MODULE I – RESOURCE UTILIZATION AND ECONOMICS 1

MODULE 1
RESOURCE UTILIZATION AND ECONOMICS

This module will discuss the differences between microeconomics and

macroeconomics, basic economic concepts, factors of production and
activities of the economy. It will also examine scarcity as the central economic
problem that affects decision making and on resource allocation. In this way,
the concept of opportunity cost is vital in making wise decisions.

Learning Outcomes: at the end of this module, you will be able to:
1. describe the economic activities, factors of production and identify
the central economic problem;
2. illustrate opportunity cost and apply the concepts in making wise
decisions; and
3. distinguish microeconomics from macroeconomics.

Learning Activities:
QUICK CHECK 1.1: (encircle the letter of the correct answer then take a picture, send to
me through the FB messenger or email. If you’re online, access this in
the Google classroom not later than September 1, 2020)
1. Economics has two root words originating from the _______ language.
a. Latin b. Greek c. Spanish d. English
2. The terms oikos + nomos were known to mean
a. Resource management c. income management
b. Household management d. materials management
3. Economics is a social science because it involves the study of
a. Man’s evolution c. man’s mind
b. Man’s behavior d. man’s body functions
4. After experiencing a little definition of roles in society during the ancient times,
people started to trade goods for other goods. This was known as:
a. Trade b. buy and sell c. barter d. economics
5. All of the following are related to the word scarce, except
a. Scant b. unlimited c. inadequate d. insufficient

TAKE YOUR PART 1.1: For you what is economics? What comes to your mind or what do
you feel when you hear the word economics? (few words are enough. Please don’t copy
and paste from any sources. Share your answer in the google classroom discussion room
or write it here then take a picture and send in my FB messenger not later than Sept. 1.

PROBING 1.1: Analyze the image on the next page showing the 2020 proposed and
already approved 2020 budget. What is the implication of these figures? Is
there an equitable distribution of Philippine resources?

Write your observations here then follow the same instruction above to submit your output.

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MY TURN

ECONOMICS
✓ from the Greek word ‘oikonomia’ or ‘oikonomos,’ which means management of a household:
oikos (house) + nomos (managing).
✓ the study of the efficient use or allocation of scarce resources in the production of goods and
services to achieve the maximum satisfaction of unlimited wants.

To better understand the definition of economics, look closely into the following terms found in the
definition

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Efficiency
the ability to do
something well or
achieve a desired
result without
wasted energy or
Unlimited Wants effort
Scarcity
refer to “a person’s the condition
desires or wherein most
preferences for things that people
specific ways of want are available
satisfying a basic only in limited
need.” supply.
Economics
Economic Good
Maximum
Satisfaction anything either a
physical commodity or a
it is the greatest service, which yields
possible degree of utility and which could
contentment one command a price
feels when one has anything used to satisfy
fulfilled a desire, a person’s wants and
need, or expectation. desires.

In the modern world, economics means:

the careful or thrifty use or management of the management of the resources of a country,
resources, as of income, materials, or labor; or community or business.

TRY ME! 1.1: What is the relationship between economics and everyday life?
(you don’t need to ask google or anybody, just share whatever is in your mind. Follow the
same instruction on how to submit your output not later than Sept. 4, 2020)

ECONOMIC RESOURCES (others called it as factors of production)

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ECONOMIC ACTIVITIES
✓ refer to the production, distribution, exchange and consumption of goods and services.
✓ The primary aim is the production of goods and services and make them available to
consumers.
✓ These include human activities which are performed in exchange for money.

Objectives of Economic Activities

1. Proper allocation of resources – since the economic resources are limited but wants are
unlimited, it is essential that it should be properly allocated to achieve the maximum
satisfaction. Every person should assess his/her needs and determine priorities for applying
the resources. Some needs are urgent while others may wait for some time.

2. Optimum use of resources - The resources should be used in a maximum level. Various factors
of production like land, labor capital, etc. should be used in producing goods in such a way
that no part is idle. The optimum is the level of greatest satisfaction and nothing can go
beyond it.

