INTRODUCTION

TO
ECONOMICS
ECONOMICS
●
Is a social science concerned chielfy with description
and analysis of the
●
• PRODUCTION,
●
DISTRIBUTION,
and
●
Focuses on the behavior and interactions of economic
agents and how economies works. CONSU
MPTION
of GOODS and SERVICE.
• HOUSEHOLD • FIRMS

• BUYERS • SELLERS
ALFRED MARSHALL
●
A well- known economist
●
He describe economics as a study of mankind in the
ordinary business of life.
●
It examines part of the individual and social action that
is most closely connected with the attainment and
use of material requisites of well- being.
PROBLEMS, CONSTRAINTS OR
LIMITATIONS
●
High Gasoline Prices
●
Shortage of Commodities
●
Insufficient allowance

●
Fare Hike
●
Not enough food

●
Not enough money for
bills
●
Not enough income/
salary
SCARCITY
●
The reason why people need to practice
economics.
●
Is a condition where there are
insufficient resources to satisfy all
the needs and wants of a population.
TYPES OF SCARCITY
•
●
Relative
• Scarcity
•
●
Absolute Scarcity
RELATIVE SCARCITY
●
Is when a good is scarce compared to
its demand.

• Ex. Coconuts and Banana

RELATIVE SCARCITY
●
Is when a good is scarce compared to
its demand.

• Ex. Coconuts and Banana

RELATIVE SCARCITY
●
Is when a good is scarce compared to
its demand.

• Ex. Coconuts and Banana

RELATIVE SCARCITY
●
Is when a good is scarce compared to
its demand.

• Ex. Coconuts and Banana

Something that has economic utility
or satisfies an economic want.
ABSOLUTE SCARCITY
●
Is when supply is limited.

Ex. Petroleum and

Cherries
CHOICE AND DECISION
MAKING
●
Because of th presence of scarcity, there is a need for
man to make decisions in choosing how to maximize
the use of the scarce resources to satisfy as many
wants as possible.
OPPORTUNITY COST
●
Refers to the value of the best foregone alternative.
●

●
It is imply giving up the use or for
enjoyment of something.
 ECONOMIC
RESOURCES
Also know as the factors of production
●

●
Are the resources used to produce goods and services.
●
These resources are, by nature, limited and therefore,
command a payment that becomes the income of the
resource owner.
 ECONOMIC
RESOURCES
Land – soil and natural resouces that are found in
●

anture and are not manmade. Owners of the lands

recieve payment that is known as
• RENT .
●

●
Labor –
●
exerted in production. It covers
• PHYSICAL manualEFFORT
and HUMAN workers like
construction wokers, machine operators, and
production workers, as well as professionals like
nurses, lawyers, and doctors.
●
The income received by the labors is reffred to as

• WAGE .
CONT'........
●
Capital – man made resources used in
the production of goods and
• MACHINERIES and EQUIPMENT .
services, which include
●
the owner of the capital earns an
income. called
• INTEREST
ECONOMICS AS A SOCIAL
SCIENCE
- It is a different science from biology and chemistry
as these are physical science.
- Is a social science that
studies human behaviourjust like psychology and
sociology.
- It is a science in a broader meaning that study the
and
- As a social science it studies
society

how people behave and

influence the world around them.

how individuals make choices in allocating

resources to satisfy their unlimited wants.
BRANCHES OF
ECONOMICS
• MACROECOMONICS
• MICROECONOMICS
 MACROECONOMICS
• A division of economics that is concerned with the
overall performance of the entire economy.
•
•• It studies the economy system as a whole
• rather that the individual economic units that
make up the economy.
•
• Focuses on the overall flow of the goods and
resources and studies the causes of change
in the aggregate flow of money, the
aggregate movement of goods and services,
and the general employment of resources.
 MACROECONOMICS
economic growth, CONT’.
the
• - Isexpansion of productive
about the nature of capacity, and the
growth of national income.
-
MICROOECONOMICS
Concerned with the behaviour of individual entities such as

consumer , , and the resource

- Is more concerned on how goods flow from the business firm to the consumer and how resources move from the resource owner to the business firm.
- Also concerned with the process of setting prices of goods that is also known as

producer owner.

PRICE THEORY.
 MICROOECONOMICS
• - Studies the decisions and choices of the individual
units and how these decisions affect the prices of
goods in the market.

- It also examines alternative methods of using

resources in order to alleviate scarcity.

