INTRODUCTION TO ECONOMICS Flashcards
came from the Greek word which
means household management
OIKONOMIA
recognized only in 1776 when ADAM SMITH,
father of modern economics, wrote his book
“An Inquiry into the Nature and Causes of the Wealth of Nations”.
a social science that deals with the allocation of scarce resources to satisfy man’s unlimited needs and wants.
economics
the study of how societies use scarce resources to produce commodities and distribute them among different people.
economics
the study of production, distribution, selling and use of goods and services.
economics
4 SIGNIFICANT CONCEPTS
- as a science.
- as a social science.
- scarcity of resources.
- insatiable human wants
systematized body of knowledge that follows a scientific approach in dealing with economic issues
economics as a science
know and understand the problem.
formulate hypothesis.
Economics as a science
gather real-world data or facts that are relevant to the problem.
Economics as a science
based on the gathered facts, observe, analyze
and make interpretations.
Economics as a science
study of human behavior.
ECONOMICS AS A SOCIAL SCIENCE
includes psychology, sociology, anthropology,
history and law, etc.
ECONOMICS AS A SOCIAL SCIENCE
how society and individuals generally make
choices.
ECONOMICS AS A SOCIAL SCIENCE
choosing one thing over the other possibilities
TRADE OFF
the value of the best foregone alternative. (e.g.
graduation vs salary).
OPPORTUNITY COST
in general are unlimited, insatiable, and amenable people are never satisfied.
HUMAN WANTS
because of the 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.
CHOICE AND DECISION MAKING
insufficiency of resources to meet all the needs and wants of a population.
SCARCITY
something that we desire but unimportant in daily life.
Wants
something that you must have in order to survive.
Needs
the efforts of people involved in production, including labor and entrepreneurship.
Human resources
the processed materials, equipment, and building used in production.
Capital resources
came from nature that are used in production, including land, raw materials, and natural process.
Natural resources
refers to the resources consumed in production in order to make products and services. (inputs used for production process)
Economic resources
also known as factors of production.
ECONOMIC RESOURCES
resources used to produce goods and services.
Economics resources
soil and natural resources.
Land
the income payment for capital.
Interest
a man-made resources used in production of goods and services
Capital
income received
Wage
payment for land owners
Rent
physical and human effort exerted in production.
Labor
2 TYPES OF SCARCITY
Relative
Absolute
Bananas are abundant in the Philippines but when a typhoon destroys banana plants, they become what?
Relative scarcity
oil is _______ in the Philippines so we rely heavily on imports from oil producing countries like Iran.
Absolute scarcity
2 DIVISIONS OF ECONOMICS
Macroeconomic
Microeconomic
it focuses on the overall flow of 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
division of economics that is concerned with the overall performance of the entiremeconomy.
MACROECONOMICS
it is more concerned on how goods flow from the business firm to the consumer and howmresources move from the resource owner to the business firm.
MICROECONOMICS
concerned with the behavior and decisions of individual entities such as the consumer, the producer, and the resource owner.
MICROECONOMICS
BASIC PROBLEMS OF SOCIETY
WHAT TO PRODUCE AND HOW
MUCH?
HOW TO PRODUCE?
FOR WHOM TO PRODUCE?
is about the market for goods. for whom will the goods and services be produced? (children, adults?, girl or boy?, rich or poor?)
FOR WHOM TO PRODUCE?
is a question on the production method that will be used to produce the goods and services. (made of wood or bronze? machine or bare hands?)
HOW TO PRODUCE?
society must have to 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 these goods should also be decided on. (for consumption or investment?)
WHAT TO PRODUCE AND HOW
MUCH?
Types of economic systems
Traditional economy
Command economy
Market economy
Mixdd economy
practiced in indigenous communities where life is less complicated and the simple needs of the society can be self-produced.
Traditional economy
methods are stagnant and therefore, not progressive.
Traditional economy
traditional societies exist in backward and primitive civilizations.
Traditional economy
this economy exists in dictatorial, socialist, and
communist nations.
COMMAND SYSTEM
the state or agency of government may be in charge in the allocation of resources by using its political power in answering the basic economic problems.
COMMAND SYSTEM
decision-making centralized in the
government or a planning committee.
COMMAND SYSTEM
the basic economic problems are answered based on the workings of demand and supply.
MARKET ECONOMY
there is an equilibrium price and output in the
market.
MARKET ECONOMY
people’s preferences may reflect on the prices they are willing to pay in the market which becomes the basis of the producers’ decisions on what goods to produce.
MARKET ECONOMY
the most democratic form of economic system.
MARKET ECONOMY
a mix of market and command economy.
MIXED ECONOMY
the government has a large role in military, international trade, and transportation.
MIXED ECONOMY
the federal government can safeguard people and markets.
MIXED ECONOMY
federal government can safeguard people and markets, government may own some key industries, government can manage social welfare programs.
Command
private property, supply x demand
= price, driven by self-interest.
Market
A good is scarce compared to its demand. Is limited by nature. (demand and supply)
Relative scarcity
supply is limited. it is where supply of a good is naturally limited (no substitutes) physical limitations of resources.
Absolute scarcity
