money . Others do not buy anymore due to
insufficient purchasing power has not been met.
These people would rather sort to ask for a share or
"pahingi" to those who can afford. Some others buy
unceasingly yet they are not satisfied at all, Likewise ,
other people who are willing to buy more are still
unfortunate because there is already shortage in
supply . They do not mind the price at all.
INTRODUCTION
4. At times , there is abundance in supply wherein
only a few are willing to purchase even if the price
is very low . The unlimited wants of the people
with very the limited means to meet the wants is
the reason to study the economics . Almost all
aspects of life are affected by economics. In order
to give a fair share food, clothing and shelter,
economist has to spread these resources wisely for
everybody to be happy. Food, clothing and shelter
are natural resources describe to be the basic
needs of man. These resources are not free. In fact
, they dictate a price that money is needed to
purchase them.
5. Even our recreation and socialization need spending .
Almost all activities as a person needs money. But
money itself is limited unless there is a continuous
printing of money. From the printing of money to the
number of its turnover from the producer to the
consumer, a student has to acquire basic knowledge
in economics . What commodities and how much of
these commodities the consumer has to buy and the
producer have to produce for each satisfaction needs
a wise decision that would lead to the improvement
of one’s self. A sound decision will result to
improvement of his community and country. This is
the essence of economics.
6. . This means that economics refers to
the operation of household
transaction. Starting from the
simple unit of the society: the
family. The income generated by
the parents up to the budget they
stretch to meet every need for the
members of the family is already
an economics in action.
LET US DEFINE BY THEORY THE WORD ECONOMICS
Economics-
Came from Greek word "oikonomia" that means
management of household expenditures
7. If we put it to the upper bracket of the society: the
GOVERNMENT, economics is about the
management or operation of the entire productions
and consumptions of the people to be able to meet
everyone's need, the need to study intelligent the
process of how to allocate the limited natural
resources and non-natural resources to satisfy the
unlimited wants of the people. "Therefore,
economics is the study of efficient and effective
allocation of scarce resources in order to satisfy
unlimited wants of the people.
8. SOME OTHER GREAT ECONOMIST
DEFINES ECONOMICS
Adam Smith –
The father of economics , state that
economics as an inquiry about the
nature and causes of the wealth of the
nations.
Paul Samuelson
- Economist is a study of how the society
could possibly use and share the limited
resources into different items of products
and services for all the sectors of the
society for the present and the future
consumption.
9. Paul Wonnacott –
It is a study of how man works, looks
for food and finds material needs.
Economics emphasizes problem in
production of how to solve or
minimize the problem.
Lloyd Reynolds –
It is the study of production,
management and use of scarce
resources.
10. Cristobal Pagoso
Economics are concerned when the
wise allocation of scarce resources.
Roger Le Roy Miller
The situation that needs the decision of how ,
when and where the scarce resources be used.
11. Gerardo Sicat
A Scientific study that points
out how people and society decides.
People have unlimited needs.
In order to satisfy this , they get resources that
are limited. Consumption may be today or tomorrow
that is why in every decision to choose one has to
take into consideration the element whether today or
tomorrow . Aside from the usage of resources it has
it's own value and demands that this need be
addressed wisely.
12. 1. Microeconomics—
Micro means small. It refers to the study of small unit of the
society's ( I. E. Family, household, person ) consumption,
spending , production and investment.
2. Macroeconomics–
Macro means big. It refer to the study of large unit of the society
(i. e . Banks, businesses , firms, government, other
countries) consumption, spending, production and
investment. The study of the whole economy of the country
base on it's measurement of it's production, income and
spending commonly called "Gross National Product or GNP" .
It also includes the decision of implementing fiscal and
monetary laws for the whole economy.
As per definition , the study of economics comprises two divisions.
Microeconomics and Macroeconomics.
13. In study of economics, a person might be able
to know how to decide in relation to his economy.
For example, in economics, there are questions one
should analyze first: Why is it that certain specific
good or product dictates different price from the
store of Mang Kiko and Aling Badang. Why is it that
some people who work using only paper and pen
and is exerting very little energy earns a lot than
those people who work using shovel and hammer
and exerting so much energy? How does the
production of the country affect the tax system?