- Does not aggregate levels of production,

employment, and income.
 SOCIETAL ECONOMIC
PROBLEMS
• WHAT ARE TO PRODUCE and HOW MUCH
The society must decide what goods and services should be
produced in the economy. Having decided on the nature of goods
that will be produced, the quantity of the goods should also be
decided on.
HOW TO PRODUCE
Is a question on the production method that will be used to produce
the goods and services. This refers to the resource mix and
technology that will be applied in production.
FOR WHOM to PRODUCE
Is about the market for the goods.
Is it for young or for old, male or female, low-income or for high-
income?
 ECONOMIC SYSTEMS
• It is the means through which society determines the
answers to the basic economic problems
mentioned.
•

a.
b. TRADITIONAL ECONOMIC
c. COMMAND ECONOMIC
d. MARKET ECONOMIC
 TRADITIONAL
ECONOMIC
• Decisions are based on traditions and practices
upheld over the years and passed on from
generation to generation.
• Methods are stagnant and therefore not
progressive.
• Traditional societies exist in the primitive and
background civilizations.
•
 COMMAND ECONOMY
• An authoritative system wherein decision- making is
centralized in the government or planning
committee.
• Decisions are imposed on the people who do not
have a say in what goods are to be produced.
• This economy holds true in dictatorial, socialist, and
communist nations.
 MARKET ECONOMY
• The most decorative form of economic system.
• Based on the workings of demand and supply,
decision are made on what goods and services to
produce.
• People’s preferences are reflected in the prices they
are willing to pay in the market and are therefore
the basis of the producers’ decisions on what
goods to produce.
 IMPORTANCE OF
ECONOMICS
• To know how important the subject is, all they need
to do is read the front page of the news papers to
see that the most important news are economic
in nature.
• Watch news on TV and for sure, economic news
always present important issues.
• Economics will help the students understand why
there is a need for everybody, including the
government, to budget and properly allocate the
use of whatever resources are available.
• It will help one understand how to make more
decisions in spending money, saving part of it,
and even investing some of it.
• On the national level, economics will enable the
students to take a look on how the economy
operates and to decide for themselves if the
government officials and leaders are effective in
trying to shape up the economy and fortunate
policies for the good of the nation.
 SCIENTIFIC APPROACH IN THE
EMPIRICAL TESTING OF AN ECONOMIC
•
THEORY
is a study that attempts to explain
Economics
how an economy operates and how the consumer
attempts to maximize his/ her wants within limited
means.
• Using such tools as
•
•
LOGIC
• the students needs to approach the empirical testing of
an economicMATHEMATICS
theory in a scientific method/ manner.
STATISTICS
STEPS IN SCIENTIFIC
APPROACH
Ø State the propositions or conditions that are taken
as given and do not need further investigation,
as the basic starting point of investigation.
These propositions will serve as the premises
upon which the theory is established.
Ø Observe facts in connection with the activity that
we want to theorize.
Ø Apply the rules of logic to the observed facts to
determine casual relationships between
observed factors and to eliminate facts that are
unnecessary and irrelevant.
Ø Establish a set of principles such that formulated
hypotheses may be tested as to whether they
are valid or not.
Ø Use statistics and econometrics as empirical proof
in testing the hypotheses.
 POSITIVE VERSUS
NORMATIVE
ECONOMICS
• POSITIVE - Deals with what are actually
happening such as the current inflation
rate, the number of employed labour, and
the level of the Gross National Product.
• NORMATIVE – refers to what should be-
that which embodies the ideal such as
the ideal rate of population growth or the
most effective tax system. Focuses on
policy formulation that will help to attain the
ideal situation.
•
 MEASURING THE
ECONOMY

• Before we go into the essence of applied

economics, it is beneficial that the
students get to learn first how the
growth of the economy is actually
measured.
• The national government is always happy
to inform the people that the country’s
GROSS DOMESTIC PRODUCT (GDP) has
grown in rates, much higher than in the
previous administration.
•
 THE GOVERNMENT
Depends
PLAN
Lookingperspective
ahead isofgrounded oneconomy
the what the past and
presenthas
perspectives
been. extended to the future .

PRODUCTION
Is the heart of the economy whose values
measure both resource INPUT
and
OUTPUT of PEOPLE
• The interplay of resources and outputs
tells how well the economy has
performed.
 GNP
GROSS NATIONAL PRODUCT

Is the market value of ALL the final products

both
sold and unsold
SUPPLY
MARKET VALUE is determined by and
DEMAND
Economy’s resources?

