Economics – a social science that
(P-ATC) Q Inferior – demand decreases as
deals with proper allocation of
scarce resources to satisfy
unlimited wants of man.
Central Definition: Scarcity
Adam Smith – Father of
Economics
TWO BRANCHES OF ECONOMICS:
Macroeconomics (Economic
theory) – study of aggregate
economy or whole economy.
Ex. GDP, GNP, Employment
Microeconomics (Price theory) -
study of the individual or part of
the economy.
Ex. Firm and Household
ECONOMIC RESOURCES -
FACTORS OF PRODUCTION
1. Land - Gold, silver, Minerals
2. Labor – man power “Most
important factor of production”
3. Capital – buildings (fixed asset)
4.Entrepreneurial Skills
Production - Transformation of
input to output
Input – labor and capital
Output - goods and services
FACTOR PAYMENT
Land - Rent
Labor – Salaries/Wages
Capital - Interest
Entrep. Skills – Profit
COMPUTING PROFIT
1. TR = P X Q ; TC = FC + VC
TR – TC = Profit
2.
DETERMINANTS OF SUPPLY
ATC = TC/Q
TR > TC = Profit
TR< TC = loss
TR=TC = breakeven
TWO METHODS OF ECONOMICS
Positive - Facts
Normative – Fallacy and
Recommendation
3 BASIC PROBLEMS
1.What to produce
2.How to produce
3.For whom to produce
4 TYPES OF ECONOMICS
Command – Dictator
Traditional – Based on tradition
Market – buyer and consumer
interact; market dictates the
economy
Mixed – government and market
PPF (Production Possibilities
Frontier) – the point in which an
economy is most efficiently
producing its goods and services.
Demand - consumers willingness
and desire for a specific goods
and services
DETERMINANTS OF DEMANDS
1. Price –
Substitute = replacement
Complementary = things that go
together
2. Income –
Normal – demand and income
increases
income increases
3. Population- target market
4. Expectation
5. Taste/ preference
Demand Curve - Graphical
presentation of the relationship
between the price and quantity
demand.
Law of Demand - Inverse
relationship bet P and QD
Demand Schedule - Tabular
presentation between P and QD
Demand Function - Mathematical
expression showing the
relationship of P and QD.
Shortage - D > S
Surplus – S > D
Qs – Qd
DIVISION OF ECONOMICS
Production
Consumption
Exchange
Distribution
Public Finance
Price Floor – the minimum price
set by the government
Price Ceiling – the maximum
price set by the government
Patent – exclusive right given by
the government
Supply – amount of goods that
producers are willing or able to
produce.
1. Number of sellers
2. Technology
3. Government Subsidy/ Taxes
4. Price of input goods
5. Expectation of future price
Elasticity- responsiveness of one
variable to price change
Elastic - greater than 1
Inelastic - less than 1
Unit Elastic/Unitary – Equal to 1
Midpoint Formula
Ed = Q2 - Q1/Q1 + Q2/2 / P2-P1/
P1+P2/2
TR = PxQ
Utility – gives us satisfaction
2 WAYS TO MEASURE UTILITY
1. Cardinal Ranking- Attaching
specific number to each level
2. Ordinal Ranking – order
according to preference.
Law of Diminishing Marginal
Utility – individual consume more
unit of commodity that his total
utility increase reaches maximum
and starts to decrease.
Total Utility – Total amount
satisfaction
Marginal Utility – Extra
Satisfaction
MU = TU/Q
Utility Maximizing rule – utility is
maximized so the last dollar spent
of cash product purchased yield
the same amount of extra
satisfaction.
Budget line - Schedule or curve
showing combination of two
products a customer can
purchase with a specific money
income.
Indifference Curve - Curve
showing indifferent combination
of two products that yield the
same satisfaction to a customer.
CHARACTERISTICS OF IND CURVE
1. Negative Sloped
2. Curved to the origin
3. Do not intersect
AGENDA 21 – action plan of the
UN related to sustainable
development. Held in Rio de
Janeiro, Brazil, 1992.
Comprehensive blueprint of
action to be taken globally.
PH AGENDA 21 – provides for the
creation of an enabling
environment w/c would assist
various stakeholders to integrate
sustainable development in their
decision making process.
PH AGENDA 21 PROMOTES
HARMONY AND ACHIEVES
SUSTAINABILITY BY EMPHASIZING:
- a sole of intervention that is
primarily area based
- integrated is land dev. Approaches
where applicable
- people and integrity of nature at
the center of dev. initiatives.
SUSTAINABLE DEVELOPMENT
- derived from “an image of society
and a shared vision of the dev. path
of that society.” 3 key players
define the goal of development
namely: Government, Business, and
Civil Society.
