Economics

NATURE AND SCOPE OF ECONOMICS

 Reflective Learning Activity
 Every society must make choices about which essential should be allocated
with the available but limited resources for production. In most cases, where
there is scarcity in the production of necessities, or where there are no enough
funds to accomplish everything for the satisfaction of everyone, the society
has to make better choices. Today, we have to adjust to the new normal way of
living. There is scarcity in the production of goods and services for everyone’s
needs and wants. Everything in this world has limitations. Rich and poor, all
individuals…”ceteres paribus….” “all else are equal”…..
 Regardless of your economic status, which is more important to you, health or
unlimited supply for your wants?
The Nature and Scope of Economics

 According to Molina, J. A. & Nadal, G. J I (2020), economics is a SOCIAL

SCIENCE concerned with the explanation and prediction of observed
phenomena in the society. Economics studies the way in the societies solve the
fundamental problems of reconciling the unlimited desires of individuals with
scarcity of resources, susceptible to numerous alternative uses. Economics is
also an APPLIED SCIENCE because it uses the scientific method in its
explanations, which consists of observing reality and presenting questions and
problems to arrive at the formulation of theories and models. As an applied
science, it follows a systematic procedure to solve issues and problems of the
society.
The Field of Economics

 Microeconomics and macroeconomics has

perspectives on the economy.
 *Microeconomics: focuses on the behavior
of individual economic units and the
functioning of markets. Its perspective
focuses on parts of the economy:
individuals, firms, and industries.
 *Macroeconomics: studies the functioning of economics
as an aggregate (production, employment). Its perspective
looks at the economy as a whole, focusing on goals like
production, the standard of living, unemployment and
inflation. Macroeconomics has two types of policies for
pursuing these goals: monetary policy and fiscal policy.
Micro vs. Macro Economics
The Economic Agents/ Stakeholders

1. Consumers
 Consume goods and services /offer production factors
 Maximize utility
2. Producers
 Produce goods / demand productive factors
 Maximize profit
3. The public sectors
 Attempt to maximize the well-being of society
*The agents interact among themselves in a specific territorial, social, natural and/or
cultural framework that determines their relationships → Market
BASIC TERMS TO UNDERSTAND
ECONOMICS
 It is essential that you familiarize yourself with the study of economics. This will
facilitate your understanding of economic analysis. Specifically you meet
GOODS – which yields to your satisfaction. It is anything used to satisfy your
wants and needs.

 TANGIBLE GOODS –material goods or commodities.

 INTANGIBLE GOODS – when they are in the form of
services. Those rendered by doctors, engineers, doctors
and other professionals
Kinds of Goods
Goods may be classified according to
use:
Essential Goods
Capital Goods or Industrial Goods
Luxury Goods
Economic Goods
ECONOMIC RESOURCES OR
FACTORS
 In the article of Nowaczyk , J (2020) on Identifying the Factors of Production, he
defined economic resources as the factors of production for goods and services.
The factors of production are inputs combinations in the production of goods and
services to make an economic profit for the firms. These factors of production are
land, labor, capital, and entrepreneurship. Resources are limited in nature, but
human wants and needs are unlimited, thus, an efficient allocation of these
resources or factors of production is a big challenge for every economy.
Economics also helps the entrepreneurs and the economy to allocate resources in
the production of supplies to meet the demands of the consumers.
Land
Labor
Capital
Entrepreneurship
Characteristics of Resources:
 Scarcity: insufficient resources to supply all the desires and needs
of individuals. In the production of goods and services; there are
issues that economics may encounter: these include: for Land –
inadequate land and natural resources; polluted areas; overcrowded
spaces; for Labor – unskilled workforce; mismatch of jobs; for
capital - low quality of equipment/machines; insufficient
fund/capital; and for entrepreneurship – Inadequate training of
entrepreneurs; limited opportunity; scarcity of great ideas but many
competitors in the market.
 Multiple use: Resources can have more than one possible
use. For example, a plot of land can be used to plant coffee
or to build a factory.
 Partially replaceable: one resource can replace another in
the production of a good or service (e.g., replace manual
labor with technology).
 Scarce resources and unlimited desires → Scarcity
 Scarcity and alternative uses → Choice
 Choice → Opportunity cost
 Microeconomics and macroeconomics are two different perspectives on
the economy. The microeconomic perspective 1) studies the behavior of
individual economic units; 2) studies the functioning of markets 3) focuses
on parts of the economy: individuals, firms, and industries. The
macroeconomic perspective 1) looks at the economy as a whole and 2)
focusing on goals like productions; standard of living, unemployment, and
inflation. Macroeconomics has two types of policies for pursuing these
goals: monetary policy and fiscal policy.
 In the production of goods and services; there are factors that
economics may encounter: these include: land – inadequate land
and natural resources; polluted areas; overcrowded spaces; labor –
unskilled workforce; mismatch of jobs; capital - low quality of
equipment/machines; insufficient fund/capital; and
entrepreneurship – inadequate training of entrepreneurs; limited
opportunity; scarcity of great ideas but several competitors in the
market.
Today, we are in a new normal way of living, a very different
one from way we have lived for several years. It’s because
everyone has that fear of the COVID 19 that might cause us
from health and economic issues. Everyone, therefore, has to
be very responsible in his behaviors in the market; and become
efficient in his consumption; friendly to the environment or the
natural resources as these may become scarce in the future.
Everyone must become aware of the micro and macro levels of
the environment and contribute to the growth of our economy.