ALLAN R.

ESPINELI, MTM
 Economics is a social science that deals
with the study of the proper allocation
and efficient use of scarce resources to
produce commodities for the maximum
satisfaction of unlimited human wants
and needs.
It came from the Greek words, ‘oikos’ which means

ECONOMICS household, and ‘nomos’ which means management.

 To learn a way of thinking:
Economics has three fundamental concepts that change the way you look
at everyday life:

Opportunity Cost – the best alternative that we forgo or

give up when we make a choice or a decision. Opportunity WHY STUDY
ECONOMICS?
cost is all about the most basic of economic concept of
trade-off. It arises because resources are scarce.

Marginalism – a second key concept used in

analyzing choices. The process of analyzing the
additional or incremental costs or benefits arising
from a choice or decision.

Efficient Market – a market in which profit

opportunities are eliminated almost
instantaneously.
To understand the society

Past and present economic decisions have an enormous

influence on the character of life in a society.

WHY STUDY
The current state of environment, the level of
material well-being, and the nature and number of
ECONOMICS?
jobs are all products of the economic system.
 To understand global affairs

News headlines are filled with economic stories.

International events often have economic
consequences WHY STUDY
ECONOMICS?
 To be an informed citizen

News headlines are filled with economic stories.

International events often have economic
consequences WHY STUDY
ECONOMICS?
 Microeconomics.
The prefix micro is derived from the Greek word
mikros, which means “small.” Microeconomics
therefore studies the economic behavior of
individual economic decision makers, such as a

BRANCHES consumer, a worker, a firm, or a manager. It also

analyzes the behavior of individual households,

OF industries and markets.

Macroeconomics.
ECONOMICS By contrast, the prefix macro comes from the
Greek word makros, which means “large.”
Macroeconomics thus analyzes how an entire
national economy performs. A course in
macroeconomics would examine aggregate levels
of income and employment, the levels of interest
rates and prices, the rate of inflation, and the
nature of business cycles in a national economy.
 NEEDS: are the basic necessities that a
person must have in order to
survive
e.g. food, water, warmth, shelter and
clothing

WANTS: are the desire that people have

e.g. things that people would like to have, such as bigger
homes, iphones, etc.
Goods and services are those that
yield satisfaction.
It may be tangible or intangible.
Classification of Goods

Consumer Goods vs. Capital Goods

Essential Goods vs. Luxury Goods

Characteristics of Wants
1. Unlimited
2. Varied
3. Insatiable (over an
aggregate period of
time)
 Resources refer to
the factors or inputs
of production.
They are those which are needed to produce goods and
services

Economic Resources
They are those with price tag because they are scarce.

Free Resources
They are those that has no price (because they are abundant)
Classification of Resources
Land
- natural resources available for production
- renewable resources: those that replenish
- non-renewable resources: cannot be replaced

Labor
- physical and mental effort of people used in production

Capital
- all non-natural (manufactured) resources that are used in the creation and production
of other products

Enterprise (Entrepreneurship)
- refers to the management, organization and planning of the other three factors of
production
Characteristics of Resources

1. Limited or scarce
2. Versatile
3. Can be combined in varying proportion to
produce goods and services
 THE
ECONOMIC What goods and services to produce?
PROBLEM should the emphasis be on agriculture, manufacturing or
services, should it be on sport and leisure or housing?

How should goods and services be

produced?
abour intensive, land intensive, capital intensive?
Efficiency?

Who should get the goods and services

produced?
even distribution? more for the rich? for those who work
hard?
 Economic System
It is the economic structure of a given economy.

Models of Economic System:

1. Capitalism - free enterprise or laissez faire economy.

2. Communism - government controls the economy.
3. Socialism - mixture of capitalism and socialism.
Capitalism or market economy

To each according to what he can grab

Institution of private property
Free enterprise/competition
Profit motive
Private ownership of resources
Laissez faire
Absence of central planning commission
Countries: England, Canada, Australia and most
developed nations
Criticisms of Capitalism
Human versus pecuniary
Unemployed resources
Freedom of enterprise and competition brings
about economic wastes
Inequality is widespread
Profit motive is not conducive to the promotion of
social welfare
Communism or command economy

From each according to his ability, from each

according to his needs
The economy has no ownership, practically no
private property
Consumer needs is much more limited’
Education is provided by the government
No private motive
Countries: North Korea/ Cuba
Criticisms of Communism

Intrudes further into the lives of people

Government has no way of knowing what to
produce because prices does not reflect supply
and demand
Low competency
Socialism or economic system by transition

From each according to his worth, from each according to

his ability and from each according to his work
State ownership and administration of the means of
production and distribution of goods wherein there is no
private property
Countries: Denmark, Nether land, Europe, Sweden and
Finland
Criticisms of Socialism

Brain drain
Difficulty in pricing goods and services
being produced
Difficulty in economic coordination
Tools of Economics

1. Logic
Emp
2. Mathematics irica
l Tes
ting

3. Statistics Dedu
ction
Spec Scientific
ify an
d Defin
e pro Approach!
blem
Obse
rvati
on