7 DIMENSION OF DEVELOPMENT
Spiritual Development
Human Development
Social And Cultural Development
Political Development
Economic Development
Ecological Development
Principles of Sustainable
Development
Different Principles of
Sustainable Dev. under PH
Agenda 21
a. Primary of developing full
human potential
b. Holistic science and
appropriate technology
c. Cultural, Moral and spiritual
sensitivity
d. National sovereignty
e. Gender sensitivity
f. Peace, order and national unity
g. Social justice, inter. and intra.
generational equity and spatial
equity
h. Participatory Democracy
i. Institutional Viability
j. Viable, sound and broad based Underemployment- person
economic development works 40 hours/week.
k. Sustainable population 2 types of Underemployed
l. Ecological soundness 1. Visible - people working less
m. Bio geographical equity and than 40 hours/week and wanting
community based resource additional work.
management 2. Invisible – people working 40
n. Global cooperation hours or more/ week and still
want additional work.
Labor Force – 15 years old and
3 TYPES OF POPULATION
above willing and able to work.
Labor Force – 15 above
Unemployment Rate –
Unemployment, Not in the Labor
percentage of labor force that is
force
unemployed
Institutionalize: PWD
Underemployed - part of the
3 TYPES OF UNEMPLOYMENT
labor force who works less than
Frictional - temporary
40 hours/week.
unemployment
Frictional Unemployment – it
Structural – Job mismatch
takes time for workers to search
Cyclical – recession phase;
for the job that best suit their
business cycle “walang trabaho”
taste and skills.
“bagsak ekonomiya”
Structural Unemployment – the
2 TYPES OF UNDEREMPLOYMENT
number of jobs available in some
Visible – working less than 40 h/w
labor markets is insufficient to
(part time drivers, farm workers)
provide a job for everyone.
Invisible – working 40 hours and
Labor problems - conflicts on
still looking for work (office work)
social reality with social ideas
FORMULA OF UNEMPLOYMENT
Keynesian Theory - theory on
RATE
rational income and employment.
Unemployed/ labor force x 100
Developed by JOHN MAYNARD
KEYNESS
Child Labor – people working
AREAS OF LABOR PROBLEMS
below 15 yrs old
Unemployment- at least 15 yrs.
Migration – people working
Old willing and able to work
abroad
Brain drain - migration of all LOSER DURING INFLATION
professional in the country Lender
BUSINESS CYCLE Fix income earners
Fluctuation - pabago bago in the Saver
overall economic activity. Teachers
4 PHASE
Recession - economy is going
down like GDP
Depression – trough; the
economy is totally down
Expansion - Economy is going up,
good sign for business
Peak - whole employment but not
totally 100% rate hence 95%
wherein 5% is unemployed.

Inflation – General price increase

Demand Pull – Demand that
cause inflation
Cost Push – When the raw
materials that is being used
causes inflation.
Consumer Price Index - it is a tool
to measure inflation.
Deflation - Decrease in price level
Stagflation – brought about by
inflation and employment
Hyperinflation- extreme inflation

GAINER DURING INFLATION

Borrower
Real estate owner
Flexible income
Store owners
Scarcity- refers to limitation-
insufficient resources, goods or
abilities to achieve the desired
ends- that exists in obtaining all the
goods and services that people
want.
Trade Off- it involves a sacrifice
that must be made to get a certain
product or experiences.
Opportunity cost- it refers to the
value of what you have to give up
in order to choose something.
Economic system- a set of
institutional arrangement and
coordination mechanism to
respond to the economic problem
Budget line model- the boundary
of affordability for a given budget
and specific goods. It shows the
combination of two products that a
consumer can afford by a given
income.
Economic theory- a statement or
set of related statements about
cause and effect, action and
relation.
Economic principle- a statement of
inter-relationships among
economic factors that explains
what may cause what, or what may
happen under certain
circumstances.
Division of Economics.
1. Production- the process of
producing or creating goods
needed by the households to
satisfy their needs. Factors: input
and output.
2.Distribution- the marketing of
goods and services to different
economic outlets for allocation to
individual consumers. In monetary
terms, this is the allocation of
income among persons or
household.
3. Exchange- the process of
transferring goods and services to a
person in return for something.
Medium of exchange used in the
market is money.
4. Consumption- the proper
utilization of economic goods.
Consumption is spending money
for goods and services in order to
yield direct satisfaction.
5. Public Finance- pertains the
activities of the government
regarding taxation, borrowings, and
expenditures. It deals with the
efficient use and fair distribution of
public resources in order to achieve
maximum social benefits.
Applied Economics
- The study of observing how
theories work in practice.
- The study of economics in relation
to real world situations, as opposed
to the theory of economics.
