• SCARCITY vs.

SHORTAGES
• THE BASIC ECONOMIC PROBLEMS
JOPIA, PAMELA EUNISE A.
SCARCITY
- is the lack of availability of resources to produce all
goods necessary to satisfy the unlimited needs and
wants of humans.
∞ HUMAN NEEDS AND WANTS
∞
- The key to understanding scarcity is that it is
caused by nature.
- Scarcity does not necessarily mean that there is an RESOURCES
inadequate supply, just not an unlimited supply.

LAND CAPITAL LABOR

-anything that is manufactured in
-any natural resources order to be used in the production -any human service (may it be
of goods or services physical or intellectual)
SHORTAGES
- quantity demanded is greater than quantity
supplied at the market price.
- While scarcity is caused by nature, shortages
are created by the market.
- It is a temporary market condition because
the supplies will be replenished and by that
time, the shortage condition is resolved.
 UNLIMITED NEEDS LIMITED
AND WANTS RESOURCES

SCARCITY
CHOICES

WHAT TO HOW TO FOR WHOM TO

PRODUCE? PRODUCE? PRODUCE?

B A S I C E C O N O M I C P R O B L E M S
THE ECONOMIC
SYSTEM
NGOTOB, JENNYLYN E.
 ECONOMIC SYSTEM
• A system of production, resource
allocation and distribution of goods and
services within a society or a given
geographic area
 3 BASIC QUESTIONS TO ASK
• What to produce
• How to produce and in what quantity
• Who receives the output of production
Basic and General
Economic System
 Market Economy
• A market economy is an economic system in which
economic decisions and the pricing of goods and
services are guided solely by the aggregate interactions
of a country's individual citizens and businesses.
 Mixed Economy
• A mixed economic system is a
system that combines aspects
of
both capitalism and socialism
 Command Economy
• A command economy is a system where the
government, rather than the free market,
determines what goods should be produced, how
much should be produced and the price at which
the goods are offered for sale.
 Production
Possibility Frontier
• The production possibility frontier (PPF) is a graph
that shows all maximum combinations of output
that an economy can achieve, when available
factors of production are used effectively
• The PPF is a great concept because it beautifully
illustrates two of the most fundamental economic
concepts: trade-offs and opportunity costs.
 Opportunity Cost
• Opportunity costs represent the benefits
an individual, investor or business misses
out on when choosing one alternative
over another.
 Trade-off
• is a situational decision that involves
diminishing or losing one quality, quantity
or property of a set or design in return for
gains in other aspects.
 THE
CIRCULAR FLOW
OF
ECONOMIC ACTIVITY
CABOTAJE, KIMBERLY MAE
 Circular Flow of Economic Activity

• It means continual circular movement of money

and goods in the economy.
• It shows where money goes and what it's
exchanged for.
 5 SECTORS IN THE CIRCULAR FLOW OF
ECONOMIC ACTIVITIES

• Household-are basically the consumer units and their

ultimate aim is to satisfy the wants of their members. They
are also the controllers of the factors of production.
• Firm/ Business- employs the factors of production or
resources (inputs) and produces the final output for sale.
Business or firms take economic resources from households
and in turn provide them with goods and services.
• Government- levy taxes on households and businesses in
order to provide certain benefits to everyone.

• Financial Institutions- the source of investment capital to

the investors as well as an institution for saving the extra
income of the consumers.
• Foreign Sector (Global Trade)- It is to be realized here
that imports and exports are a crucial factor in any
economy. It is such acts which provide for both access to
goods and services unavailable in the nations as well as
expanding the market for goods and services produced
in the nation. It is this sector of the model which converts
the nations economy to an open economy.
THE 3
SECTORS
OF THE
ECONOMY
FRANCISCO, NICOLE
 Primary
Sector
Is a sector
whereby the raw
materials are
extracted from
earth.
 Secondary Sector
– A sector whereby the raw material that is extracted from earth is
converted to semi- finished goods or finished goods.

– A lot of people work in factories, using machines to transform

raw materials into manufactured products. This is called the
Industrial Process.
Secondary Sector
 Tertiary Sector
– A sector that transports and distributes goods to
retailers or wholesaler.
– Trade, the buying and selling of products is one of the
most important activities in this sector. It connects
products from the primary and secondary sectors
with consumers. There are also other services apart
from trade, such as education, health and financial
services. `
TERTIARY SECTOR
 The Importance of Each
Sector
– Each sector is important because if there was one sector
that did not exist there other sectors would also not
exist. And it would have a bad influence in our economy.
MACROECONOMICS
FOCUS AND GOALS

ORTEGA, RHYZZA MICA JADE

INTRODUCTION TO MACROECONOMICS

Macroeconomics is study of the behaviour of a national or

regional economy as a whole. It is concerned with understanding
economy-wide events such as the total amount of goods and
services produced, the level of unemployment, and the general
behaviour of prices.

•The branch of economics that deals with the study of how whole
the economy performs.

• Looks at the big picture

Focus on
• aggregate consumption of goods produced
• Productiveness of country’s labour force
• How the actions of government stimulate overall economy
MICROECONOMICS MACROECONOMICS
Studies individual income Studies national income
Analyzes demand and supply Analyzes total employment in
of labor the economy
Deals with households’ and Deals with aggregate decisions
firms’ decision
Studies individual prices Studies overall prices
Analyzes demand and supply Analyzes aggregate demand
of goods and aggregate supply
MACROECONOMIC TERMS
 FOCUS OF MACROECONOMICS
The three primary concerns in macroeconomic analysis are as
follows:
• Inflation
• Unemployment
• Gross Domestic Product (GDP).

