REVIEWER ECONOMICS: all about wealth 1.

Allocation of wealth or resources -to answer scarcity -to satisfy unlimited wants or desires of people KINDS OF ALLOCATION A. traditional social consensus B. command dictates of governments central planning C. price system uses market *allocation- mechanism of distribution *wealth -limited resources or scarce resources 2. Creation of consumption of wealth -providing a social mechanism for material survival and development -to have goods and services -deals with problems of production and distribution *production employment of resources as productive inputs *distribution payments for the use of productive inputs -how things are transacted in market -impact of relative power of the various actions in market *consumption- science of getting and using of wealth 3. Science of choice -because our resources are finite or limited -to make a decision *Guidelines for decision 1. process of optimization *optimization is getting the best from limited resources 2. using the least amount of resources for a given amount of output GOALS OF ECONOMY: 1. Social Survival Solution (How to achieve this?): Politics (freedom & power) *Power to maintain order, rules to follow, be a member to make rules, secures independence of society *Essential for survived & growth *evenly distributed Political development -give individuals greater capacity to use freedom & opportunities 2. Social Progress Solution (How to achieve this?): Culture -should be maintained a practice -building blocks for continuation of society -should be cultivated, expanded and developed Cultural development -citizens = expanded capacity to enjoy dignity of life, actions & beliefs

Weakened people is directly proportional to society - easy prey for countries After achieving cultural and political development, ECONOMIC DEVELOPMENT will follow. 3.Economic Development -expansion of wealth + equitable distribution of fruits and of wealth ECONOMIC QUESTIONS 1. What goods to produce? -productive activity of society -needs and wants of citizens -how society views the importance of needs and wants -needs social mechanism *Social mechanism A. Market System -price attach -Price (UP), demand (UP) Price is directly proportional to demand B. Planning System -central planning agency which determines what society should produce C. Traditional System -social norms 2. How many will be produced? -amount of goods and services

-human wants, extend of wealth and tech. used A. Market System price of commodity -Price (down), production (down) -Price and production is directly proportional B. Planning System -goals of society -rapid growth = more future goods and services C. Tradition System -events/ special occasions may increase or decrease production 3. Who will produce? -based on the availability of resources of relative productivities A. Market System -price of productive input is compared to productivity to determine employment B. Planning System -decided by planning board -labor regardless of productivity & employment C. Traditional System -group of people are assigned social tasks (ex. Caste System) 4.How will it be produced? *Technology

- process of combining resources -intensity of use of resources A. Market System -relative cost of productive input & productivities B. Planning System -for industrialization thrust C. Traditional -practices handed down 5.For whom? A. Market System -allocation will depend on your contribution B. Planning System -securing social equity -taxation -one will pay the other will receive C. Tradition System -value they give to the people -may not participate but highly esteemed will give a large part BRANCHES OF ECONOMICS 1.Microeconomics -functioning of individual industries & the behavior of their economic decision -making decisions of households & firms -allocation by small economic units -use of price as mechanism of allocation

-process of optimization of small economic units 2.Macroeconomics -examines the economic behavior of aggregates on a national fear -ECONOMY AS A WHOLE -national income ANALOGY- Microeconomics: trees :: macroeconomics:forest

ECONOMIC SYSTEMS 1.Command E. - central government sets output targets, income to prices - questions are answered by the government -may be (+) or (-) 2. Laissez-Faire or Free Market -lack of government involvement -individuals pursue their own self interest without regulation Market - interaction of buyers and sellers a. Consumer sovereignty - Consumers ultimately distate what will be produced by choosing what to purchase b. Free enterprise freedom of individuals to stand & operate private business in search of profits. c. Distribution of Output

-determined in a decentralized way -amount one gets depending on the income & wealth *income- earnings *wealth- accumulated amount d. Price Theory - basic coordinating mechanism in a free market is price 3. Mixed System -individual enterprises exist and independent choice is exercised even with the involvement of the government. ECONOMIC RESOURCES Resources are materials provided by nature or previous generations that can be useful to satisfy human wants. Production is a process that transforms scarce resources into useful goods and services. FACTORS OF PRODUCTION 1. Land 2. Labor 3. Capital -produced & used in production of other goods and services.