Introduction to Economics

Business Econ1- Microeconomics

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 OBJECTIVES
UNIT 1

• De ne Economics

• Di erentiate the two main branches of economics

• Identify the types of analyses to analyze economic facts

• Recall the principle of ceteris paribus

• De ne the Law of Scarcity and Opportunity Cost

• Identify the types of Economics System

• Illustrate and discuss production possibilities and productive e ciency Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

ff
fi
fi
ffi
The word ECONOMY comes from
the Greek word, oikonomos, which
means “one who manages a
household.
At first, this origin might seem
peculiar. But in fact, households and
economies have much in common. Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

Do you think the

economy is worth
studying for?

Why is there a
need to study it?
Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

Why do we have markets, and according

to economists, what roles should
government play in them?

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 ECONOMICS

-is a social science essential for dealing with

extremes: SCARCE RESOURCES and
UNLIMITED HUMAND DEMANDS
- is the study of how people choose to allocate
their scarce resources in order to produce,
exchange and consume goods and services in
an attempt to satisfy their unlimited wants Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 ECONOMICS

•is the study of how society

manages its scarce resources.

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 SCARCITY

•means that society has limited

resources and therefore cannot
produce all the goods and
services people wish to have.
Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 EFFICIENCY

•the property of society getting the

most it can from its scarce
resources

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 EQUALITY

•the property of distributing

economic prosperity uniformly
among the members of society

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 SCARCE RESOURCES

• Time

• Water

• Oil

• Coal
Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 OPPORTUNITY COST

•whatever must be given up to

obtain some item

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 RATIONAL PEOPLE

•people who systematically and

purposefully do the best they can
to achieve their objectives.

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 MARGINAL CHANGE

•a small incremental adjustment to

a plan of action

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 MARKET ECONOMY

•an economy that allocates

resources through the
decentralized decisions of many
rms and households as they
interact in markets for goods and
services Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

fi
 SCARCE RESOURCES
AND
UNLIMITED HUMAN DEMANDS

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 SCARCE RESOURCES

• Time

• Water

• Oil

• Coal
Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 UNLIMITED HUMAND DEMANDS

• Food

• Water

• Clothes

• Internet

• Gadgets Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

FACTORS OF PRODUCTION

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

FACTORS OF PRODUCTION

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

FACTORS OF PRODUCTION

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

FACTORS OF PRODUCTION

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

HUMAN CAPITAL

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

FACTORS OF PRODUCTION

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Why are these factors of production

considered scarce?
They are either:

A.improperly allocated or

B.limited

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 SCOPE OF ECONOMICS
(Microeconomics and Macroeconomics)

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 TRUE OR FALSE?

Choice requires time and information.

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 TRUE

In connection to the art of Economic

Analysis, choice involves a comparison
of the marginal cost and marginal
bene t of alternative actions, a
comparison that requires time and
information.
Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

fi
 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Theories vs Models

Theories- propositions about certain

related variables that scienti cally
explain a certain phenomena.

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

fi
 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 How are theories tested?

Through Scienti c Method

1.Identify and de ne key variables that are relevant to the

economic problem under consideration.

2.Specify the assumptions under which the theory is to apply.

ceteris paribus assumption- the assumption, when

focusing on key economic variables, that other variables
remain unchanged.

behavioral assumptions- an assumption that describes

the expected behavior of economic actors (the most
fundamental behavioral assumption is that of self-interest) Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

fi
fi
 How are theories tested?
Through Scienti c Method

3. Formulate Hypothesis

4.Test a Hypothesis

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

fi
 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Opportunity Cost
and
Trade-Off

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

Basic Economic Questions and

the The Economic Systems

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University

 Ten Principles of Economics

How People Make Decisions How the Economy as a Whole
1.People Face Trade-offs
Works
2.The Cost of Something Is What You Give Up 8.A Country’s Standard of Living
to Get It

Depends on Its Ability to Produce

3.Rational People Think at the Margin
Goods and Services

4.People Respond to Incentives

9.Prices Rise When the Government

How People Interact Prints Too Much Money

5.Trade Can Make Everyone Better Off

10.Society Faces a Short-Run

6.Markets Are Usually a Good Way to Organize Trade-Off between Inflation and
Economic Activity

Unemployment
7.Governments Can Sometimes Improve Market
Outcomes

Prepared by:

Rae Marie G. Leong-on & PS Charity Alibogha

Department of Business Administration

Central Philippine University