HAND OUT 1 ECONOMICS WITH

TAXATION
Prepared by: @alegnanozit
DEFINITION OF ECONOMICS
Definition: Economics is a study of the ways in
which people use resources to satisfy their wants.
CONCEPT OF SCARCITY
It refers to the tension between our limited
resources and our unlimited wants and needs
For an individual, resources include time,
money and skill. For a country, limited
resources include natural resources, capital,
labor force and technology.
It pertains to the limited availability of
economic resources relative to societys
unlimited demand for goods and service.
How to narrow this gap between what people
want and what they are able to get is the basic
problem studied in economics. We shall refer to
this problem as the problem of scarcity.

BACKGROUND AND HISTORY

POSITIVE AND NORMATIVE ECONOMICS

I. Four Basic Economic Questions

a. What to produce?
b. How to produce?
c. How much to produce?
d. For whom to produce?
What to produce?
There is a need to identify the commodities
needed to be produced for the utilization of the
society in everyday life.
A society must also take into consideration the
resources that it possesses before deciding what
goods to produce.
For example: Philippines
Our main livelihood or resources comes from
agriculture. We are not blessed with technological
advances like the United States. So it wouldnt be
feasible for us to create satellites or space shuttles
because our resources wont allow us to. Like what
we said earlier, our wants are limited by our
means.
However, we can take advantage of its natural
resources by producing agricultural goods and
boosting our tourism services. Because these are
the things that are within our means.
How to produce?
Identify the different method or means to produce
such commodities.
The society must determine whether to employ
labor intensive production or capital intensive
production.
Labor Intensive Production: uses more human
resources or manual labor in producing goods and
services than capital resources.
This is advisable to societies with large population.
Example, China. Usually, the labor of this countries
are cheap. Goods are produced by employing more
of cheaper resources and less of more expensive
inputs.
Capital Intensive Production: employs more
technology and capital goods like machineries and
equipments in producing goods and services than
labor resources. Example: Japan
Mostly utilized by countries with high level of
capital stock and technology and with scarce labor
resources.
How Much to Produce?
Society must identify the number of commodities
to be produced in order to answer the demand of
the society.
Underproduction will result to a failure to meet the
needs and wants of society. On the other hand,
overproduction results to excess goods and
services going to waste.
For Whom to Produce?
Identify the population which demands
commodities produced in a society. Economist
must determine the target market of goods and
services which are to be produced to understand
their consumption behaviour.
3 ES IN ECONOMICS

Efficiency
Equity
Effectiveness

FACTORS OF PRODUCTION

a. Land
b. Labor
c. Capital
d. Entrepreneurship