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REFERENCE:
MICROECONOMICS
Simplified
Avila-Bato, Malveda, Viray

INTRODUCTORY MICROECONOMICS 4TH Ed

Pagoso, Dinio, Villasis, Pagoso-Nemesis, Pagoso-
Veloso
 Origin of the Word
Economics

Greek words :OIKOS – Household

NOMUS – system/management
OIKONOMIA OR OIKONUMUS :
Management of household - Microeconomics

Statement management - Macroeconomics

 ECONOMICS
The production, consumption, distribution of scarce
resources to satisfy the unlimited wants of individuals,
society, government and nation.

A social science that studies how individuals, government

, firms and nations make choices on allocating scarce
resources to satisfy their unlimited
ECONOMICS
Studies how prices of land, labor, capital are determined
and how these prices are used to allocate scarce resources

Looks into the behavior of financial markets and how it

allocates capital to the rest of the economy

Looks into the distribution of income and into ways of

helping the poor without causing harm to the country’s
economic performance

Studies the impact of growth of government spending, taxes

and budget deficits
SCARCITY

ALLOCATION
How much to produce
 4 Basic Economic Questions
1. WHAT TO PRODUCE
Identify what are the goods and services
needed to produce for the utilization of the
society .
2. HOW TO PRODUCE
 Methods and techniques
 Labor-intensive (w/ large population) or
capital-intensive production.

Example: Example :
an island-nation to produce space shuttle Philippines, Vietnam, China vs
or agricultural goods and tourism services . Japan, Germany, USA

3. HOW MUCH TO PRODUCE 4. FOR WHOM TO PRODUCE

 Numbers of goods and services needed Target market
to answer the demand. To increase profits
 Producers to approximate to avoid
shortage or surplus
POSITIVE ECONOMICS NORMATIVE ECONOMICS
 Concerned with “what is”  Concerned with what should be
 A statement that can be proved  A statement that reflects an
or disproved by reference to opinion, which cannot be proved
facts or disproved by reference to the
 A way of describing and facts
explaining economics as it is, not  A way of describing and
as it should be explaining what economic
behaviour ought to be, not what
EXAMPLES: is actually is.
The economy is now experiencing a EXAMPLES:
slowdown because of too much The Philippine Government should
politicking and corruption in the govt initiate reforms in order to regain
investor confidence, and uplift the
economy
 2 BRANCHES OF ECONOMICS

• Microeconomics Macroeconomics
Studies the behavior of how Focus on the
individual modern households production of the
and firms make decisions to whole nation/entire
allocate limited resources. economy.

•
 Economic systems are the means by which countries and
governments distribute resources and trade goods and services

TYPES of Economic Systems

Economic Description Example
System
Traditional Subsistence. Family producing Middle East, Asia, Africa and
food for its own consumption South America
Command Dictated by the government Iran, Cuba, China and North
Korea
Market Capitalism/resources are US
privately owned
Socialism Key enterprise owned by the China
gov’t .
Private is recognized
Mixed Market and command system Philippines (more of market-
oriented)
BRIEF HISTORY
Birth of Economic Theory : CLASSICAL
ECONOMICS . focused on economic growth
and economic freedom, stressing laissez-faire
ideas and free competition.

of Scotland :The father of

Economics
Wealth of Nations 1776
(“bible in economics’ for
100 years)
Invisible hand .
Boom and bust cycles are
natural
• German philosopher and
sociologists Das Kapital
(1867), Marx proposes
that the motivating force
of capitalism is in the
exploitation of labor,
whose unpaid work
is the ultimate source of
surplus value
 BRIEF HISTORY

o NEOCLASSICAL ECONOMICS – 1870

o is an approach to economics focusing on the determination of goods,
outputs, and income distributions in markets through supply and demand.

ALFRED MARSHAL . Most influential economist of the

period because of his book Principles of Economics
(marginalism)
BRIEF HISTORY