1

Hey! Are you

familiar with the
term ECONOMICS?
At the end of the lesson you are all
expected to:

a)define Economics as a social science.

b) explain the two branches of economics; and
c) value the significance of economics in human
lives
 CLASS,
3

LOOK AT ME!
Direction: There will be pictures presented on the screen
and all you need to do is to figure out what does the picture
imply. You can refer to the description and scrambled letters
provided in the same slide.
 WHAT DOES THE PICTURE
4

IMPLY?

It is the rate of
increase in prices over
a given period of time.

LTIONAFIN
INFLATION
 WHAT DOES THE PICTURE
5

IMPLY?

It is the action of making or

manufacturing from components or
raw materials, or the process of
being so manufactured.

PRODUCTION​
TIONDUCPRO​
 WHAT DOES THE PICTURE
6

IMPLY?

It is a cycle or series of cycles

of economic expansion
and contraction.

BUSINESS
SIBUNESS CYCLE
CLECY
ECONOMICS
AS A
SOCIAL
SCIENCE
 8

WHAT IS ECONOMICS?
• Is a social science concerned with the
using scarce resources to obtain the
maximum of the unlimited wants of
society.

• The study of production, distribution,

selling , and use of goods and services.
 ECONOMICS AS
9

SOCIAL SCIENCE

• As a Social Science, economics

studies how individuals make
choices in allocating scarce
resources to satisfy their
unlimited wants.
2 BRANCHES
OF
ECONOMICS:

• Microeconomics
• Macroeconomics
MICROECONOMICS
• Studies the decision and choice of the 11

individual units and how these decisions

affect the prices of goods in the market.

• It also concerned with the process of

setting prices of goods that is also known
as Price Theory.
Examples:
•How a local business decides to allocate their funds.
•How a city decides to spend a government surplus.
•The housing market of a particular city/neighborhood.
•Production of a local business
MACROECONOMICS
12

• It is a division of economics
that is concerned with the
overall performance of the
entire economy.

Examples:
 Inflation  monetary policy
 GDP  national income
 aggregate demand  unemployment
rates
 13

IT’S YOUR TURN!

Share to the class a certain scenario

happened to you in which you were able
to apply the concept of economics.
THANK
YOU!
 
Opportunity Cost
EXPLAIN 
Economic Resources
Land
ME! Labor
Capital
Entrepreneurship

GROUP 1
EXPLAIN Economic System
ME! Traditional Economy
Command Economy
Market Economy

GROUP 2
EXPLAIN Mixed Economy
ME!
Positive Economics
Normative Economics
Gross National Product

GROUP 3
EXPLAIN Gross Domestic Product
ME!
Unemployment
Poverty
Poverty line

GROUP 4
 It is the application of economics
theory and quantitative tools (
econometrics and statistics) to
APPLIED analyze specific economics
ECONOMICS problems and other inquiries
(positive economic) with the end
of providing solutions and new
direction (normative economics).
ECONOMETRICS
It is the use of statistical and
mathematical models to develop
theories or test existing hypotheses in
economics and to forecast future trends
from historical data. It subjects real-
world data to statistical trials and then
compares the results against the theory
being tested.
THE PHILIPPINES’
21ST CENTURY
SOCIOECONOMICS
CHALLENGES
 • War and Terrorism in the Middle
East
- the rise in the number and frequency of
terrorist attacks across the world is a cause
GLOBAL for concern.
CHALLENGES - developing nations that are in trade
agreements that are in trade with
economies that are under serious threat of
terrorist attacks may experience a
slowdown in the demand for their exports.
 • The Territorial Dispute with
China
- The Philippines has on going
DOMESTIC maritime dispute with China over
ISSUES the west Philippine Sea, which
started in 2012 when China banned
Filipino fishermen around
Scarborough Shoal, an area in the
disputed sea.
 • The Ongoing war in Mindanao
- The war between the government and
the Moro Islamic Liberation Front
(MILF) that started in the 1970s has
DOMESTIC been on going for over 40 years and
ISSUES across six administrations.

