ECONOMICS IN

EVERYDAY
INTRODUCTION
LIFE
 ECONOMICS
One of the branches of Social Sciences

comes from two Greek words

OIKONOMIA
OIKOS NOMOS
HOUSEHOLD MANAGEMENT
 Given the time is
limited, what should
be prioritized?
WHAT IS
• The study of efficient allocation of available
resources.
• The study of how society manages its
scarce resources.
• Economics finds ways of reconciling
unlimited wants with limited resources
• Economics explains the problems of living
in communities in terms of the underlying
resource costs and consumer benefits
 “the Queen of Social Science”
Noble Laureate Paul Samuelson
• Economics & Sociology
• Economics & Psychology
• Economics & Political Science
• Economics & History
• Economics & Mathematics
Greek word 'Mikros' - “small” Greek word ‘Makro’ - large
The study of the economic Study the forces and
behavior of individual units trends that affect the
of an economy persons, economy as a whole ( national
households, firms, and or global economies).
business).
Example: Fiscal policy,
Example: demand & supply taxation, and national growth
ECONOMIC
SCHOOLS OF
THOUGHT
CLASSICAL | KEYNESIAN | NEOCLASSICAL
 CLASSICAL ECONOMICS

ADAM SMITH
A Scottish political economist
and the leading advocate of
classical economics.
FATHER OF MODERN ECONOMICS
FATHER OF THE CAPITALIST
ECONOMY
 CLASSICAL ECONOMICS
THEORY OF THEORY OF FREE
DIVISION LABOR MARKET SYSTEM THEORY OF VALUE

Claims that Markets are States that the

specialization believed to be self- value of a good is
leads to higher regulating and determined by its
productivity work best if there cost of production
are no or minimal
government
intervention
 CLASSICAL ECONOMICS

DAVID RICARDO

LAW OF DIMINISHING
MARGINAL RETURNS

LAW OF COMPARATIVE ADVANTAGE

 CLASSICAL ECONOMICS

THOMAS ROBERT
MALTHUS
MALTHUSIAN THEORY

MGA EPEKTO NG “POPULATION

GROWTH”
 KEYNESIAN ECONOMICS
JOHN MAYNARD KEYNES
FATHER OF MACROECONOMICS
KEYNESIAN ECONOMICS
Keynesians believe that, because prices
are somewhat rigid, fluctuations in any
component of spending—consumption,
investment, or government
expenditures—cause output to change. If
government spending increases, for
example, and all other spending
components remain constant, then
output will increase.
Believes that government invention is
necessary to solve economic problems.
 NEOCLASSICAL ECONOMICS

UTILITY OF MAXIMIZATION THEORY OF THE FIRM

Individulas will States that firms
mazimize their are naturally profit
satisfaction maximizing

RATIONAL CHOICE THEORY

Claims that collective individual decisions
drive the aggregate social behavior.
SCARCITY
CHAPTER 1 - LESSON 1
NEEDS & WANTS
CHAPTER 1 - LESSON 2
S__RC__Y
SCARCITY
S_ _R _AG_
SHORTAGE
AM I A
NEED OR A
WANT?
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
NEED
WANT
• Safe shelter
• Food
• Education
• Friends
• Family
• Clothes
• Medical Care
• Pets
• Status
• Ability to pursue interests that
help define who you are.
ALLOCATION OF
RESOURCES
CHAPTER 1 - LESSON 3
THE CONCEPT OF
CONSUMPTION
CHAPTER 2 - LESSON 1
 Economic Models
u Economists use models to simplify reality in order to
improve our understanding of the world
u Two of the most basic economic models include:

