Economics Economics in a Process

 Greek word “oikonomia” Unlimited wants > Scarcity > Make choice
 “Household Management” a. Scarcity
 It is a fundamental economic problem of
1. Feliciano Fajardo
having humans
Economics is the proper allocation and efficient use of available who have unlimited wants and needs
resources in world of limited resources.
for the maximum satisfaction of human wants.
 Is a condition where there are insufficient resources to satisfy
2. Paul Samuelson
all the need and wants of a population
Economics is the study of how societies use scarce resources
to provide valuable commodities and distribute them among
different people. b. Importance of Economics
 Earning money
3. William D. Nordhaus
 Buying goods and services
Economics is the science of choice.  Depositing and withdrawing money in the bank
It studies how people choose to use scarce resources or limited
productive resources to provide various commodities
and to distribute these commodities for consumption.
4. Gerardo Sicat
Economics defined as scientific study which deals with
how individuals and society in general make choices.
Father of Economics
5. Webster Dictionary Adam Smith
Economics as a branch of knowledge that
deals with the production, distribution and consumption of goods
and services.
Economics as Social Science
 It deals with the study of human’s life and how he lives with
other men. (social)
 It is concerned with
human beings and his behavior. (w/ other people)

Nature of Economics
1. Psychology
 The science of mind.

2. History
 The science that records and explains past events.

3. Sociology
 The science that deals with the development of society.

4. Political Science
 The science of government.

5. Geography
 The science that determines the main resources of a region.

6. Religion
 Religious traditions and belief can
discourage or encourage economic development.
Branches of Economics Goods
1. Macroeconomics  It is something you can see and feel.
 It deals with the economic behavior of the whole economy or  It is something you can use.
its aggregates.
 Aggregates – composed of individual units.
 It includes Business, Government and Household Services
 It is something done for someone else.
 It is called Employment and Income analysis  Sometimes people are paid for their service. Sometimes they
are not.
Concerned with the discussion of topics like:
 Gross National Product (GNP) Producer
 Level of Employment
 National Income  A person or business that makes goods and services.
 General level of Prices
 Total expenditures
Consumer
 A person or business that buys or uses goods and services.
2. Microeconomics
 It deals with the economic behavior of the individual units.
 It includes Consumers, Firms and Owners of Production
 It is called Price Theory
Concerned with the discussion of topics like:
 The price of rice
 The number of workers of a certain firm
 The income of Mr. Nueva 27
 The expenditures of PLDT
Divisions of Economics 4. Consumption
 This refers to the proper utilization of economic goods.
1. Production
However, goods and services could not be utilized unless you
 This refers to the process of producing or creating goods
pay for it.
needed by the households to satisfy their needs.
 We can also say that it is spending money for goods and
services in order to yield direct satisfaction.
 Factors of Production – Inputs
 Goods and services – Outputs
5. Public Finance
 This pertains to the activities of the government
2. Distribution
regarding taxation, borrowings, and expenditures.
 This refers to the marketing of goods and services to different
 It deals with the efficient use and fair distribution of public
economic outlets for allocation to individual consumers.
resources
in order to achieve maximum social benefits.
3. Exchange
 It refers to the process of transferring goods and services to a
person
in return for something.

 Money – Medium of exchange

Tools of Economics
1. Logic
It is a science that deals with sound thinking and reasoning.
2. Mathematics
It is a science that deals with numbers and their operations.
3. Statistics
It is a science that deals with numbers and their operations.??

Command
 Is the authoritative system
wherein decision-making is centralized in the government or a
planning committee.
Economic Resources 3. Capital
 Also known as Factors of Production or Inputs Two economic definitions of Capital
 Capital can represent the monetary resources
1. Land
use to purchase natural resources.
 is considered an economic resource because
 Capital can represent the major physical assets individuals and
it has a price attached to it.
companies use when producing goods and services.

 We usually pay for it through rent or lease.

 The payment for capital is interest.
These resources consist of free gifts of nature which includes:  Is a man-made resource
used in the production of goods and services,
 Soil
which include machineries and equipment.
 Rivers
 Owner of capital earns an income called interest.
 Lakes, oceans
 Forests
 Mountains 4. Entrepreneurs
 Mineral resources  This is a French word meaning enterpriser.
 Climate  An entrepreneur is the organizer and coordinator
of the other factors of production.
 He utilizes his initiative, talent and resourcefulness to create
2. Labor
economic goods.
 Also called “Human resources”
 It refers to all human efforts, be it mental or physical that
help to produce satisfying goods and services. 5. Foreign Exchange
 This refers to dollar and dollar reserves that the economy has.
 In return, he or she earns income in  It is part of economic resources because we need foreign
forms of wages and salaries. currency, particularly dollars for international trading and
buying raw materials from other countries.
 It is flexible factor of production as workers
can be allocated to different areas of the economy for  Dollar – International medium
producing goods and services.