ECONOMICS

 Economics is the scientific study of the ownership, use, and exchange of scarce resources - often
shortened to the science of scarcity.
 is the social science that studies the production, distribution, and consumption of goods and
services. Economics focuses on the behavior and interactions of economic agents and how
economies work.

Scarcity (Kakapusan)
Is a condition where there are insufficient resources to satisfy all the needs and wants of a
population.
Shortage (Kakulangan)
A shortage is a situation in which demand for a good or service exceeds the available supply.
Possible causes of a shortage include miscalculation of demand by a company producing a good
or service, resulting in the inability to keep up with demand, or government policies such as price
fixing or rationing.

2 types of scarcity
 Relative Scarcity
 Is when a good is scarce compared to its demand
Examples:
1. Coconuts are abundant in the Philippines since the plat easily grows in our soil and climate.
However coconuts become scarce when the supply is not sufficient to meet the needs of the
people.
2. Bananas are abundant in the Philippines and are being grown in a lot of regions around the
country. But when a typhoon destroys banana plants and farmer has no bananas to harvest,
then bananas become relatively scarce.
 Absolute Scarcity
 When supply is limited.
Examples:
1. Oil is absolute scarce in the country since we have no oil wells from which we can source our
petroleum needs, so we rely heavily on imports from oil producing countries like Iran, and
other middle east countries.
 Economic Resources
 Also known as factors of production, are the resources used to produced goods and services.

Economic Resources
1. Land – soil and natural resources that are found in nature and are not man made.
Owners of lands receive payment known as rent.
2. Labor – physical and human effort exerted in production.
3. Capital – man made resources used in the production. The owner of capital earns an
income called interest.

ECONOMICS as SOCIAL SCIENCES

 Economics is a social science because it studies human behavior just like psychology and
sociology. Broadly speaking, the study of society and how people behave and influence the world
around them, economics studies how individuals make choice in allocating scarce resources to
satisfy their unlimited wants.

NEEDS and WANTS

 A need is something that a person must have in order to thrive. Without it, that person will suffer
either physically or mentally.
 A want is a choice. A desire which a person may or may not be able to get. Life will continue if a
person doesn’t get what they want.

MACROECONOMICS
  Is a division of economics that is concerned with the overall performance of the entire economy.
It focuses on the overall flow of goods and resources.

MICROECONOMICS

 Concerned with the behavior of individual entities such as the consumer, the producer and the
resource owner.

 Studies the decisions and choices of the individual units and how these decisions affect the prices
of goods in the market.

ECONOMIC SYSTEMS

1. Traditional Economy

- Decisions are based on traditions and practices upheld over the years and passed on from generation to
generation.

2. Command Economy

- This is the authoritative system wherein decision making is centralized in the government.

3. Market economy

- Based on the workings of demand and supply, decisions are made on what goods and services to
produce.

APPIED ECONOMICS

 Applied economics is the study of economics in world situations as opposed to the theory
of economics. It is the application of economic principles and theories to real situations, and
trying to predict the outcomes.

BASIC ECONOMIC PROBLEMS OF SOCIETY

1. What to produce and how much – society must decide what goods and services should be
produced in the economy.
2. How to produce –is a question on the production method that will be used to produce the goods
and services.
3. For whom to produce- is about the market for the goods. For whom will the goods and services
be produced? The young or old, the male or female market, the low income or the high income
groups.