- The Philippines was rated 7.27, which

ranked the country as the 11th most
vulnerable to terrorism in 2015.
MICROECONOMICS
ISSUES
POVERTY 26

- Pronounced deprivation in well-being. Poverty is the lack

of monetary resources to meet one’s needs or the lack of
specific goods like food, asset, shelter, health, and the like.

Solutions:
- Create jobs (e.g. government projects, encourage
investment)
- Raise the minimum wage
- Properly allocate time and resources (e.g. social
program)
- Provide increase access to education
SOCIAL INEQUALITY 27

- It refers to disparities and discrepancies in areas

such as in income, wealth, education, health,
nutrition, space, politics and social identity.

Solutions:
- implement progressive income tax
- spend more on public/social services and
infrastructure
- Increase government ownership of basic utilities
MONOPOLY 28

- is a market structure characterized by a sole seller in

a particular market wherein the nosiness entity ,ay
control the supply, compromise the quality of goods
and services, and manipulate the price.
Solutions:
- implement price capping (limiting price increase)
- regulate merges
- regulate the quality services
- investigate and address abusers
 ENVIRONMENTAL ISSUES 29

- environmental issues are harmful effect of

human activities (usually economic activities)
on the environment.
Solutions:
- conserve water and energy
- proper waste disposal
- implement laws for environment conservation
MACROECONOMICS
ISSUES
 RECESSION 31

- it is a period of temporary economic decline during

which industrial and trade activities are reduced,
marked by a fall in GDP in two consecutive quarters
(6-18 months).
Solutions:
- Implement expansionary fiscal policy to expand
the money supply in the economy by either
reducing taxes or increasing government spending.
 32

- Tax cuts or Reduced tax will increase people’s

disposal income which later results in increased
consumption, increased production, employment,
and so on.

- Increased government spending, done by investing

or making projects like construction of
infrastructures like roads, railways, ports and the
like. These activities will create jobs as well as
purchases of the government.
UNEMPLOYMENT 33

- It happens when a lot of people are

jobless/cannot find work or are losing jobs.

Solutions:
- Creates job by creating public projects
- Invite foreign investments
INFLATION 34

- it is the constant increase in the average price level of

goods and services.
- the purchasing power of money declines and it lowers
living standards.
- According to experts, 2-3% is good for the economy.
- It can be caused by an a increase in in the cost of
production (cost-push high inflation), a high rise in
demand (demand-pull inflation), or too much money
supply in the economy.
 Note: Solutions to inflation vary depending on its 35

nature/cause.
• Contractionary Monetary Policy – the central banks
control the money supply on the economy. This can be
done by raising bank rates/ interest rates, expand market
operations (government selling securities like bonds), or
increase the reserve requirement of the banks.

• Contractionary Fiscal Policy – government reduces its

expenditure/spending and raise tax rates to decrease the
money supply in the economy.
 36

The Law of
Demand and Supply

and the
Market Equilibrium
 WHAT IS A COMMODITY?
• This term as used in economics pertains to a
homogenous good that commands a price.
• It is characterized by its uniformity across the
market
• It is often used as raw materials or inputs to
produce another good (secondary products).
Example:

Wheat is used to make bread and beer, while crude oil is refined to
produce petroleum, which in turn is processed further to create ink,
fuel, paint, plastic, among other things.
WHAT IS A COMMODITY?
• Its price is dictated by the quantity
available in the market, taken as a whole.
For instance:

Assume that the supply of rice in the country

largely comes from the Central Luzon. If a strong
typhoon hits and damages the rice crops in that
region, expect the domestic supply of rice to fall.
This will in turn cause the price of rice to surge.
 Local producers import a good for
three main reasons:
1)the good is not available locally
2)the cost of importing is cheaper
than procuring the same good
locally, and
3)the quality of the imported good is
better that a similar good sold
locally.
Example: • Crude oil is the commodity that the
Philippines imports.

• The Middle East and member of

countries of the Organization of
Petroleum Exporting
Countries(OPEC) having an
abundant supply of it are the major
supplier globally.
Identify which of the following goods are
commodities (C) and which are secondary
goods (S). Write C or S on the blank.

