MODULE 1 Introduction to Economics and the Scope of

Module No. and Title

Managerial Economics.

Lesson No. and Title LESSON 1 Introduction to Economics

1. Define key economic concepts and the feature of the economic

Learning Outcomes perspective.
2. Describe the role of economic theory in economics and business.

Introduction
As you begin your studies, you are probably asking, why is it important to study economics?
Many consider studying economics because they need to know the language of the market.
Others hope to make money. Some simply wants to understand the laws of demand and
supply. But what really is economics?
The purpose of this lesson is to elaborate this definition and introduce the subject matter of
economics.

Activity ANSWER THIS!!!

Pause for a moment and consider a typical day in your life, then answer the following.

1. How do you choose what to wear for the day? (10 POINTS)

2. How did you decide on the snacks to buy from your favorite store? (10 POINTS)

3. How did you go about in deciding what degree to take up in college? (10 POINTS)

Analysis ANSWER THIS!!!

✔ What do you think has influenced your choice on what to wear? What about on the snacks
to buy and eat? (10 POINTS)

✔ How do your constraints impose the way you choose? (10 POINTS)
✔ Based on the activity above, define economics and discuss the limits we face as we make
choices. (10 POINTS)

Abstraction
What is economics?
Economics is the study of proper allocation of scarce resources to satisfy unlimited human
wants and needs.
Behind this definition are key economic ideas: human wants and needs are insatiable, yet
resources are limited and scarce. Thus, economics is the study of how we make choices
among the alternative uses of our resources.
The definition of economics also embodies some key concepts:
Resources. These are inputs that are either produced or natural that is necessary in the
production of goods and services that satisfy human wants and needs. These resources, often
referred as factors of production, are classified into four broad categories:
▪ Land – generally refers to as natural resources, is anything that nature offers. These
gifts of nature include land itself that is used for farming, the renewable and
nonrenewable energy resources that we use on a daily basis, and other environmental
resources, such as the water we drink and the air we breathe.
▪ Labor – refers to the time a person spends to produce goods and services. This
includes persons working in a factory, on a farm, in schools, and offices.
▪ Capital – refers to physical resources that are produced in order to produce yet other
goods and services. This includes machineries, buildings, roads, distribution facilities,
furniture, computers, and other equipment.
▪ Entrepreneurial ability – refers to a person or enterprise who brings together land,
labor, and capital to produce goods and services that satisfy human wants and needs.
This is a specialized form of labor.
Wants and needs.
The two differ in terms of their impact to survival. To satisfy a need is essential in order to
survive. Primarily, these needs are your basic needs: food, shelter, and clothing. Want, on the
other, is something you desire that may not be necessary for survival. Note, however, that
these differences are general in nature. For example, you need food in order to survive,
however, you need not to eat a beef steak in order to survive. You need shelter to survive, but
you do not need to live in a condominium to survive. You need clothing to survive, but you
do not need to wear designer clothes to live.
It is important to emphasize that the primary concern of economics is the satisfaction of
human wants and needs among the many uses of resources.
Scarcity. This is a critical quality of a resource. This simply means limited. Since everything
in the world is limited, including the clean air we breathe and the potable water we drink, this
limits our production of goods and services. Such limitations restrict our options and demand
our choices. In other words, “we can’t have the best of both worlds”. We must choose what
we will have and what we must forgo. The fact that economic resources are scarce (and thus,
have competing uses) gives rise to opportunity cost: the cost of something is what you give
up in order to get it. In other words, decisions involve trade-offs.
Simply put, economics is the study of how people make choices among the competing uses of
resources in order to satisfy their needs.

Division of Economics
You may be unaware about the breadth of what you are going to study in economics. Some
think that economics will teach them how to make money and what to do with it. Perhaps,
you may be thinking that economics will teach you about the stock market. Or perhaps,
economics deals only with demand and supply.
To understand the breadth of what you will be studying, economics is organized into two
major division:
Microeconomics. The study that examines the behavior of the basic decision making unit: the
firm and its industry, and the household. This involves examining the market through the
laws of demand and supply, the production and cost decisions of the firm, and the different
industries or market structures.
Macroeconomics. The study that examines the behavior of the national aggregates: income,
prices, output, employment, among others. This deals with understanding the problems of
inflation and unemployment, the factors that determine the national output, and the policies to
stimulate the economy.

The Method of Economics

Economics seeks to answer two kinds of questions – positive and normative.
Positive economics. It seeks to understand economic behavior by focusing on facts and cause-
effect relationship. It generally answers the question “What is?”
Positive economics is often divided into two:
▪ Descriptive economics. This involves gathering and compiling data that describe a
phenomenon and fact. Examples of such data are those collected by the Philippine
Statistical Authority (PSA).
▪ Economic theory. This involves generalizing about the data and interpret them. This
is a statement that describes about the relationship between two or more variables and
predicts responses to changes in one or more of the variables. A well-tested and
widely-accepted theory is called an economic principle or economic law. One
example is the law of demand postulated by Alfred Marshall in 1890: when price rises
of a particular good, quantity demanded falls, and vice versa.
Normative economics. It seeks to evaluate the result of economic behavior as good or bad.
This involves value judgments and prescriptions for courses of action. It generally answers
the question “What ought to be?”

Application ANSWER THIS!!!

Answer the following:
1. Is money a factor of production? Why or why not? (10 POINTS)

2. On the Forbes’ List of the World’s Billionaires List of 2020, America’s Jeff Bezos ranks
as the “world’s wealthiest person for the third year in a row” with a net worth of U.S
$113 billion. Does this “world’s wealthiest man” face scarcity? Source:
https://www.forbes.com/billionaires/ accessed on July 29, 2020. (10 POINTS)

3. If you were the president of the country, would you be more interested in your advisers’
positive views or their normative views? Explain. (10 POINTS)

Well done! You just finished the first lesson of Module 1. If you are ready to proceed, the
next lesson will discuss the nature and scope of Managerial Economics.

“Ayaw kaibog anang naay mga uyab. Mas malipayon ang

single, way gasto, way away, way stress, importante buhi”
 SAMPLE FORMAT IN ANSWERING YOUR LESSON TESTS

NAME:
YEAR, SECTION AND COURSE:
LESSON 1 OF MODULE 1

ACTIVITY (ANSWERS ONLY)

1.
2.
3.
ANALYSIS (ANSWERS ONLY)
1.
2.
3.
APPLICATION (ANSWERS ONLY)
1.
2.
3.

NOTE:
A. WRITE (HAND WRITTEN OR TYPE WRITTEN) YOUR ANSWERS IN A SEPARATE
SHEET OF PAPER (ANY KIND OF PAPER).
B. TAKE A PHOTO OF YOUR ANSWER SHEET AND SEND THRU MESSENGER OF
YOUR TEACHER FOR CHECKING.
C. COMPILE ALL YOUR ANSWER SHEETS AND SUBMIT AT THE END OF THE
SEMESTER WHICH WILL SERVE AS YOUR REQUIREMENT.
D. AUTOMATIC 10 POINTS DEDUCTION IF NOT FOLLOWING INSTRUCTION.

SUBMIT YOUR LESSON 1 TESTS BEFORE OCTOBER 01, 2022.