Belong to Filipino Citizens

and Corporatioans.
 ECONOMIES
RESOURCES?
• Not all resources in the economy belong to
the economy like capital and
entrepreneurship brought to the country by
multinationals like Nestle and Proctor and
Gamble (P&G).

In addition, the value of final products already

includes the values of its components from
the lower production stages.
 WAYS TO ACCOUNT
GNP

v EXPENDITURE
APPROACH
vINCOME APPROACH
 THE INCOME APPROACH AND THE
EXPENDITURE APPROACH TO
MEASURING THE GDP OF A NATION
• GDP is generally understood to represent the
health of a nation’s economy, and most
people realize that if GDP is growing, things
are going well, while if it’s falling things have
turned sour in the economy.
But what, precisely, does GDP measures?

There are two primary methods for measuring GDP, which

should yield the same result even though they measure
completely different factors.
 EXPENDITURE
APPROACH?
v  measures the total amount spent on the
goods produced by a country in a year.

v Products are final when they have

reached the highest levels of
processing in the economy for
different uses in the given period.
C = Household/ individual Consumption
G = Gov’t Expenditures on Good and Services
X = Exports
I = Investment
M = Imports
 INCOME APPROACH
• measures the total incomes earned by households in
a nation in a year.
• As basic factors of product and contribution resources
(LAND, LABOR, CAPITAL, ENTREPRENEURSHIP) add
value to products (LEATHER) as processed into
higher forms (SHOES).
• If all payments for resource contributions (RENT,
WAGE, INTEREST, and PROFIT) went to resource
owners, GNP would simply be the sum of all factor
payments from the raw material to the final product
stage.
 CONT’……
• This approach is based on the estimation of income
of various factors of production. Income method
considers payments made to all productive
resources of the country in the form of rent, wage,
interest and profit. Thus,

• It doesn't includes the followings:

Ø The income earn from the sale of car, house,
property, etc. produced in past.
Ø The income earned from the sale of stocks,
bonds.
Ø Transfer payments from government.
 THE INCOME METHOD
CONSISTS THE
FOLLOWING
Wages and Salaries 

It includes the wages and salaries received by the

employees during the year plus certain supplements
like provident fund and other labor income.

Rent

Rent includes the rent of land, factories, and houses

from where the production process is carried out to
supply goods and services to the consumer.
• Interest
It includes the net interest income received by the people
of the country from the investment as a factors of
production.
Corporate Profits 
It consists of corporate profits with inventory valuation
and capital consumption, adjustments. It is the profits
before tax, which consists of dividend, profit, tax and
undistributed profits.
Depreciation
The depreciation made by each firm for the repair and
maintenance of capital goods is also included in national
income.
Net Indirect Taxes 
The income generated from indirect taxes is also included
in national income accounting approach.
 ECONOMICS AS AN
APPLIED SCIENCE

• APPLIED ECONOMICS is an application of

economic theory and econometrics in
specific settings with goal of analysing
potential outcomes.
•
•
 JOHN NEVILLE
KEYSEN

• Attributed to be the first to use the phrase

“APPLIED ECONOMICS” to designate the
application of economic theory to the
interpretation and explanation of
particular economic phenomena.
• We should be able to improve HUMAN
WELFARE among Filipinos by the
investigation and analysis of economic
problems in the real world. Applying
theory in our lives means trying to
address economic issues and able to do
something about it.
 CONCEPT OF
SCARCITY AND
CHOICE
• Should encourage us as individuals to help
in or way to provide high and what to the
country’s economic problems.
 PHILIPPINES
ECONOMIC
PROBLEMS
• UNEMPLOYMENT
As of 2015, there are 2.68 million of
unemployed indivdiuals

POVERTY

BOOMING POPULATION
Philippines population represents 1.37%
of the world’s total population
 LEE KUAN YEW
• An economic icon, and an example of how a
leader of a previously undeveloped
country can lead to overcome its country’s
basic economic problems and move
toward economic growth.
• The prime minister of Singapore and known
to be the longest-serving prime minister in
the history from 1959-1990.
• During his rule, Singapore became the most
prosperous nation in Southeast Asia.
•
• Before he became the Prime Minister of
SG, the country was a poor nation that is
mired in dept and plagued poverty.
• He introduced a five-year plan calling for
URBAN RENEWAL and CONSTRUCTION of
NEW PUBLIC HOUSING, GREATER RIGHTS
for WOMEN, EDUCATIONAL REFORM, and
INDUSTRIALIZATION.
• He led SG into a merger with Malaysia, but
after 3 years SG left the union for good.
• He resigned in 1990 and his son became
the new prime minister in 2004.