1. Sugar ________
2. Coffee ________
3. Plastic ________
4. Rubber Cement ________
5. Flour ________
6. Diesel Fuel ________
7. Timber ________
8. Textile ________
9. Corn ________
10. Gravel __________________
THE LAW OF
DEMAND
 43

• Consumer Utility – refers to the person’s

willingness and ability to consume a good in
reaction to price changes.

The Law of Demand

- It states that as the price of a good goes up (Pꜛ),
the quantity demanded of that good goes down
(Qdꜜ), all other things remaining constant (ceteris
paribus).
Demand Curve
– illustrates the linear
attribute of the law of
demand.

Assume that this is the

demand curve for apples.
At point A where the price of
apple is P30.00, quantity
demanded is 1. At point B
where the price of apple is
P10.00 per price, quantity
demanded is 3 pieces.
Downward-sloping
demand curve
- It represents the inverse
relationship between
quantity and demand.
- It implies a negative slope

Note: the slope of a linear

function is rise over run
given two points of the
curve
Demand Schedule
– or a table of price Price Quantity
and quantity values. Demanded
150 0
Remember: plot the price
variable on the y-axis and
100 2
the quantity demanded 50 4
variable on the x-axis. 25 5
Determinants of Demand
• Income
- Disposable income refers to the net amount after the
taxes and other mandatory contributions have been
deducted.
- Typically, as consumer’s income rises (ꜛ), quantity
demanded of good also increases (ꜛ). This is known as
Income Effect.
- Goods that display this attribute are identified as
normal goods.
This convention of
graphing consumer
income and quantity
demanded is
formally known as
the Engel Curve –
which was named
after named after
Ernst Engel, a
German statistician
from the 19th century
(1821-1896)
Is an opposite effect
likely to happen?

Is it possible to demand YES!

less of a good as you
earn more income?
Inferior Good
- Goods that exhibit a decline (ꜜ) in
quantity demanded as consumer
income rises (ꜛ)
- these are often of poorer quality
than normal goods.
The quantity
demanded of
inferior goods
decreases (Qd to
Qd1) as income
increases (Y to
Y1).
In terms of elasticity, there are two
types of normal goods – luxury goods
and necessity. Remember: elasticity
is a measure of
responsiveness of one
variable to change in
Income Elasticity – it relates to the
another variable.
change in quantity demanded in
response to an adjustment in income.
 Luxury Goods
– it exhibit an
increase in demand
more than the
proportionate
increase in income.

It shows that luxury goods

have a more elastic demand
curve relative to normal goods.
Necessity Goods
– show an increase
in demand that is
less than the
proportionate
increase in income.
 Veblen Good
– to increase in demand when its price soars to the point of
being overpriced.
For example:
A luxury brand’s most
Luxury goods, owning Veblen goods exclusive and most
high status. But in contrast to luxury expensive limited
goods, Veblen goods are not driven edition line is
commonly a Veblen
by an increase in income. Rather, the
Good.
appeal comes from their
expensiveness and exclusivity.
Substitutions
– these are goods
that meet the same
requirement or fulfill
the same needs as
another good.

Assume that good B is a

substitute for good A. As the
price of Good A increase, the
quantity demanded of its
substitute also increase.
Complementary Goods
– these are generally
consumed or used
together.
- There is interdependence
between the two goods.
An increase in price of good A
decreases the quantity
demanded of good A, following
the law of demand.
Correspondingly, quantity
demanded of its
complementary good declines.
Consumer
Expectations
– when consumers
anticipate the price of a
particular product to
rise , they will tend to
buy more of that
product now before the
perceived or scheduled
price increase.
Taste and Preferences
– increased in popularity,
taste and personal
preferences influence the
demand of specific good.

- Some consumers will be

inclined to buy a certain
brand because of the
perceived status of owning
it.
THE LAW OF
SUPPLY
While the Quantity Demanded is based on
consumer’s utility, Quantity Supplied is based on the
profit- maximizing characteristics of firms.

