BASIC MICRO

ECONOMIC
PRESENTED BY: JANNAH MARIE ANOG
COURSE AND BLOCK: BSBA-FM 1-2
 THE PROBLEM OF PROVISIONING

Society is confronted with a finite set of resources and a

given state of technology at a given point of time. As a
result, there is a finite amount of good and service.
 WHAT IS SCARCITY?
Scarcity as an economic concept "refers to the
basic fact of life that there exists only a finite
amount of human and nonhuman resources
which the best technical knowledge is capable of
using to produce only limited maximum amounts
of each economic good.“
 SOCIAL INTERACTION
In a society, the behavior of individuals must be coordinated through
social interaction. The social interaction takes many forms ranging from
cooperation to competition.
Society, guided by these values, perceptions and beliefs and constrained
by institutions, technology and resource endowment, must solve the
problem of provisioning.
 THE TWO IMPORTANT FORMS OF SOCIAL
INTERACTION
Specialization is the case where an individual (firm, organization or
country) focuses on the production of a specific good (or group of
goods). It can increase the amount of goods that can be produced. It also
requires some form of social institution to coordinate the process.
 In The Republic, Plato [427-347 B.C.] suggests specialization as an
explanation of the origins of the city-state. Plato describes a conversation
between Socrates and a group of students. They are pondering the nature of
justice. They conclude that justice is each person doing that which they are
best suited to do.
Division of labor is another form of social interaction that allows
individuals to do what the isolated person cannot. In the division of
labor, the production of a good is broken down into individual steps.
 ECONOMIC ACTIVITIES
John Stuart Mill [1806-1873] divided economic activities into three
categories: production, distribution and exchange.
 WHAT IS PRODUCTION
Production is the process of combining various material inputs and
immaterial inputs in order to make something for consumption. 
 WHAT IS DISTRIBUTION
 Distribution usually describes the process of allocating the goods and
services that have been produced.
• Societies have used market exchange, reciprocity, eminent domain,
inheritance, theft and philanthropy to distribute goods and services. The
primary means of distribution or allocative mechanisms that are used in
most societies are market exchange, reciprocity and eminent domain.
THE THREE PRIMARY MEANS THAT
THE SOCIETY USED
• Market exchange- an exchange of private property rights between
individual agents.
• Reciprocity- is a system of obligatory gift giving.
• Eminent domain- is a redistribution of private property rights through
the authority of some organization.
 CONSUMPTION
The end purpose of economic activity is to provide goods and services
that can be consumed by individuals to satisfy needs and wants. Modern,
neoclassical economists generally do not like to use the word “needs.”
The use
of the word “wants” is an attempt to take subjective judgment out of the
analysis.