Characteristics of Economic Activities

1. It is undertaken to earn an income.
2. To satisfy human needs and wants. Tertiary sector
3. To produce wealth (service-based
activities) Quaternary
Secondary sector
Sector
(manufacturing -
(knowledge-
based sector)
based activities)

Primary sector Sectors Quinary sector

(resource-based of the (intellectually-
and extractive based macro-
activities) Economy level activities

MAGNIFYING 1.1: Cite an economic activity that you have been part of. Identify the economic
resources being used. What is the impact of your participation? Few words will do. Submit not
later than Sept. 4, 2020.

THE CENTRAL ECONOMIC PROBLEM

✓ From the definition of economics, it states that “resources are limited or scarce yet human
wants are unlimited but the desire is to achieve the maximum satisfaction”.
✓ Therefore: Human wants are unlimited, but resources are not.
✓ Scarcity is the fundamental economic problem which the society needs to identify how best
to produce and distribute these scarce/limited resources.

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BASIC DECISION PROBLEMS

a) Consumption – The society decides the goods and services they want to consume and
utilize.
b) Production – The producers determine the consumer’s demands and decides how to
allocate resources to meet them.
c) Distribution – Proper allocation of all the resources for the benefit of the whole society.
d) Growth Over Time – All problems of choice have to be seen in the context of future events.

ECONOMIC SYSTEMS
✓ the way a nation makes economic choices about how it will use its resources to produce
and distribute goods and services. It will determine how to answer the fundamental
question of economics.

Four Types of Economic Systems:

1. Pure Market Economy (Pure Free Market)
In this system, no government involvement in economic decisions. Private firms account for
all production. The consumers decide WHAT should be produced. They do this through the
purchases they make. The businesses on the other had determine HOW the products will be
produced. They must be competitive. On WHO buys the products? The people with the most
money are able to buy more goods and services.

2. Pure Command Economy (Pure Planned Economy)

All resources are government-owned. One person (dictator) or a group of officials decide
WHAT products are needed. The government runs all businesses, controls all employment,
and decides HOW goods and services will be produced. The government decides also WHO
receives the products that are produced.
3. Traditional Economy
Economy is shaped largely by custom or religion. These customs and religion determine the
WHO, WHAT, and HOW.

4. Mixed Economy
Most economies in the world today are mixed. Classification is based on how much
government intervention there is.

TRY ME 1.2: Based on the discussion above, what do you think is the economic system
being practiced in the Philippines? Defend you answer. This discussion will be open in the
group chat.

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OPPORTUNITY COST
✓ It is the concept of cost that is relevant in making wise decisions.
✓ It is defined as “the cost of choosing to use resources for one purpose measured by the
sacrifice of the next best alternative for using those resources.”
✓ Refers to the foregone value of the next best alternative.

Illustrations:
1) In buying ice cream at 7-11, you have to choose between rocky road and chocolate. When
you choose rocky road, the opportunity cost is the enjoyment of the chocolate.
2) Jake gives up going to a party to study for a test in order to get a good grade. The
opportunity cost is the enjoyment and meeting friends in the party.
3) Joey decides to take BSBA instead of BS Accountancy. The opportunity cost is becoming a
CPA.
4) Angela was asked to help in the store with a ₱250 allowance but she prefers to stay at home
because she is afraid of the COVID-19. The opportunity cost is the income of ₱250

There are instances that opportunity cost is measured by monetary value (money) depending on the
decision being made. For you to be a wise decision maker, always consider the opportunity cost. Always
evaluate the alternatives and remember to sacrifice the lesser cost.

DO IT MORE 1.1: Recall some instances in your life or family where you apply the concept of
opportunity cost. How does it help you in making wise decision? Write a not less than 250
words essay about it. Share in the Google classroom or FB messenger or email not later than
Sept. 4, 2020

BRANCHES OF ECONONOMICS
The analysis of economic situations, behaviors, or problems can be done through a micro or
macro perspective. The two branches are:
1. Microeconomics – is the study of decision-making of individual economic units such as
one producer or one household. It also studies the individual supply and individual
demand and uses relative prices.