The Law of Supply

- It states that, ceteris paribus, an increase in price
(Pꜛ) causes an increase in quantity supplied (Q ꜛ).
Conversely, a fall in price causes a drop in quantity
supplied.
 Supply Curve
– illustrates the linear
characteristics of the
law of supply.
Assume that this is the supply curve
for strawberry wine.
At point A where the price of wine is
P120.00 per bottle, the firm supplies
10 barrels of wines. Assuming there
are no changes in other factors, the
law of supply states that sellers tend
to produce more when the price of
the good become more expensive.
Upward-sloping supply curve
- Signifies that the variables in
the x- and y-axis have a
positive relationship.
- A positive slope means that
the two variables move in the
same direction.
Technology
– it aids manufacturers
either by minimizing delays
in production of by directly
increasing labor
productivity.

- Following the law of

supply, new technology
tends to improve
productivity, which in turn
increases output or quantity
supplied.
 Factors of Production:
• Land
• Labor
• Capital
• Entrepreneur

Input Prices
– the efficient allocation of these
resources results in more profit from
the supplier’s point of view.

- An increase in input prices drives up

costs. Higher costs lead to a decrease
in quantity supplied.
 Prices of Other Goods
Consider a manufacturer that
produces two goods, A and B.
As the price of A arises, the
quantity supplied of good A also
increases. This follows the law
of supply.
What happens to the good B?
Due to the higher potential profit
good A, the manufacturer might
decide to transfer some of its
resources (from good B) to the
production of good A. this will decline
in the output for good B.
Producer
Expectations
– producers anticipate a
surge (ꜛ) in factor prices
tend to increase
production before the
higher input prices
become in effect. This
leads to an increase in in
Quantity Supplied.
Government Policy
– taxes, subsidies, and import quotas imposed by the government
impact quantity supplied of a good but in different ways.

1. Excise tax
- It is imposed on the manufactured goods.
- It is applicable to producers and sellers as opposed to value-
added tax (VAT) that is paid only by the customers or end users.
- Excise tax increases input prices and cost of production, which
ultimately leads to a decrease in output or quantity supplied.
 2. Subsidy
- On the other hand, is monetary assistance by the government in
support of target industries or sectors of the economy.
- A subsidy results in lower costs for recipient producers because
the government pays a portion of the costs.
- Lower costs lead to more output and quantity supplied.

3. Import Quota
- It is a limit to the volume that local producers can bring into the
country.
- It is particularly restrictive to manufacturers that rely heavily on
imported raw materials for their production.
- The limit on raw materials leads to lower quantity supplied.
Fig. 3.15 Figure (a) shows the effect of a government subsidy on quantity supplied, ceteris paribus, while
figure (b) displays the effect on quantity supplied of the imposition of excise tax and import quotas.
MARKET
EQUILIBRIUM
Market
- it is a meeting place for buyers and sellers where the buyer can
purchase goods from a seller for a price that is agreeable to both.
- in economics, “market” is not limited to physical location (e.g.,
wet market) but also include contemporary, online platform that is
typical of the financial market (e.g., stock exchange)

Market Price
- It is the price in which the seller and buyer had agreed
on for an exchange of good to happen.
- It is represented as the intersection of the demand and
supply curves (refer to figure 3.16).
Market Equilibrium
- It is the point where
the consumer and
supplier expectations
meet.
- It is the point where
quantity demanded is
equal to the quantity
supplied (Qd =Qs)
- It determines the
equilibrium price (P*)
and quantity (Q*).
Market Shortage
- It happens in the market
when there is excess
demand.
- To eliminate the
shortage, suppliers tend
to increase production to
meet demand. (point1)
- Increase the price. The
higher prices will
discourage consumers,
so quantity demanded
will eventually decline
(point2)
Market Surplus
- It happens in the market
when there is an excess
supply.
- At market price (P1),
quantity supply exceeds
the quantity demanded in
the market.
- Producers will try to get rid
of the excess supply by
reducing prices of
producers and producing
less.
A shift of the demand
curve to the right from
D to D1 moves the
Market Equilibrium
from point 1 to point
2. The new equilibrium
level results in a
higher price (P1* to
P2*)and quantity (Q1*
to Q2*).
A shift of the supply
curve to the right from S
to S1 will shift the market
equilibrium from point 1
to point 2. The new
equilibrium level will
result in a lower price
(P1* to P2*) and more
quantity (Q1* to Q2*).