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Comes from the greek word “OIKOS” which means
“house”, “NOMIA” which means “management”
def. A social science that deals with man’s problem of
using scarce resources to satisfy human wants
Household and the Economy is faced with a number of
factors to consider in coming up with any decision .
Basic Terms
Goods- anything that yields satisfaction
Economic Goods- goods which are useful and scarce and
can be acquired only at some effort or cost
Economics Resources –inputs used in the production of
goods and services.
Basis of Economics
Material wants are insatiable or unlimited but the
economic resources available are scarce or limited.
Scarcity
Unlimited human needs and wants in a world of
limited resources
Trade off
losing one quality or aspect of something in return
for gaining another quality or aspect.
1. Economic Growth
2. Full Employment
3. Price Stability
4. Economic Freedom
5. Equitable Distribution of Income
6. Economic Security
7. Balance of Trade
Economic Resources
1. Land- refers to all natural resources, which
are given by and found in nature
2. Labor-any form of human effort exerted in
the production of goods and services
3. Capital-man made goods used in the
production of goods and services.
4. Entrepreneur-one who decides in the
combination of land, labor and capital
Types of Economic System
1. Traditional Economy-a customary economy in
which production is based in the traditional
manner of doing things
2. Command Economy- means of production is
owned by the government, there exist a
collective determination of economic decisions
3. Market Economy-resources are privately
owned and decisions are made by the people
themselves.
2 Fields of Economics
Macroeconomics
a division that deals with aggregates, the
economy as a whole i.e. income, output,
employment
Microeconomics
a division that studies the economy in parts
i.e. price system, individual consumer
Opportunity Cost
Cost or benefits foregone in the alternative use of a
resource
Law of Demand
As price increases, the quantity demanded of
the product decreases, but as price decreases
the quantity purchased will instead increase.
Law of Supply
Complementary Goods
Goods that supplement each other and are
therefore used together
Price Elasticity of Demand
2 15 8
3 17 6
4 20 5
5 22 -4
6 24 -8
7 28 -12
Law of Diminishing Marginal Utility
states that as additional units are consumed,
the additional satisfaction derived from each
additional unit diminishes per unit consumed.
1. Pure Competition
• The market consist of buyers and sellers trading in a uniform commodity .
Monopolistic competition
• In economics, the market consist of many buyers and
sellers who trade over a range of prices rather than a
single market price is called monopolistic competition. A
range of price occurs because sellers can differentiate
their offers to buyers. Sellers try to develop difference by
using – customer segments, and in addition to price,
freely uses branding, advertising, and personal selling to
set their offers apart.
Oligopsony
In economics, oligopsony is a market where there is a small number of
buyers for a product or a service. In this market structure, buyers have
power over the seller. Because as there are small number of buyers, if they
are united and pressure the seller to sell the product or service in a
reasonable and affordable price, the seller must have to consider that.
Price discrimination
In economics, if one product or service has different price for different buyers
which is provided by the same provider, then we call that price discrimination
market strategy. A good example of this strategy could be the airlines
company-“Philippine Airlines”.
It has offered different prices for different category of passengers for the same
destination. Such as, it has “Student package” for the students, “Honeymoon
package” for the couples which are of lower price than their regular one.
Gross National Product
The market value of all final products produced by the
resources of the economy during a specified period of time
3 important limitations
– Excludes products not produced by the resources of the
economy as imports
– Includes only those products that can no longer be used
for higher stages of production , those that reached the
higher level of transformation
– Products can be considered final once they flow directly
from the producing units to consumption, government and
the rest of the world.
Gross Domestic Product (GDP)
• Inflation
is a rise in the general level of prices of goods and
services in an economy over a period of time
Labor Economics
Study of economic behavior of employer and
employees in response to changing prices, profits,
wages and working conditions
Managerial Economics
studies the application of the theories, tools and
findings of economic analysis to managerial decision
making
Monetary Policy
that which affects savings, investment, and
money supply
Fiscal Policy
that which controls taxes and government
expenditures
Trade Policy
that which affects a country’s exports and
imports