2. Macroeconomics – is the study of the relationship of the broad economic sectors making
up the entire national or global economy. It studies aggregate supply and aggregate
demand and uses average, general absolute price levels.

They are further differentiated:

Aspect of the Microeconomics Macroeconomics
Study
Units of the Individual consumers, producers, Aggregate units such as state, national
study workers, traders, etc. or international economy

Activities Optimization and maximization of Long-term growth, maintenance of

personal gains and profits
Origin Micro activities emerge on the
demand side of consumer’s choices
high levels of production and
employment.
Problems of long-term growth depend
upon the supply of productive
resources

Conditions This approach is functional under This approach is functional under

static conditions and small time dynamic conditions and complex long-
intervals. run changes.

Methods It is concerned with small It deals with complex, dynamic

adjustments, for which the changes inviting the use of advanced
application of a marginal method is mathematical techniques.
suitable.

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Aspect of the Microeconomics Macroeconomics

Study
Levels Micro adjustments in resource Macro approach attempts to find the
allocation are made in response to conditions of long-term expansions in
changes in relative prices of goods output as a whole, assuming relative
and services. The aggregate level prices as constant (or significant)
of income or total economic
activities is considered to be
constant.

TRY ME 1.3: Classify the following topics as macroeconomics or microeconomics. Share your
answer not later than Sept. 4, 2020

1. A farmer’s decision to plant onion or tomato.

2. The impact of tax increase on aggregate output.
3. The effect of pandemic in the economy.
4. The income of Aling Elena.
5. The relationship between two competing firm’s pricing behavior.

CIRCULAR FLOW OF ECONOMIC ACTIVITY

The figure below illustrates the flow of resources and payments for their use as well as the
flow of goods and services and payment for them. This simple economy consists of households and
businesses and there is no government.
Households are the owners of the resources (selling their resources in the resource market)
and income flows into the households. Households are the ones who buy the goods and services in
the products market. The prices that are paid in the products market are determined by supply and
demand.
Businesses buy the resources providing income to the households. Businesses buy the
resources to produce goods and services that are then sold in the product market to households.
When firms sell their products, the money that they receive is called revenue.

Circular Flow Model

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Assessment
Additional formative and summative assessments are posted in the Google
classroom using the following tools:
a. quizizz.com
b. Google forms

Big Ideas…
➢ Economics is a social science that studies how people, institutions and society make choices
despite the reality of scarcity. The limited resources give rise to more problems faced by the
economy.
➢ Economic activities include the production, distribution, exchange and consumption of the
goods and services. In these activities, it aims the maximum satisfaction of unlimited wants.
➢ Economic resources are inputs into the production process and are classified as land, labor,
capital and entrepreneurial ability. These are also known as factors of production.
➢ Essential to the study of economics is the idea of opportunity cost which is useful in making
wise decision. This is driven by sacrificing either the value of the good, service, or time to
obtain something else.
➢ Microeconomics examines the decision making of specific economic units or institutions
while macroeconomics looks at the economy as a whole or its major aggregates.
➢ Economic systems are sets of institutional arrangements and a coordinating mechanism to
solve economic problems
➢ Households and firms are the activity performers in the economy. They exchange resources,
goods and services as well as income.

REFERENCES:
1. Avila-Bato, Malveda, Marcelo, Viray (2011). Micro Economics Simplified. National
Bookstore
2. Azarcon, et al. (2008). Principle of Economics (A Modular Approach). Valencia
Educational Supply
3. Microeconomics (2012)Mc Graw Hill
4. Philippine Budget. https://www.dbm.gov.ph/images/pdffiles/2020-Budget-at-a-Glance-
Proposed.pdf
5. Sectors of the economy accessed from
https://www.economicshelp.org/blog/12436/concepts/sectors-economy/
6. https://examples.yourdictionary.com/opportunity-cost-examples.html
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Southern Christian College Econ 221 – Basic Microeconomics