Introduction to

Economics
Applied Economics
Economics- is the social science that
involves the use of scarce resources to satisfy
unlimited wants.

Alfred Marshall – “economics as a study of mankind in the

ordinary business of life.
Scarcity- a condition where there are insufficient resources to
satisfy all the needs and wants of a population.
▪ Relative scarcity- when good is scarce compared to its
demand
▪ Absolute scarcity- when supply is limited.
Choice and Decision-Making

Opportunity Cost- refers to the value of the best

foregone alternative.

Economic resources- also known as factors of

production, are the resources used to produced
goods and services.
Economics resources-also known as factors of
production, are the resources used to produced
goods and services.
1. Land – soil and natural resources that are found in nature and
are not man-made. Owners of land receive a payment
know as rent.
2. Labor- physical and human effort exerted in production.
3. Capital- man-made resources used in the production of
goods and services, which include machineries and
equipment. The owner of capital earns an income called
interest.
 Economics as a Social Science

Economics is a social science because it studies human behavior just like

psychology and sociology.
2 Branches of Economics
1. Macroeconomics- a division of economics that concerned with the
overall performance of the entire economy.
2. Microeconomics- concerned with the behavior of individual entities
such as the customer, the producer, and the
resource owner.
Price Theory- concerned with the process of setting prices of goods.
Basic Economic Problems of
Society
1. What to produce and how much- society must decide what
goods and services should be produced in the economy.
2.How to produce- is a question on the production method
that will be used to produce the goods and services.
3. For whom to produce- is about the market for the goods.
For whom will the goods and services be produced? The
young or old, the male or female market, the low-income
groups?
Economic Systems

1. Traditional Economy- Decisions are based on

traditions and practices upheld over the years
and passed on from generation to generation.
2. Command Economy- This is the authoritative
wherein decision-making is centralized in the
government or a planning committee.
3. Market Economy- This is the most democratic
form of economic system.
 Economics as an Applied Science

Applied Economics is the application of economic theory and

econometrics in specific settings with goal of analyzing potential outcomes.

ASEAN ICON
Lee Kuan Yew (1923-2015) is an economic icon and an example of how a
leader of a previously undeveloped country can lead to overcome it’s
country’s basic economic problems and move toward economic growth.