Filamer Christian University

College of Teachers Education

Accredited Level IV – ACSCU – AAI
Roxas Avenue, Roxas City

Ma. Kissiah L. Bialen

Comparative Economic Planning

Economics

Economics is the study of how society uses its limited resources. Studying economics, we could
be able to manage our money, not only money but also our decision making in life. To know if
what is more important to us, and what we need most. 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 on allocating resources to
satisfy their wants and needs, trying to determine how these groups should organize and
coordinate efforts to achieve maximum output.

Concerns of Economics

Scarcity
When something is both desired and limited, it is scarce. Fewer resources than are needed to
fill human wants and needs. These resources can be resources that come from the land, labor
resources or capital resources. Scarcity is considered a basic economic problem. Economics
deals with the concept of scarcity and answers questions about scarce goods.
Example, waste of water through long showers or allowing water to run while brushing one's
teeth can contribute to a scarcity of water.

Goods and Resources

Goods are those objects that people desire. To produce goods, you need resources. Economics
is concerned with how resources affect our lives. To further define the concept of goods and
resources, economists call goods created with scarce resources "economic goods" and goods
created with plentiful resources "free goods." The car is an example of an economic good while
sunshine is an example of a free good.

Individual Behavior
Because an economy contains people and people's action affect an economy, economics is
interested in the behaviors of individuals. These individuals include consumers, workers and
producers. This particular sub-field of economics is called microeconomics.
National Behavior
Economists also study the behavior of people at the national level. Primarily, they are
interested in how the nation affects individuals' decisions. When studying national behavior,
economists focus on issues such as a nation's productivity, prices of goods in a nation,
employment and unemployment and income distributions.

Tradeoffs
Economics is also concerned with the idea of making decisions when there are many
alternatives or choices. Choosing one option over another may give benefits and detriments
simultaneously. This situation is called a tradeoff. Specifically, economists are interested in
analyzing the tradeoffs related to economic goods.

Interactions of Producers, Consumers and the Government

An economy is composed of three entities: producers, consumers and the government.
Economists study the interactions between these three groups to understand the changes that
take place in a nation's economy.

Supply and Demand

Supply and demand is a concept familiar to many: those who offer goods or services compose
the supply, and those who want those goods or services compose the demand. Economics
researches how this idea of supply and demand determines the prices of goods

Opportunity Cost
The opportunity cost is something is that which we give up when we make that choice or
decision. Giving up the things that could give us benefits and what we prefer the most, what we
want, and what we need.
For example, if Celeste can spend her time either watching Korean drama or studying, the
opportunity cost of an hour watching Korean drama is the hour of studying she gives up to do
that.
Production Possibilities Curve

Production possibilities curve measures the maximum output of two goods using a fixed
amount of input. The input is any combination of the four factors of production: natural
resources (including land), labor, capital goods, and entrepreneurship. The manufacturing of
most goods requires a mix of all four. Each point on the curve shows how much of each good
will be produced when resources shift from making more of one good and less of the other.
Example:

B
B 100 C F
E
75 B
R
R
I
E E
S D
50

A
100 150

WHEAT

A. Shows the production level of wheat alone

B. Indicates the production level of berries only
C. Is one possible combination of levels of production of both berries and wheat (75F,
100C)
D. Is another combination of these production levels (50F, 150C)
E. Shows inefficient utilization of resources or unemployed resources, i.e. a case in which
the output is less than what it has the potential to be
F. Shows an unattainable level of production, based on current resources

If the country wants to produce more berries, they must produce fewer of wheat, based on
limited resource availability. Likewise, if they want to produce more wheat, they must produce
less of berries. The government must assess the opportunity cost of producing more of one or
the other. The graph above demonstrates this trade-off. If this country wants to increase the
production of berries from 50 to 75 units, this requires sacrificing the production of 50 units of
wheat. And if this country wants to increase the production of wheat from 100 to 150 units,
they must sacrifice the production of 25 units of berries.
 Full Employment
Full employment is the condition that exists when all available resources are engaged in the
production of goods and services. In other words, all resources that could be used for
production are being used. This is indicated in production possibilities analysis by producing a
combination of goods that places the economy on the production possibilities curve. If an
economy is operating on the production possibilities curve, and is thus operating at full
production, it will use all resources fully. In macroeconomics, there are two groups of
resources: capital and labor. Capital refers to machinery, agricultural land, buildings and
vehicles among other things. If both capital and labor are operating at their furthest extent, full
employment must equate to full production. However, the concept of full employment is not
relevant in the real world, as there are natural levels of unemployment in most economies. For
example, people may be between jobs, may take time off to travel or may not wish to work.

Full Production
Any point on the production possibilities curve represents an economy at the full level of
production. At the current level of technology and resources, this means that there can be no
increase in output of one product without a reduction in the output for the other product. Any
point outside the production possibilities curve (that is, on the opposite side of the graph's
origin) is technically unattainable. Any point that lies on the inside of the production
possibilities curve signifies a point where the economy is not using its resources to their full
potential.
Production Efficiency
Production efficiency is an economic term describing a level in which an economy or entity can
no longer produce additional amounts of a good without lowering the production level of
another product. Production efficiency may also be referred to as productive efficiency.
Productive efficiency similarly means that an entity is operating at maximum capacity.

Economic Growth
Economic growth is an increase in the production of economic goods and services, compared
from one period of time to another. It can be measured in nominal or real (adjusted
for inflation) terms. Traditionally, aggregate economic growth is measured in terms of gross
national product (GNP) or gross domestic product (GDP), although alternative metrics are
sometimes used. It refers to an increase in aggregate production in an economy. Often, but not
necessarily, aggregate gains in production correlate with increased average marginal
productivity. That leads to an increase in incomes, inspiring consumers to open up their wallets
and buy more, which means a higher material quality of life or standard of living.