Spotting economics in

Action
An Introduction to the themselves) (overextraction); where
Economic-Naturalist Style of the common resource is non-
Thinking (and Writing) excludable but rivalrous

Cost Benefit Principle

Scarcity
- Rational individuals only take actions
- Limited availability (supply) in which the Marginal Benefit is
- Limitless wants (demand) greater than or equal to the Marginal
- Demand-side or supply-side induced Costs
- Policy interventions can help regulate - Marginal Benefit – additional
or alleviate scarcity (govt or marketing benefits to be gained
- Marginal Costs – additional costs to
dept will step in)
be incurred
- Will occur when there is a mismatch in - More than the money, there are more
supply and demand factors (peace of mind, preference)
- Price correction will happen to
eliminate scarcity (taasan ang presyo) Utility
(taxation)
- Allocation issue – concerned with the - Degree of satisfaction or pleasure
derived from an economic action
distribution of limited resources
- Loose concept and has been subject
to much criticism
Tragedy of the Commons - Nonetheless, the abstract concept of
utility has been used to explain
Excludable Non- observable action such as consumer
– Access may Excludable behavior
be regulated – Access may Not-All-Cost-Matter-
or prevented be difficult or Equally
impossible to
regulate

Rivalrous – Private Common - Sunk Cost – you will have to pay

Consumption property – resources – nonetheless (membership fees,
by one bars Housing, natural installation, processing fees,
consumption consumable resources machinery, exploration cost)
by another goods (energy)
(can’t be (forests) Economies of Sale
shared)
Non- Club Goods Public - Cost go down as volume of goods are
Rivalrous – – subscription goods – being reproduced (production level)
Can be (cable TV, streetlighting,
consumed Netflix) infrastructure Economies of Scope
repeatedly by
different - Costs go down as product selection
parties goes up (variety)
- They profit more by offering more
- Every agent has a incentive to partake products
in a common resource (to satisfy

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 Careless Crash Course in
Macroeconomics &
Monetary Theory increases, which again increases
spending

Economic Concept: Stimulus

Business Cycles
- “Stimulate” or kickstart economic
activity by urging the private sector to
- The economy as a Roller-Coaster (up increase demand
& down) - In other words: get people spending
- Things tend to go wrong now & then – again
P. Krungman - Can be enacted through direct
transfers (gov’t issues check, ayuda
- Marked by the alternating or cyclical system, cash aid) or tax decrease
phases of expansions (up) or (indirect)
contractions (down) in the economy - Stimulus is favored (reawaken the
- Fluctuation of key aspects – prices, economy, demand
production (output), employment in
one direction or another (they tend to Austerity
move together)
- Recurring but not periodic (no one - Aims to reduce public debt to preserve
should be complacent about the state a country’s financial position
of the economy) (no can predict) - In other words, the government needs
to make more money, or spend less
- What to do when the economy is (tightening the belt)
up/down? - Can be enacted through tax increase,
or budget cuts
Economic Concept: Policy
Response to a Recession
- But where does the government get
the money for stimulus?
- “Why do you think in times of
recession, the government should
favor stimulus over austerity” (S. Economic Concept: [Public]
Colbert) Debt
- The main goal under a Recession is
RECOVERY
- Y=C+I+G - “If you’re a family and you spend
 Output or Production (Y) is the more money than you have that’s bad.
How can a government spend more
sum of consumption, investment,
money than it has?”
and government spending
(S. Colbert)
 Output or Production (Y) is the
- Accumulated deficits and
sum of SPENDING by the private
borrowings of a government
and public sector. Their spending
- Deficit is the annual difference
creates a demand for production
between a government’s revenue (tax)
or output which in turn provides
and their spending
incentive to produce
- Debt accumulates interest
 Economic stimulus increases
private or public spending, which
increases demand and production. - Philippine Debt is mostly domestic
As production increases, income

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 - Debt is dangerous when a country is
endangered to not pay it back
(financial crisis) Economic Concept: The
- Is debt inherently bad? It depends
Evolution of Money
(no). (who do you owe the money to?
How are you doing as you pay it back?
When is it due? Can you pay for it? Barter
What are you using the debt for?)
- Exchange of goods and/or services for
other goods and/or services
Economic Concept: Money – - Relies on the double-coincidence of
definition & background wants

- Medium of exchange Money

- Unit of Account (way to gauge the
value of something) - Addressed several of the issues with
- Store of Value the barter system
- Social Construct? – yes, it’s built under - Accelerated commerce
a collective trust - Began with objects with intrinsic
value (gold, cigarette, real estate)
Money - Evolved into paper money, or “legal
- tender”
- Medium of exchange used for paying - Presently, fiat money (paper money)
for transactions is valuable due to
- An intangible concept of value; fulfills - its contractual properties
a role as a medium of exchange, a
unit of account, and a store of value Economic Concept: Print
away our problems!
Income

- Earned as compensation for work - Printing more money is bad because it

rendered, as well as gained from cause inflation. Why?
interest or dividends (salaries, - Inflation – sustained increase in the
compensation) price of goods and services
- Printing more money [without a
Wealth commensurate or proportional
increase in production] is bad because
it causes inflation (market adjusts as
- Accumulation of worth; the value of
well) (hyperinflation)
one’s financial assets less their
- Quantity Theory of Money (MV = PQ)
liabilities (net worth, how much
- Real variable = quantity
money & assets you have in stock)
Economic Concept:
Currency
Inflation Good? Print
much more of it?
- The physical manifestation of money
(coins & bills, depending on the - Inflation in the form of Stimulus
- An increase in the money supply
society, place)
(printing more money) lowers interest
rates

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 - Interest Rates are an incentive to
save money
- When interest rates go down, there is
an incentive to spend money
- Increasing money supply encourages
consumers to spend – thus it’s a form
of stimulus by The Central Bank

Debt Monetization and Hyperinflation

- Debt monetization is literally “printing

away a country’s debt” (illegal in a lot
of countries)
- The Government forcibly sells bonds
to The Central Bank, which the latter
pays for by printing money
- Possibly abuses power of the
government, and excessive use of this
leads to hyperinflation