A.

Economics as a social science

* Economics:
-from the greek word oikonomia which means
household management
-a social science that deals with the fair alloca-
tion of scarce resources among alternative uses
in order to satisfy unlimited human needs and
wants.
*Adam Smith:
-father of Economics

Application of economics:
- Management of personal and national
resources
Methodology in Economics:
Why make decisions?
((Economic goals))
Equality
Equity
Efficiency
Full employment
Fact- data relevant to a study
Principle- generalization about an economic
behavior
Theory-principle that can easily disproved
Law- principle that lasts for a long period of
time
Policy- actions made by the government
**fact> principle > policy

B. Microeconomics and macroeconomics

MICROeconomics- deals with the economy of
individual units, household, industries and
firms.
((individual))
MACROeconomics- deals with the economy of
the nation as a whole
((nation as a whole))



C. Scarcity
*Scarcity is a condition wherein resources are
limited because needs and wants are unlimited
*Shortage is a condition wherein current sup-
ply doesnt meet current demand
*Trade-off is the act of making a choice which
results in having less of one good in order to get
more of something else.
*Opportunity cost is the real economic cost of
a good, service or resource. Also the best alter-
native foregone.
*Choice is the power to select or decide.

PPF or production possibilities frontier
- The ppf table shows the alternatives or possi-
bilities of how much of each variant could be
produced, if the resources are used to its full-
est.
PPF graph
-To make the ppf graph, plot the values for vari-
ant 1 and 2 for each alternative.
ex:(based on the ppf table above)

D. Human needs and wants
Needs - basic requirements for survival
Wants - not of real importance
- means of expressing a need
0
20
40
60
80
100
90 70 60 0
b
r
e
a
d

phones
possibilities variant 1(cellphones) variant 2(bread)
A 90 0
B 70 30
C 60 60
D 90 90















check pg. 93- gov. agencies which protect con-
sumers
E. Consumption
- using goods and services to satisfy needs and
wants
factors affecting consumer behavior
*Economic
-income
-interests on loans
-expectations

*culture
-pakikisama
-colonial mentality
-regionalism
-tradition

*Media
-brand
-testimonial
-scape
-bandwagon

Types of consumption
direct consumption- immediate satisfaction.
productive consumption- goods purchased are
used to produce other goods.
wasteful consumption- purchased goods do not
produce any satisfaction.

Law of diminishing marginal utility
utility- level of satisfaction measured in utils
Marginal utility- additional satisfaction that a
consumer gets from consuming one more unit
of the same good.
As the individuals consumption of a commodi-
ty increases, the marginal utility of each indi-
vidual unit decreases.
(nagsasawa)

F. Production
-process wherein inputs are combined to create
outputs

factors of production-resources or inputs used
to produce goods or services
Land
Labor
Capital
Entrepreneur

forms of income- income gained by providing
factors of production
Land = rent
Labor = wage
Capital = interest
Entrepreneur = profit

Consumer rights Consumer responsibilities
Safety be vigilant
be informed take action
Choose be concerned about community
be heard be concerned about environment
compensation against damage foster unity
a clean environment
consumer education


Circular flow of goods and services
*capital accumulation

savings loans capitaland then back to
savings
(households) (banks) (firms)

Consumersfactors of productionproducers
Producersincomeconsumers

Consumerssupplyproducers
Producerspayment

G. Distribution

Economic Systems
- Mechanisms that a society uses to an-
swer the three basic economic ques-
tions: what? how? for whom?
- Key players: consumers, producers,
government

1. Traditional
What? determined by customs and
traditions
How? methods are inherited
For whom? People

2. Command
What? government decides on re-
sources, prices, and wages
How? centralized system of plan-
ning of the government and its em-
ployees
For whom? Government prefer-
ences
Government is the holder of power;
producers and consumers are not
key players
Socialism: equitable distribution
of goods (laborers/capitalists)
Communism: classless society
3. Market
What? determined by consumers
preferences and economic deci-
sions are based on the interaction
between households and firms
How? producers seeking profits and
competition (perfect competition
means there is no monopoly) (invis-
ible hand means that regardless of
our own motives, the economy will
balance itself out because of the
natural tendency of humans to co-
operate)
For whom? Based on the purchas-
ing power of consumers
Capitalism: capitalists/laborers
4. Mixed
What? partly government, partly
consumers
How? market economy with gov-
ernment intervention wherein the
government controls health, educa-
tion, transport, and other regulari-
ties while private sectors control
minor industries
For whom? Partly government
preferences, partly consumers

Economic Epochs
1. Primitive-communal: everyone
owns everything
2. Master/Slave: winner vs. loser
3. Feudalism: landlords/peasants
4. Capitalism: capitalists/laborers
5. Socialism: laborers/capitalists
6. Communism: equal