Why does the price of goods continue to increase?
IMPORTANCE AND AIMS OF ECONOMICS
14. What is the effect to our economy when the price
of oil increases? What happens when there is
inflation? Why is it that exchange rate of US dollar
to Philippines peso determines stability of our
nation? Is it true that if one earns much, he spends
more and extends his lifespan and acquires higher
educational attainment? Are there economic
reasons behind these? Well , the study of
economics will give answers to these queries.
15. . To be able to understand and explain economic events
and economic theories, the student of economics must be
able to have the basic tools of economics:
1. Logic -- it is the science of good and sound
reasoning. Conclusion must be drawn from good
reasoning or logical reasoning.
2.Mathematics -- It answers the economic problems
which are best solve with the use of numbers and
quantitative description.
3. Statistics -- Some of the theories are based on
observation and experimentation through the use of
statistics. It is the tool use in empirical validation.
16. THE PROBLEM OF SCARCITY
Economic resources are scarce and
limited in supply. What are economic
resources? These are resources that are
used for the production of economic goods.
These are what we call factors of the
production.
"These resources are: Land, Labor, Capital
and Entrepreneur. "
17. Four Factors of Production
1. Land- considered the natural resources. Trees, water,
forest, mineral, and oil are considered under the category of
land as factor of production in Economics.
These natural resources even
without the help of man could
produce something for their
consumption. Trees bear fruits;
water has its own creatures
such as fishes, shrimps, oysters,
shells and other ocean
creatures;
mineral and oil are essential products that are used in
the production of other products such as fuel, gasoline
and energy that gives life to our industry.
18. 2. Labor-
refers to the labor force. The exertions of human
energy in order to produce or in layman's
term to work. According to the Philippine
labor law, labor force starts from age 15 years
old and above who are able and capable of
working and could render service, employed
or unemployed under the labor force code.
Some of those not included in the counting of
labor force are; those who are full time
students, housewives and those disabled
persons who are incapacitated to work.
19. Nevertheless during our modern times these
disabled persons have already find their place
contributing to the labor force because modern
society paved the way of proving that these
people still are worthy in the labor force. Even
the housewives are no longer housekeepers are
caregivers in their family. They involved
themselves in a part time job like selling
processed meats (tocino, longanisa etc.)
cosmetic (Boardwalk, Avon, Natasha)
handicrafts and Electronic Load(E-loading).
20. 1. Physical Exertion-
Labor using mostly hand and body
or actual manpower action.
Labor Force is Divided into Two Categories:
2.Mental Exertion-
Labor using mostly brain for
decision making and
planning.
21. Filipinos are known as exporter of labor
force because of their known resilient physical
stamina matching their good educational
attainment. Today a lot of professional workers
such as nurses, teachers, physical therapists,
caregivers, seamen, singers and dancers are in
demand abroad because of their extraordinary
skills and talents.
22. The overseas contract workers comprise a big part in the
computation of our Gross National Product (GNP) and Gross
National Income(GNI).
Anything that is man made
like machineries and equipment
that are used in the production of
another product would be under
capital. Due to man’s innovation
and encompassing vision of the
future man has created tools and
equipment that allowed him to
produce his everyday needs.
Technology is a very good example
of capital.
3. CAPITAL-
23. 4. ENTREPRENEUR-
Although it can be classified as
under labor, it has a special type of work
and is therefore , not ordinary labor. He is
the person who combines the other
economic resources for use in the
production of goods and services.
Entrepreneur is given the gift of skill in
providing physical and mental knowledge
plus money to put up a business. He
hopes to make profit- normal profit-
which is the amount after all allocations
to the other economic resources have
been made.
24. The problem of scarcity is the main reason why
we have to economize our economic resources as
efficiently as possible. Philippines has a rapid growing
population but the resources do not grow instantly.
The use of modern technology really helps a lot in the
efficient distribution of these limited resources yet the
need to economize is still very much needed to satisfy
everybody. Economics also studies the basis in the
problem of production. The need to choose arises
because of the limitation of resources. The need to
satisfy unlimited wants of the people will be the basis
for the economist action. The following are the four
major concerns of economics in the problem of
production or what is called economic problems.