The Circular Flow Model

u

uThe Production Possibilities Frontier

 1. All consumers have
rights when buying new
goods/services from a
business.
TRUE FALSE
When you buy goods/services, you enter into a
contract with the retailer (shop). Under
consumer law, an item must:
• Be of a reasonable and acceptable
standard
• Be fit for the purpose for which it was
bought
• Match the description given verbally or in an
advert
 2. A shop must
always give you a
receipt when you buy
goods or services.
TRUE FALSE
 As a rule under Section 237 of the Tax Code, every
business entity is mandated by the Bureau of
Internal Revenue (BIR) to issue an official receipt
and/or sales invoice for every sale of goods,
properties or services.
For failure to issue receipts – P10,000 for the first
offense and P20,000 for the second offense
For refusal to issue receipts – P25,000 for the first
offense and P50,000 for the second offense
3. You buy a coat, take it home
and decide you don’t like it.
Should you:
a) Take the coat back & demand a full refund
b) Take the coat back & demand a credit note
c) Check the shops returns policy
You have no rights under consumer law if
you just change your mind about something
you bought and want to return or exchange it.
However, some shops may offer an
exchange or refund as a gesture of goodwill.
Check the shop’s return policy especially if
you are buying something you are unsure
about.
 4. You get a present for your
birthday but you don’t like it.
Should you:
a) Take it back to the shop & demand a full refund
b) Take it back to the shop with the gift receipt and
ask if it’s possible to exchange it for
something else
c) Give the present to someone else
Some shops may exchange an item if you
received it as a gift and want to exchange it for
something else. In this case, you will need proof of
purchase (gift receipt). There is no legal
requirement for shops to exchange unwanted gifts
so you may end up giving it to someone
else.
5. You buy a juicing machine in
the sale, but when you get
home it doesn’t work. Should you:
a) Take the juicing machine to the recycling centre
b) Take the juicing machine back to the shop and
demand a full refund of the price you
paid or a replacement
c) Take the juicing machine back to the shop and
demand a full refund of the price you paid
If an item is faulty, your rights do not change just
because it was on sale.
If an item you bought at full price is faulty, and is
now on sale at a reduced price, you are entitled
to a refund of the price you paid or a replacement
of the same value, with proof of purchase.
6. You buy a pair of shoes but decide they
don’t suit you at all. Yesterday you noticed
the same shoes are now on sale. Should you:
a) Take the shoes back to the shop & ask for a
refund of the sale price
b) Take the shoes back to the shop and demand a
full refund of the pre-sale price
c) Check with the shop their returns policy
If you buy something at full price but change your
mind about it, and it is now on sale at a lower
price, you may only be entitled to the reduced
amount if the shop is willing to offer a refund. Any
offer of a refund in this situation is up to the retailer
and is a gesture of goodwill.
The shop’s returns policy may be different when
something is bought in a sale, so check the
policy with them before buying if you think there is
a chance you might change your mind.
 7. You buy a kettle but it stopped
working after one use. You take
it back to the shop and they say
you have to return the kettle to
the manufacturer yourself. Is this right?
YES NO
Your contract is with the retailer or supplier who sold
you the item so if there is a fault, it is up to
them to sort out the problem – not the manufacturer.
The retailer should sort out the problem for you within a
reasonable time and without much inconvenience to
you. If the fault is major, like a kettle that stops working
after one use, you have the option to get your money
back. If a fault occurs within the first 6 months after you
buy it, it is presumed that the fault was there when you
bought the item and you are entitled to ask for a refund
or a repair.
8. You buy a lovely shirt for your dad for his
birthday but when you go to wrap it you see
that two buttons are missing. Should you:
a) Sew on a couple of buttons you found in your
granny’s sewing box
b) Take the shirt back to the shop and ask for a
repair, a replacement, a refund/ a reduction in price
c) Give the present to your dad & hope he doesn’t
notice
Because this is a minor fault, you have the
option to request a repair or replacement. If
this is not possible or does not happen, you
can ask for a reduction in the price you paid,
or a complete refund.
 9. You buy a phone but it doesn’t
work properly from the start. You
take it back to the shop and
they repair it but a month later it’s
not working again. You are entitled
to a replacement or a refund.
TRUE FALSE
If you agree to a repair, it must be
permanent. If the same fault occurs
again, then you should be entitled to
a replacement or refund.
 10. You buy a new laptop. It works
for a week then you experience
problems turning it on. You
return it to the shop, where you are
asked to pay 2,500 to get it fixed. Do
you think this is right?
YES NO
Repairs and replacements should be
free of charge to you if the fault was
not caused by you. The seller is not
allowed to charge any additional
costs for labour, materials or
postage
 QUESTION 1

Consumers have the right to be

protected against products and
services that are deemed hazardous to
health and life.
The right to the satisfaction of basic needs

The right to safety

The right to be informed

 QUESTION 2

Consumers must have access to basic

goods such as food, clothing, and
shelter as well as basic services like
health care and public utilities.
The right to the satisfaction of basic needs

The right to safety

The right to be informed

 QUESTION 3

Consumers have the right to relevant,

correct, and full information about
products and services, and be
protected against false advertisements
The right to the satisfaction of basic needs

The right to safety

The right to be informed

 QUESTION 4

Consumers have right to live and work

in a safe and healthy environment

The right to be heard

The right to a healthy environment

The right to consumer education

 QUESTION 5

Consumers have right to be

represented in government policy-
making and their interests be
considered in the development of
products and services.
The right to be heard

The right to a healthy environment

The right to consumer education

 QUESTION 6

Consumers have the right to acquire

basic knowledge and skills necessary
to make better buying decisions

The right to be heard

The right to a healthy environment

The right to consumer education

 QUESTION 7

Consumers have access and right to

choose from a selection of products
and services that have passed quality
assurance and are offered competitive
prices.
The right to choose

The right to redress

The right to consumer education

 QUESTION 8

Consumers have right to fair

settlement on cases borne out of
product or service misinterpretation

The right to choose

The right to redress

The right to consumer education

 QUESTION 9

Service providers are required to

disclose pertinent information about
the service being offeres. Read the
terms and conditions before signing
any document.
Check quality

Know the return and exchange policy

Read the fine print

 Employment of labor hours Production
Computers Wheat Computers Wheat
A 50,000 0 500 0
B 40,000 10,000 400 1,000
C 25,000 25,000 250 2,500
D 10,000 40,000 100 4,000
E 0 50,000 0 5,000
 Points off the PPF

On the graph
above, find the
point that
represents (100
computers, 3000
tons of wheat),
label it F.
Next, find the point
that represents
(300 computers,
3500 tons of
wheat), label it G.
1. On the graph above, find the point that represents (100
computers, 3000 tons of wheat), label it F.
Question: Would it be possible for the economy to produce
this combination of the two goods? Why or why not?

2. Next, find the point that represents (300 computers, 3500

tons of wheat), label it G.
Question: Would it be possible for the economy to
produce this combination of the two goods?
 : What We Know So Far
• Points on the PPF (like A – E): • Moving along a PPF
– Possible & Efficient: all resources – Involves shifting resources from
are fully utilized the production of one good to the
other
• Points under the PPF (like F): • Society faces a tradeoff
– Possible but Not efficient: some –Getting more of one good
resources are underutilized (e.g., requires sacrificing some of the
other Next, find the point
workers unemployed, factories idle) that represents
(300
• The slope of the PPF computers,
• Points above the PPF (like G) 3500 tons of
–The opportunity cost of one good
–Not possible wheat), label it G.
in terms of the other