Econometrics
- The application of statistical and
mathematical theories to
economics for the purpose of
testing hypotheses and forecasting
future trends.
Economic Resources/Factors of
Production
1. Land- it refers to all natural
resources which are given by and
found in nature.
2. Labor- a form of human effort
exerted in the production of goods
and services.
3. Capital- it refers to man-made
goods used in the production of
goods and services.
4. Entrepreneur- the person who
combines the other economic
resources for use in the production
of goods and services.
Economic Payments?
1. Factor Payments- are the
income people receive for
supplying the factors of production;
land, labor and capital.
2. Transfer Payments- are
payments made without goods or
services being received in return. It
also called a non-exhaustive
payment because they do not
directly absorb resources or create
output.
Demand- quantity of goods and
services that consumers/buyers are
willing and able to buy given
different prices at specified period
of time
Demand schedule- tabular form
Demand curve- inversely
proportional
- shifting to the right=increase
- shifting to the left=decrease
Law of Demand
Ceteris Paribus- all other things
held constant.
- no other factor would affect the
quantity demand.
*higher price, decrease in
quantity demand
* lower price, increase in
quantity demand
Supply- willingness of the
manufacturer to produce or sell
goods in market.
Supply schedule- tabular form
Supply curve- directly proportional
Law of Supply
Ceteris Paribus
*higher price, increase in
quantity supply
* lower price, decrease in
quantity supply
Market Equilibrium
When supply and demand are
balanced in a market
Equilibrium price
The exact price where the market is
at equilibrium. the highest price at
which you have consumers willing
to pay for something meets the
lowest price at which producers are
willing to make it available
What two things can happen when
there is disequilibrium
Shortage and Surplus
Price ceiling
The highest price that someone can
legally charge for a good or service:
rent control
Price floor
The lowest price that can be
changed for a good or service:
minimum wage
The Equilibrium Principle
A market in equilibrium leaves no
unexploited opportunities for
individuals but may not exploit all
gains achievable through collective
action
Elasticity
Price Elasticity of Demand
The percentage change in the
quantity demanded of a good that
results from a 1 percent change in
its price
Elastic
The demand for a good is elastic
with respect to price if its price
elasticity of demand is greater than
one
Inelastic
The demand for a good if its price
elasticity of demand is less than
one
Unitary elastic
The demand for a good is unit
elastic with respect to price if its
price elasticity of demand is equal
to one
Point Elasticity of Demand
Elasticity calculated at a specific
point on a demand curve
Arc Elasticity of Demand
Elasticity calculated between the
endpoints of a segment of a
demand curve
Income Elasticity of Demand
The percentage change in the
quantity demanded of a good in
response to a 1 percent change in
income
Cross-price Elasticity of Demand
for two goods
The percentage change in the
quantity demanded of one good in
response to a 1 percent change in
the price of a second good
Cost of Production
Short run- a period to brief for a
firm to alter its plan capacity yet
long enough to permit a change in
the degree to which the fixed plan
is used.
Ex. PAL+ additional
workers (100 workers)
Long run- a period long enough for
the firm to adjust the quantity of all
resources that employs including
the plan capacity.
Ex. PAL+ additional
building + equipment
Total product- total quantity/total
output of a particular good or
service produce.
Marginal product- refers to extra
output/added product associated
with adding a unit of variable
resource to the production process
Average product- the product or
labor productivity/output per unit
of input
Marginal cost- the increase in total
cost that results from carrying out
one additional unit of an activity
Average cost- total cost of
undertaking n units of an activity
divided by n
Total Costs- the amount of money
spent by a firm on producing a
given level of output. Total costs
are made up of fixed costs (FC) and
variable costs (VC).
Total variable costs- the cost of all
variable inputs used in producing a
particular level of output
Fixed costs- expenses of
production that do not change with
output e.g. rent. Fixed costs are
almost always indirect costs and
are sometimes called overheads.
Variable costs- expenses of
production that do change with
output e.g. components and raw
materials. Variable costs are almost
always direct costs.
Average fixed cost- total fixed cost
of operating the business divided
by the number of units produced or
sold.
Average variable cost- the cost of
the variable inputs per unit of
output; u-shaped curve
Average total cost- total cost per
unit of output
Marginal product of labor
the additional output produced
when one more worker is hired;
change in quantity / change in
labor
Increasing marginal returns to
labor
the marginal product of labor
increases as more labor is hired;
additional workers allow
production to be more specialized
Diminishing marginal returns to
labor
the marginal product of labor
decreases as more labor is hired;
with additional workers, the gains
from specialization are harder to
achieve
Law of diminishing marginal
returns
as more and more of any input is
added to a fixed amount of other
inputs, its marginal product will
eventually decline.