ECONOMICS

GUIDE TO ECONOMICS FOR FILIPINOS

BY BERNARDO VILLEGAS
 CHAPTER 2
THE CIRCULAR FLOW OF
ECONOMIC ACTIVITY
4 Basic Economic Activities:

 Production-is the use of economic resources in

the creation of goods and services for the
satisfaction of human wants
 Consumption-when goods and services produced
are ready for use which lead to this activity
 Employment-the use of these economic resources
in production
 Income generation
Two Economic units:
1) Household
2) Firm

 ASSIGN: JUL 3, 2012

 What are the different circular flow of

economic activity. Explain them briefly

Flow-is quantity measured over a
particular period of time
Stock-is quantity measured as of given
point in time
Wealth-is anything of value, consist of
money, jewelry, buildings, and other
property

Wealth is a STOCK,
Income is a FLOW
**Economic Model of Production

1. The Circular flow of Production Process

2. The Circular flow of Goods and Income
among Producers and Households
3. The Circular flow of Goods among
Production Units
4. The Circular flow of Income
5. The Circular flow of Income among
Production units
6. The Circular flow of Physical Goods and Money
income
7. The Circular flow of Goods and Income of
Households and Firms, with the Government and
Foreign countries
8. The Circular flow of Economic activity reflecting
the outflows and the inflows

--------

The Final output of goods within the flow consists

of:
 Consumer goods-goods used in consumption
 Capital, producers or investment goods-goods
used in the production of other goods

***The value of this final output of goods is

equal to the value of the expenditures on
these goods.
***The circular flow of economic activity implies:

1. That goods, resources, and money payments

will flow as long as households continue to
consume, and as long as firms continue to
produce

2. That since goods and resources flow in

exchange for payments, the rate of payments
flow will in the end be same
 Two types of purchases the government
makes in the economy
1. It hires labor from the household sector, rents
their land for their offices and factories, borrows
capital by selling securities-money payments

2. The government also buys goods from business

firms, and makes money payments for these
purchases
 INFLOWS AND OUTFLOWS:
*** Consumption is the mainstream of the circular
flow
*Outflows:
 Savings
 Taxes
 Imports

*Inflows:
 Investment
 Government spending
 Exports
*** When the outflows in the economy equal the
inflows, the level of economic activity is
maintained

• Outflows are difficult to control

because they are dependent on
income.

*When income increases, we expect

savings, taxes, and imports to
increase.
 Inflows are easier to manipulate.

 Three sets of policy may be adopted

by the govt. to encourage exports
and investments

1. Monetary policy-this affects savings

and investments
2. Fiscal policy-this controls taxes and
government expenditures
3. Trade policy-this affects the country’s
exports and imports
 The ultimate objective of economics is to
develop better policies to solve and to curve our
economic problems.

Economic Goals
1. Provide full employment or a high level of
employment
2. An equitable distribution of wealth income
3. Efficiency
4. Economic growth
5. Economic freedom
6. Price stability
END OF CHAPTER 2

QUESTIONS?????
PREPARE FOR A QUIZ…
QUIZ – Dec. 5, 2008
1. What’s the ultimate objective of
Economics? - is to develop better policies to
solve and to cure our economic problems.
2. Five goals of Economics
1. Provide full employment or a high level of
employment
2. An equitable distribution of wealth income
3. Efficiency
4. Economic growth
5. Economic freedom
6. Price stability
3. Four Basic economic activities
1. Production
2. Consumption
3. Employment
4. Income generation
4. Five Circular flows of Economic activity
1. Circular flow of Production Process
2. Goods among production units
3. Goods and Income among producers and
households
4. Income
5. Income among production units
6. Physical goods and money income
7. Goods and Income of households and
firms, with the government and foreign
countries
8. Economic activity reflecting the outflows
and the inflows
5. Three inflows in a circular flow
 Exports
 Expenditures
 Investments
6. Three outflows in a circular flow
1. Imports
2. Taxes
3. Savings
7. Three policies which enhance our
nation’s economy
1. Monetary policy
2. Fiscal policy
3. Trade policy
QUIZ – April 8, 2008
1. What’s the ultimate objective of Economics? ( 2)
2. Five goals of Economics
3. Four Basic economic activities
4. Five Circular flows of Economic activity
5. Three inflows in a circular flow
6. Three outflows in a circular flow
7. Three policies which enhance our
nation’s economy
Total = 25 pts.
 =====
CHAPTER 3- DEMAND AND
SUPPLY
Aggregate demand-the totality of a
group of consumer’s demand
Aggregate supply-the totality of a
producer’s supply
Demand schedule-the quantities
consumers are willing to buy of a
good at various prices
END OF CHAPTER 3

QUESTIONS????
PREPARE FOR A QUIZ….
Quiz for chapter 3
 CHAPTER 4
FACTORS AND THEORY OF
PRODUCTION
 CHAPTER 4
FACTORS AND THEORY OF
PRODUCTION
Factors of Production- refers to the
economic resources or all the things
necessary in the production of goods and
services
1. Land- refers to the natural resources or all
gifts of nature
2. Labor- is the exertion of human effort to
acquire an income, both mental and physical
talent as well as ability to produce goods and
services.
 to money but
3. Capital- refers not only
also to all equipment, machinery,
building and other man-made
production tools
4. Entrepreneur- the one who
combines all economic resources
 Roles of the Entrepreneur
1. Organizes production or combines all factors
of production to make and produce goods
and services
2. Makes business decisions, planning,
forecasting and figuring what goods and
services to produce and how to produce and
whom to produce
3. Take the risk
4. Innovate or introduces new techniques, new
technology, new products and new
management of organizing business
 Qualities of an Entrepreneur
1. He is skillful
2. He is courageous
3. He is self-confident
4. He has good academic background

Production – it is concerned with the

exertion of efforts to obtain the
needed goods and wealth.
 ASSIGN-May 6, 2O11

 SUBMIT AT LEAST 2 FILIPINO SUCCESSFUL

ENTREPRENEURS.

 Email- lynda1OO556@yahoo.com
 Aims of Entrepreneur
1. Make money at the same time gratify
other desires
2. Gain prestige, public acclaim and
admiration
3. To become well known and popular
4. Fulfill such ambition
 Five Kinds of Utilities in
Production
1. Form utility-this can be increased to a
certain commodity by changing its forms
2. Place utility-this can be determined by
transporting the goods into proper places
3. Possession utility-the owner of the
goods sell them to the vendor in the
market. The seller has the possession
of the products or goods
4. Service utility- this refers to the
immaterial or intangible goods
5. Time utility-Some goods can’t be
kept for a long time and wait to
satisfy the maximum need for the
commodities

Capital – is said to be an instrument

that supports or aids labor in
production
END OF CHAPTER 4

QUESTIONS?????
END OF CHAPTER 5

QUESTIONS?????
 PREPARE FOR A QUIZ….

 PROCEEDTO LAND
REFORM OR AGRARIAN
REFORM
 QUIZ-April 12, 2008 (25
items)
1. Four qualities of an Entrepreneur
2. Five kinds of Utilities in Production
3. Six Types of Capital
4. Five Advantages of Specialization
5. Two Roles of an Entrepreneur
6. Three Forms of Specialization
PREPARE FOR A QUIZ
QUIZ-APRIL 15, 2008 (20 items only)
1. Three forms of Business Organization
2. Four classification of Partners
3. Two types of Corporation Securities
4. Two kinds of Stockholders
5. Three advantages of Sole proprietorship
6. Three advantages of Partnership
7. Three advantages of Corporation