• + Economic Growth
 INFLATION
• Inflation is the rate at which the general level of prices for
goods and services is rising and as a result purchasing power
diminishes.

• The more inflation rate goes up the less goods and services
your money will buy you.
 CAUSES OF INFLATION
• Demand Pull Inflation- It occurs when demand for a good or
service increases so much that it outstrips supply. If sellers
don't raise the price, they will sell out. They soon realize they
now have the luxury of hiking up prices. If enough do this,
they create inflation.
 CAUSES OF INFLATION
• Cost Push Inflation- It only occurs when there is a supply
shortage combined with enough demand to allow the producer
to raise prices. 

• Expectancy Inflation- Rate of inflation that workers,

businesses and investors think will prevail in the future, and
that they will therefore factor into their decision-making.
 UNEMPLOYMENT
• is when an individual is looking for work and cannot find a job.

Unemployment categories include classical unemployment,

frictional unemployment, and structural unemployment.

Those who are in labour force

Labour Force- group of people who can, want and are able to work
 TYPES OF UNEMPLOYMENT
• Classical unemployment is when wages are too high
for employers to consider hiring more workers.
• Frictional unemployment occurs when the time taken
to search for an appropriate employee is too long. Also
when there is conflict between employee and employer
• Structural unemployment occurs when there is a
Under frictional
unemployment
mismatch between a worker’s skills and the actual skill
required for a job.
• Another important category of unemployment is
Not enough jobs cyclical unemployment that occurs when an
around due to
low levels of economy’s growth is stagnant. No activity
economic activity
 GROSS DOMESTIC PRODUCT (GDP)
• This refers to the market value of all final goods and services
produced domestically in a given period of time. One of the ways
in measuring the performance of an economy.
 Summation of all final goods and services- this means all the
market value of products sold and services rendered within a
specific time period.
 Final goods- this means that the values of product as a raw
material and as an intermediate are not measured because these
will double-count the value of the good.
 NOT INCLUDED IN MEASURING GDP
• Intermediate Goods- goods inside a final good
• Non Production Transaction
Financial Transaction (nothing produced)
used goods
•Non Market and Illegal Activities
Things made at home/household product
Non registered Illegal products
 GROSS NATIONAL INCOME
• Total domestic product and foreign output claimed by residents
of the country
 GOALS OF MACROECONOMICS
• Price Stability- The objective of the nation is to keep its
inflation rate as low as possible by maintaining price stability.

There prolonged inflation or deflation

To achieve high levels of economic activity and employment

Keep purchasing power stable

 GOALS OF MACROECONOMICS
• Low Unemployment or Full Employment- . A lower rate of
unemployment means that productivity in the economy is
higher. This objective simply means that as many people who
want to be employed are employed, so the economy is running
at or near full productivity.
• this matches the economic growth by providing people with
jobs that will allow them to satisfy their needs and wants
through the income they receive.
 GOALS OF MACROECONOMICS
• Economic Growth- It is attained by increasing production of
goods and services. Growth is indicated by measuring the
growth rate in production. When an economy manufactures
more goods than the previous year, then it is growing. 

Refers to increase in full production level of a nation overtime

Economy must be operating at maximum capacity

 DEFLATION
• Is a decrease in general price levels throughout an economy

>Negative effect if deflation causes company to lose money

>They fire employees
>Fired employee can’t afford to buy
>Downward pressure on prices continues
>People delay buying products because they think that the price will eventually drop
• DEVALUATION
» is an official lowering of the value of a country's currency within a fixed exchange
rate system, by which the monetary authority formally sets a new fixed rate with
respect to a foreign reference currency or currency basket.

• HYPERINFLATION
» Extremely rapid period of inflation
» Caused by rapid increase in money supply

• DISINFLATION
» Change of inflation over time
» Inflation rate is declining over time but remains positive
• Ex. January 5% - March 4%
The Government and the Economy
Martin, Lorraine
7 Roles of Government in a Mixed Economy

1. Establishing and enforcing rules of exchange:

a.Property rights

b.Contract law
7 Roles of Government in a Mixed Economy

2. Promoting competition/prevent anticompetitive

practices
3.Regulating natural monopolies
 One firm that can serve the entire market at a lower
per- unit cost than can two or more firms
7 Roles of Government in a Mixed Economy

4.Provide public goods

Technical characteristics of public goods:
Non rival consumption
High cost of excluding those who do not pay
7 Roles of Government in a Mixed Economy

5.Dealing with externalities Externality is a cost or benefit

that falls on third parties and is therefore ignored by
the two parties to the market transaction
a. Negative externality – cost imposed on others
b. Positive externality – benefit gained by others
7 Roles of Government in a Mixed Economy

6. Redistribute income
7. Promote macroeconomic goals of:
a.Full employment
b.Price stability
c.Economic growth
THANK YOU
FROM GROUP 1

Cabotaje, Kimberly
Francisco, Nicole
Jopia, Pamela
Martin, Lorraine
Ngotob, Jennelyn
Ortega, Rhyzza Mica Jade