Ramirez, Deira Angela D.

201F

CHAPTER 2: ECONOMIC PROBLEM

REVIEWER

 Individuals firms and societies have unlimited wants and needs

 but resources are LIMITED or SCARCE.
 Scarce resources force individuals and societies to choose wisely among
competing uses of resources
 alternative combinations of produced goods and services
 and among alternative final distributions of what is produced among households.

INDIVIDUALS, FIRMS, AND SOCIETIES HAVE UNLIMITED WANTS AND NEEDS

 Ang ibigsabihin nito ang mgacomponents ng micro and macroeconomics ay

marami talagang pangangailangan, unlimited ang mga combination ng mga
goods and services na ito na want at need nila. Anong pagkain ba at tirahan ang
kailangan ng mga bagong kasal pa lang na mag-asawa, iba rin ang mga
combination ng mga gamit sa bahay ng isang pamilya na nag-aaral na ang mga
anak.
 For firms , iba-iba ang combination ng wants and needs of different kinds of firms
(merchandising firm, services firms and manufacturing firms ) Even in size, iba-
iba rin sa mga maliliit na firm, medium size firms and multinational firms.
 For Goverments of different kinds, iba-iba rin, iba sa Manila at sa isang small City
like San Juan, or a provincial town in the remote area

BUT RESOURCES ARE SCARCE AND LIMITED

 So maraming panganagilangan ang mga components ng micro and

macroeconomics however as what we have learned resources are scarce and
limited. Laging kulang ang mga ito.
 Firms always want to improve , they want to invest in new business , their
resources always scarce and limited
 Governments, they are always deficit in their budget, always in need, so they get
loans from other countries. Even now pandemic, the country, the town, and the
barangays slowly running out of resources to aid the people.

Scarce resources force individuals and societies to choose wisely among

competing uses of resources

 because of this scarcity, they should choose wisely

  alternative combinations of produced goods and services
 among alternative final distributions of what is produced among households
All the activities collectively is what you called THE ECONOMY

SCARCITY –KAKULANGAN

THREE BASIC QUESTIONS ASKED

1. WHAT GETS PRODUCED?
2. HOW IS IT PRODUCED?
3. WHO GETS WHAT IS PRODUCED?
These are the three questions that need answers to be able to solve the problem of the
economy which is SCARCITY.
WHAT IS THE SOLUTION TO THIS PROBLEM ?
PRODUCTION
WHAT IS THE PROBLEM OF THE ECONOMY ?
SCARCITY
If you will look closely at the micro model , you will notice the two components of
microeconomics
1. Individuals / households
2. Firms
The individuals/ households are the primary consuming or buying units of the economy.
BASICALLY THEY DEMAND
The firms are the primary producing or selling units of the economy . BASICALLY THEY
SUPPLY.
The households or the individuals in turn are the primary or the basic demanding units.
Primary or basic means ang unit na pinaka-unang una at smallest scale.
The micro model also show the
TWO MARKETS IN MICROECONOMICS
1. OUTPUT MARKET
2. INPUT MARKET
There are two kinds of outputs (you must always remember.)
1. Goods - are the tangible outcomes of production
2. Services - are the intangible outcomes of production
Tangible –means you can touch , see, hear and taste like food , clothes , useable
things
Intangible–means you can just experience but not see, touch
There four kinds of inputs
1. L Land –are anything produced by the earth
2. L Labor –human resources
3. C Capital-monetary resources or machinery
4. E Entrepreneurial Mind –innovative critical thinking of owners of firms
Inputs or resources
- Anything provided by nature or previous generations that canbe used directly or
indirectly to satisfy human wants.
Outputs
- Goods and services that have been produced by the inputs which is of value to
households.
Production
- The process that transforms scarce resources into useful goods and services.
inputs---process----outputs
Capital - Things that are produced and then used in the production of other goods and
services.
Factors of production (or factors) - The inputs into the process of production. Another
term for resources.
Production- The process that transforms scarce resources into useful goods and
services.
Inputs or resources- Anything provided by nature or previous generations that can be
used directly or indirectly to satisfy human wants.
Outputs- Goods and services of value to households.
One Person Economy
Opportunity Cost
- Is the best alternative that we give up, or forgo, when we make a choice or
decision
In Macroeconomics , we can compare Bill and Colleen to two countries with different
needs and different productions The Two Person Economy
ABSOLUTE ADVANTAGE AND COMPARATIVE ADVANTAGE
Absolute advantage
- A producer has an absolute advantage over another in the production of a good
or service if he or she can produce that product using fewer
Comparative advantage
- A producer has a comparative advantage over another in the production of a
good or service if he or she can produce that product at a lower opportunity cost.
Theory of Comparative Advantage
- The study of the positive way of studying Economics The Descriptive and the
Theories
4 Phrases that mean opportunity cost
1. Opportunity loss
2. Forgo
3. Trade off
4. Give up
Two kinds of products according to the Final User
1. Consumer Good- Goods that are produced for present consumption, bought by the
final user.
2. Capital Good- Goods that are produced for the production of other goods, usually
bought by a manufacturer or service company.
The production possibility frontier (ppf)
- A graph that shows all the combinations of goods and services that can be
produced if all the society’s resources are used efficiently.