Basic terms in economics

1. 1. BASIC TERMS IN ECONOMICS Ena Josel F. Portillo

2. 2. Economics – a social science concerned with man’s problem of using scarce resources to
satisfy human wants.  Consumer Goods – goods that yield satisfaction directly, just like
softdrinks and food.  Capital Goods – goods used in the production of other goods and
services. Ex. Buildings, machinery, and equipment  Essential Goods – goods that are used
to satisfy the basic needs of man such as food, shelter, and medicine.  Luxury Goods – are
those goods man may do without, but are used to contribute to his comfort and well-being.
Ex. Perfumes, chocolates, luxury cars
3. 3.  Economic Good – a good which is both useful and scarce. It has a value attached to it
and a price has to be paid for its use.  Free Good- a good that is abundant that there is
enough of it to satisfy everyone’s needs without anybody paying for it.
4. 4. GOODS are created by means of PRODUCTION
5. 5. ECONOMIC RESOURCES (FACTORS OF PRODUCTION) Land Labor Capital
Entrepreneur
6. 6. SCARCITY refers to the limitations that exist in obtaining all the goods and services that
people want. It gives rise to economic problems.
7. 7. THREE QUESTIONS (3) BASIC TO ALL ECONOMIES 1. What to produce and how
much? 2. How shall goods be produced? 3. For whom shall goods be produced?
8. 8. TYPES OF ECONOMIC SYSTEM 1. Traditional Economy – This is basically a
subsistence economy. A family produces everything that it consumes.
9. 9. 2. Command Economy – The means of production are owned by the government. Its
decisions are arrived at by government economic planners.
10. 10. 3. Market Economy – The basic characteristic of this economy is that resources are
privately owned and decisions are made by the people themselves.
11. 11. 4. Mixed Economy – a combination of two or more economic system.