Economics may be defined as the science which deals with the activities of man in obtaining wealth for the

satisfaction of his wants. Originally meant household management a concept that is associated with the individual family. Some writers use the term national economy to convey the idea that the subject matter is national in scope Other writers use the terms social economy or social economics to indicate the essentially social character of the study. Antoine de Montchretien (1615) A Frenchman, who used the term political economy to signify that the economy of modern times was no longer that of the household, but that of the nation. Economics as a Science It is concerned with the classification and logical arrangement of economic phenomena and of the principles and laws that concern the relation between man and wealth. Economic Law It may mean the statement of the relationship of phenomena which holds under given conditions. States that is certain changes occur, certain results are sure to follow; the relation of facts is expressed in a statement designated as a law. Is interchangeably used with economic principle, economic theory and economic doctrine. o Principle generally describes a simple relationship of facts while law refers to the statement of a more complex relationship o Theory means an idea or scheme of thought used on the known facts o Doctrine means a body of principles Fundamental Institutions of the Present Economic System 1. Private Property 2. Competition 3. Free Enterprise 4. Cooperation Divisions of the Field of Economics 1. Production deals with the factors necessary in the creation of wealth. These factors are land, labor, capital and the enterpriser or business organization. The nature of these factors is analyzed including their utilization and organization for production. 2. Exchange the principles of money, credit and banking and their relation to price and the exchange of goods are subjects in this division 3. Distribution deals with the appointment of the social income or national dividend among the different factors that cooperate in production 4. Consumption deals with the utilization of goods and services in the satisfaction of human wants. Free goods unlimited quantities without exerting any effort in acquiring them Economic Goods goods that are scarce Wealth all things that have utility and are limited in quantity Attributes of Wealth 1) Possession of utility 2) Must be transferable 3) Must be material and external to man 4) Must be scarce

Producers goods or capital The goods that satisfy our wants indirectly Consumers goods Those goods that satisfy our desires directly Capital Is defined as produced goods utilized for further production. Income Consists of the goods and services resulting from the productive activities of the people. Takes the form of material or immaterial goods Is often defined as an inflow of satisfactions from economic goods Different Kinds of Income 1) Money income or nominal income 2) Real income consist of material goods in the form of clothing, rice, meat, vegetables and other concrete objects. 3) Psychic income by Professor Frank A. Fetter, defines as desirable results produced in the realm of feeling by valuable objects or by valuable changes in the environment which accrue to or affect an economic subject within a given period. 4) Gross income means the total receipts that he receives within a certain period of time 5) Net income the amount that he saves/ remains from the total receipts