(B) The Nature and Importance of Economics (Revised)

THE NATURE AND IMPORTANCE OF ECONOMICS
By: Angelito D. Platino THE NATURE AND IMPORTANCE OF ECONOMICS 1
Objectives:
At the conclusion of the session, you must have been able to:
Compare the various definitions of economics and identify their common ground. Identify the basic economic problem addressed by the concerns of economics. Relate economics with the other social sciences.
By: Angelito D. Platino
Objectives:
At the conclusion of the session, you must have been able to:
Differentiate macroeconomics from microeconomics as the two main divisions of economics. Enumerate and discuss the significance of the following: economic systems, economic resources, and economic goals.
Economics Defined
a social science concerned with using scarce resources to obtain maximum satisfaction. (Walstad and Bingham, 1993)
Economics Defined
the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. (Samuelson and Norhaus, 1992)
Economics Defined
the study of production, distribution, selling, and use of goods and services. (Collin, 1997)
Economics Defined
the study of how people use their limited resources to try to satisfy unlimited wants. (Parkin and Bade, 1991)
Question:
What is the common ground of the definitions?
The Common Ground:
Resources Human needs and are scarce.

wants are unlimited.
More Definitions:
SCARCITY
the imbalance between our desires and the means of satisfying those desires. (Hyman, 1992) The condition wherein most things that people need and want are available only in limited supply.
10
More Definitions:
WANTS
refer to a persons desires or preferences for specific ways for satisfying a basic need. (Bannock, 1974)
11
More Definitions:
OPPORTUNITY COST
the cost of choosing to use resources for one purpose measured by the sacrifice of the next best alternative for using those resources. (Hyman, 1992)
12
Question:
From the foregoing definitions, what do you find to be the basic economic problem?
13
The Fundamental Economic Problem:
SCARCITY
14
The Decision Questions:

1. What goods and services must be produced and in what quantities?
Rice or weapons? If rice, how much of what type?
15

2. How shall these goods and services be produced?
Who shall produce them? What resources and technologies shall be used?
16

3. For whom shall these goods and services be produced?
Who shall consume them? What benefits from the results of the economic activities?
17
The Concerns of Economics:

The PRODUCTION, DISTRIBUTION and CONSUMPTION of goods and services.
18
Economics is Concerned with:
PRODUCTION
The creation or addition of utility. Utility is the economic term for usefulness. It is the ability of a good or service to satisfy a want.
Form Utility Place Utility Time Utility Possession Utility
19
PRODUCTION
Factors: (Economic Resources)
Land land and natural resources Labor time and effort of human beings involved in the production process. Capital goods used to produce other goods Entrepreneurship undertaking that combines the three other factors in the production process.
20
DISTRIBUTION
The allocation of the total product among the factors of production. The distribution of money incomes among the factors of production.
Land RENT Labor WAGES Capital INTEREST Entrepreneurship PROFIT.
21
CONSUMPTION
The use of a good or a service. Without it, there would be no need for production and distribution.
22
GOODS AND SERVICES

Characteristics of Economic Goods:
Material Useful Scarce Transferable
23
GOODS AND SERVICES

Economic Services non-material activities that are useful, scarce, and transferable. Give examples of economic services
24
Economics and the Social Sciences

Economics is related to: Because:
POLITICAL SCIENCE
Government has a role in the economy.
25

SOCIOLOGY Low standard

of living leads to social problems.
26

PHILOSOPHY
Economic acts are humans acts (morality).
27

HISTORY
Economic development occurs through time.
28
Divisions of Economics:
MICROECONOMICS Concerned with the behavior and activities of specific economic units individuals, households, firms, industries and resource owners. Critical concept MARKET MACROECONOMICS Deals with the behavior of the economy as a whole with respect to output, income, the price level, foreign trade, unemployment and other aggregate economic variables.
29
Economic Goals:
1. 2. 3. 4. 5. 6. 7. 8. Economic Growth Full Employment Economic Efficiency Price Level Stability Economic Freedom Equitable Distribution of Income Economic Security Balance of Trade
30
Economic Goals:
1. Economic Growth
Society desires a higher standard of living manifested by the production of more and better quality goods and services.
31
Economic Goals:
2. Full Employment
There must be jobs for those who are willing and able to work.
32
Economic Goals:
3. Economic Efficiency
The utilization of resources to derive the maximum benefits for the society.
33
Economic Goals:
4. Price Level Stability

The economy should be able to avoid great fluctuations in the general level of prices.
34
Economic Goals:
5. Economic Freedom
High degree of freedom to choose what economic activity to undertake afforded to various sectors.
35
Economic Goals:
6. Equitable Distribution of Income

The condition whereby the rich get richer and the poor get poorer is prevented.
36
Economic Goals:
7. Economic Security
Enough provision must be accorded for those who are not able to earn minimal income like the aged, the chronically ill, the disabled, etc.
37
Economic Goals:
8. Balance of Trade
Balance between import expenditures and export revenues must be maintained.
38
Main Reference:
Principles of Economics by Roberto Medina, Chapter 1.
39

(B) The Nature and Importance of Economics (Revised)

Uploaded by

Copyright:

Available Formats

You might also like

(B) The Nature and Importance of Economics (Revised)

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(B) The Nature and Importance of Economics (Revised)

Uploaded by

Copyright:

Available Formats

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino THE NATURE AND IMPORTANCE OF ECONOMICS 1

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

What is the common ground of the definitions?

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

The Common Ground:

Resources Human needs and are scarce.

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

The Fundamental Economic Problem:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

The Decision Questions:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

The Decision Questions:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

The Decision Questions:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

The Concerns of Economics:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

Economics is Concerned with:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

Economics is Concerned with:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

Economics is Concerned with:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

Economics is Concerned with:

By: Angelito D. Platino

THE NATURE AND IMPORTANCE OF ECONOMICS

Economics is Concerned with: