ECONOMICS :

Its Concepts & Principles

Prepared by: Cams Ganda 
WHAT IS ECONOMICS?

“ The study of the proper

allocation and efficient use of
scarce resources to produce
commodities for the satisfaction
of unlimited needs and wants.”
GOALS OF ECONOMICS

To strengthen economic freedom.

Promote economic efficiency.

Promote economic stability.

To improve economic security.

Attaining a high level of growth in the economy.

ECONOMICS AS A SOCIAL
SCIENCE
Economics as related to other Social
Sciences:

•Anthropology •Psychology
•Political •History
Science •Physics
•Sociology •Religion
BRANCHES OF ECONOMICS

MICROECONOM
ICS
MACROECONO
MICS
The Scientific Method of Economics
Data Gathering
- Empirical Method
Economic Analysis
- Creates Economic Principles
(Generalizations)
- ASSUMPTIONS: ceteris
paribus : “ other things being
equal or constant”

Economic Conclusion
- Reasoning : Inductive or
Deductive
Methodologies

NORMATIVE
ECONOMICS
“what ought to be”

POSITIVE
ECONOMICS
“what is”
 NORMATIVE
ECONOMICS

“The government
should fund education
for everyone.”
 POSITIVE
ECONOMICS
“Investing in the stock market
over the last 4 years was more
profitable than investing in
savings accounts.”
 POSITIVE
ECONOMICS

“Health insurance is a good

lifetime investment.”
NORMATIVE
ECONOMICS

“The government
shouldn't fund the
arts.”
 POSITIVE
ECONOMICS

“If the government raises the

tax on beer, this will lead to a
fall in profits of the brewers.”
POSITIVE ECONOMICS
• It uses what is and what has been
occurring in an economy as the basis for
any statements about the future.
• Focuses on “Cause and Effects”
• Involves the evolution and development of
economic theories.
• It does not contain value judgements and
its accuracy can be tested.
 POSITIVE
ECONOMICS

“A rise in average
temperatures will increase
the demand for sun screen
products.”
Seatwork 
1. Cite two examples on how you can use
economics in a real life situation.
2. Differentiate microeconomics from
macroeconomics by citing examples.
3. Give examples of normative and
positive statements. (2 statements each
methodology)
4. Identify at least two goals of
economics. Briefly explain and cite an
example.
SELECTED CONTRIBUTORS IN
THE DEVELOPMENT OF
ECONOMIC THOUGHT
Ancient Period

“DIVISION
OF LABOR”

THEORY OF THEORY OF
MONEY MARKET
 His main concern was to outline
how one could live a moderate
and virtuous life in harmony
with the interest of society.

• FAIRNESS IN EXCHANGE
• MONOPOLY
• USE VALUE AND EXCHANGE
VALUE – Paradox of Value : “what is rare
is greater good than what is plentiful”
“Thus gold is a better thing than iron, though less
useful.”
OIKNOMIKOS 0r OIKONOMOS
-”household management”
- Efficient management translated into
effective leadership.
 Medieval Period
• LENDING AND
INTEREST
Luke : “ Lend freely,
hoping nothing in
return”
• The Just Price
“ Do unto others as you would have them do unto
you.”
Distributive Justice (Fair distribution)
Compensatory Justice (Fair Exchange)
 Classical Period
“The Wealth of
Nations”
Invisible Hand
• MERCANTILISM
• CAPITALISM
• LAISSEZ FAIRE
• FREE TRADE
• LIBERALISM
• NATION WEALTH INDIVIDUALISM
• SUBSISTENCE THEORY OF WAGES
• TAXATION
Modern Period

JOHN MAYNARD
KEYNES

• CAPITAL
• MONEY SUPPLY
The Basic Economic
Problems
The Three Basic Economic Problems

1. What goods and services should be

produced and in what quantities?
2. How should these goods and
services be produced? – maximum
output with minimum input without
sacrificing quality
3. For whom should these goods and
services be produced?
FACTORS OF
PRODUCTION
Economic Systems
 it is a set of economic
institutions that dominates a
given economy
1. Traditional
2. Command
3. Market
4. Mixed
The Economic System Models
1. Capitalism
- private property - free competition
- economic freedom - profit motive
2. Communism
- no private property
- no free competition
- no economic freedom
-no profit motive
- presence of central planning
3. Socialism
The Circular Flow Of
Economy