REVIEW QUESTION FOR MODULE 1

A.) Define economics. Why is it important to study economics?

Economics is a social science concerned with the production, distribution, and consumption of goods
and services. It studies how individuals, businesses, governments, and nations make choices about how
to allocate resources.

Studying economics provides one with not just an understanding of human behaviour, but also
cultivates in students the problem-solving, analytical, communication and persuasion skills that are
critical for success in today's job market.

Importance of Studying Economics

1) It makes us understand the real world conditions and then go through logical analysis.

2) It helps us understand and appreciate how business, individuals and government arrived at their
decisions.

3) It helps us to understand how the different economic system allocate its resources and used it
efficiently.

4) It permit prediction of the results of changes in the economic variables.

5) It serves in policy formulation.

B.) Differentiate between microeconomics and macroeconomics.

Economics is divided into two different categories: microeconomics and macroeconomics.

Microeconomics is the study of individuals and business decisions, while macroeconomics looks at the
decisions of countries and governments. Microeconomics focuses on supply and demand, and other
forces that determine price levels, making it a bottom-up approach. Macroeconomics takes a top-down
approach and looks at the economy as a whole, trying to determine its course and nature.

C.) Describe the different types of economic system

Market Economy – The basic characteristic of this economy is that decisions as to the basic economic
problems are determined by the two most important units of the society these are the buyers and
sellers of goods and services. The system depends on prices set by the conditions of demand and supply.
Competition is supreme; there is consumer sovereignty, and the price of the good is the guiding factor
for producers to know what to produce and how much to produce.

The Command Economy or Communistic Economy – In this type of economy the basic economic
problems faced by the economy is solved by the state or the central planners of the government. We
can say that this is a planned and dictated economy wherein then different factors of production are
control and manage by the central authorities.

Socialistic or Welfare economy – This type of economy takes into consideration the contribution of
labor to production. it is called the Welfare economy because it acknowledge the participation of labor
in the production of goods and services thus they should share in the profit or benefits the economy or
the business firms gets from the distribution of this goods and services. The different factors of
production are usually control and managed by the labor sector because they are the dominant factor in
the production of goods and services which encompasses a greater percentage of the population.

D.) Why is there a need to economize? How do you intend to practice economizing habit?

 Economizing of resources means making the best possible use of resources. It is necessary that
the available means of the society must be used in the best possible manner, so that the
maximum satisfaction may be achieved.
 I will apply the concept of economics in my everyday transactions.

E.) Briefly explain the basic economic problems of the economy.

1. Resource Allocation - -What to produce (goods and services)?

- In what quantity?

-How much?

-How available resources will be allocated?

2. Production – How to produce?

-What are the equipment, raw materials and machineries needed to produce a certain

product or services?

-What production process, method, and technique to use in the production of such

product or services?

3. Distribution – For whom to produce?

- Who are the consumers of the product or services? Its characteristics?

- Where are they located?

- What price to ask for the product and services?

- What kind of market structure? (Monopoly, Oligopoly, Perfect Competition or

Monopolistic Competition)

- How is the product or services be distributed to its customers? (communication,

transportation and promotion)

4. Economic Growth – How are we going to increase the production and distribution of goods and
services to meet the growing needs of the economy? (Mass production, Specialization, Technology, and
out expansion)