25. FOUR ECONOMIC PROBLEMS
1. What are the products and services to be produced.
Woods are being used for the
production of houses, cabinets and
furniture, now the answer to the question
whether logs should partially or totally be
banned is subject for intelligent debate.
For human resources, what is the right age
for those who work part time or full time
job. What type of worker should be
needed for a certain work? How many
holidays are to be given, when does the
contract ends, these are the questions.
26. Woods are being used for the production of houses,
cabinets and furniture, now the answer to the question
whether logs should partially or totally be banned is subject
for intelligent debate. For human resources, what is the right
age for those who work part time or full time job. What type
of worker should be needed for a certain work? How many
holidays are to be given, when does the contract ends, these
are the questions.
2. How to produce-
This is the decision in the production, process and
method of producing. Are we endangering the environment
if we are putting our waste anywhere? Are the products not
harmful to the health of the people? These are some
questions to be answered in the process of how to produce
a certain product
27. 3. For whom to produce-
These are the type of people who will demand for the
product- the market target. Who would accept the product from
the market?
4.Availability of the produce-
Are the resources available all throughout the year either
locally made or export material? Will the product be a finished
product, processed product or by- product? Will it be seasonal or
occasional?
28. The manner in which these economic problems will be solved
depends greatly on the type of economic system it adopts.
Types of Economics Systems
1.Traditional Economy –
This a very backward of type of economy. It is characterized by
a system where the production of goods, trading and
distribution of incomes are sanctioned by custom. Referring to
the traditional manner of doing things makes decisions on
what, how and for whom to produce. The methods of
production are carried over by the system used by our
forefathers. Technological change and innovation are closely
constrained because they may clash with tradition and
threaten the social order. Religious and cultural values are over
and above economic activity. To attain status in society, one
must belong to the highest position in the religion or tribe.
29. 2. Command Economy –
The government owns the means of production. The
government dictates what, how and for whom to produce. This
type of economy is also called communist economic structure
whereby all the capital resources and consumer goods are being
divided to its citizenry. No private or individual production and
consumption are allowed. The government dictates prices.
EX.: In Saudi Arabia, the women are not yet liberated from the
household chores. They are not permitted to work for a career. So
most of the commodity of the country produces favor the men
because they are the labor force in the production. In Afghanistan,
because of its tradition, can afford to sacrifice themselves for jihad
or holy war. Since all men are assigned to be soldier, military
weapons are a must in their economy activity. Women are no
longer being sent to school once they finish their elementary
grades.
30. Ex. : The Communist China and the USSR before the dictated
the entire production to be produces and how much of it
would be sold.
Some of essential characteristics of communism are:
a. No economic freedom –
You cannot choose to get rich. Everything has a fair share.
You could not just put up your business because the
government will take care if it. No one is allowed to just lie
down all day; everybody has to work on order to eat.
b. No free competition –
The government is the sole source of central planning
because it dictates how much to produce and how much
price the commodities cost, when to produce and how to
produce.
31. c. No profit motive –
Because communist prides themselves for having equal share,
the government does not impose too much profit because it
gives people what been generated as revenue. Business firms are
not motivated to sell anymore because the government
intervenes the price of their goods.
d. No religion –
People do not believe in God.
3. Market Economy –
The resources are privately owned and the people
themselves make decisions. This is also known as capitalism or
free enterprise economy and it follows the laissez faire policy,
French term which means “ let alone policy” or leave it alone.
The economy problems are being decided by the person who
actively participates in the independent buyers and sellers of
each product and resource therefore, competition arises giving
height to consumer’s sovereignty.
32. The price of a good is the basis for the produces knowledge. This is
the exact reverse of communism,
Ex. USA, Philippines, Great Britain, Japan. Some characteristics of
capitalism are:
e. Presence of economic freedom –
People can have a choice to get rich. They could put up
their own business. If someone does not want to work, he could
choose to do so. If he works hard and longer he could ask payment
for extra working hours.
f. Presence of profit motive –
there are a lot of people motivated in trading and business
because there is private property. Businessmen could price their
goods at their whims but taking in consideration the demand and
supply in the market.
33. g. Presence of competition –
Business needs to survive in the selling that is why they are
competing which each other for the quality and the price.
h. Presence of religion –
This is the recognition of the belief in God. Whatever religious sect
it may enter as long as it does not jeopardize humanity is permitted.
i. No central planning –
There is no one who could dictate how much to produce, when to
produce, how to produce and for whom to produce.
4. Mixed Economy – There are only few country that has a pure
economic system. If you take a look at the United States if
America, although there exists market economy, it cannot
deny that the government is controlling some of its goods. The
USSR basically is known to have a command economy which
uses also market price is some of its commodity. The
Philippines applies three form of economic system.
34. The government controls the price of our basic
commodities through placing price ceiling and price
floor while other commodities depends its price on the
demand and supply in the market. Some of the
religious and cultural values.
Ex. : government controls the price of rice, milk, sugar and
all agricultural products while other commercial
produce such as bags, clothes, cars, appliances greatly
depend its prices on the demand and supply in the
market where competition is very stiff. Basically this
has a coexistence of public and private sector,
managed by the government and private sectors and
they function together generally.
35. The Need to Choose and the Economizing Habit
It is the aim of economics
to have a wise decision with
regards to the allocation of
limited resources. If resources
are abundant and human wants
are limited, economic problems
would not exist but that is not
the case in the real world. To
make the most of what we have
need to economize in order to
satisfy our needs. So a student
who studies economics would
be given a chance to weigh
things before he decides.
36. In giving one thing he is surely be satisfied with the
other alternative and this is the concept of opportunity
cost.
Ex. : due to a limited allowance of a student, he needs to
budget his monetary resources. Let us say that student A
was given 100.00 peso for weekly food allowance. The
cost of hamburger is 20.00 while soft drink is 10.00, giving
the following alternative:
37. The bar graph representation of
figure 1.1 coke and hamburger when
connected by a line is what we call the
consumption possibilities line. It
represents a downward sloping line
that represents inverse relationship
between the consumption of coke and
the consumption of sandwiches. Let
us say that your original choice is 5
coke and 2 sandwiches.
However, within the week you decided to eat one more
sandwich that means you will have to give up 2 coke to do so.
Your new choice will be 3 coke and 3 sandwiches and your
opportunity cot is the value of the 2 coke you have given up.
A sacrifice forgone due to another choice of alternative is
what we call opportunity cost.
38. It is not only the consumers that need to weigh which would
satisfy him most because of limited resource that he has. Even the
producers have to make a sound decision in attending to the
needs of his production, which should be given up and which
should have to take more. Will they spend more in the use of
machinery or produce lesser number of goods? Will he hire more
laborers and lessen use of machinery or to add more machinery
and lay off laborers for a more efficient production. The
government also takes part in the need to make a choice because
of limited resources. Will it spend more on the production of foods
for the people or spend in the construction of houses for the
people given a limited budget.
Example : In the table 2.1 the government has a budget of 50M;
food P50, 000/unit; houses 5,000,000/unit; the government has a
budget of P50M; food P50,000/unit; houses 5,000,000.unit.
39. The data in table 2 is
represented graphically as the
production possibilities curve or
production possibility frontier.
Each point along the curve
represents possible alternatives
that correspond to the proper
allocation of resources for the
production. Given a budget of
P50M where P50,000/unit for food
and P5,000,000/unit for houses,
one can see that all resources are
devoted to the production of food
a maximum of 100 units will be
produced and 0 units of
construction of houses.
40. If on the other hand a
maximum of 10 houses will be
built there will be no food
production. Other point can be
considered like point C 500
units of foods and 5 units of
houses and these would be a
good combination of
production.
While in any point inside the Line graph or point inside the
production possibility curve say, Point F, does not utilize
resources very well or not using the best technology to it.
While a point outside line graph out outside the production
possibility curve say Point G is not possible to meet or cannot
be reached with the technology and resources available.
41. Ex.
1. Positive economics
The fluctuation of peso exchange rate everyday
is what actually is happening right now.
2. Normative economics
The stabilization of peso exchange rate for a
longer period of time.
Since the students already knows the value of
good decisions, making use of the study of economics he
should also learn how to describe the on going economic
activities. A positive economics deals with the study of
positive science meaning it deals with what it is. This is in
contrast with the normative economics that deals with
what should be.
