The origin of economics

Economics came from the Greek word Oikonomia which means household
management. With the growth of Greek society until its development into-states, the
Greek word oikonomia became known as state management.
As a distinct science or discipline, economics was recognized only in 1776
when Adam Smith wrote his book “An inquiry into the Nature and Causes of the
Wealth of Nations”.

Economics Defined
Economics is the study of the efficient ALLOCATION of SCARCE resources
to meet UNLIMITED human wants.

Some others Great Economist defines Economics.

 Adam Smith- the Father of Economics, states that economics as an inquiry
about the nature and causes of the wealth of the nations.
 Paul Samuelson- economics is a study of how the society could possibly use
and share the limited resources into different items of product and services.
 Paul Wonnacott- it is study of how man works, looks for food and finds
material needs. Economics emphasizes problem in production of how to solve or
minimize the problem.
 Lloyd Reynolds- it is study of production management and use of scare
resources.
 Cristobal Pago so- economics is concerned with the wise allocation of scarce
resources.
 Roger Le Roy Miller- the situation that needs the decision of how, when and
where the scarce resources be used.
 Gerardo Sicat- a scientific study that point out how people society decides.
People have unlimited needs.

Microeconomics vs. Macroeconomics

Microeconomics - is concerned with decision-making by individual economic

agents such as firms and consumers. (Subject matter of this course),
while Macroeconomics - is concerned with the aggregate performance of the entire
economic system. (Subject matter of the following course) Empirical economics -
relies upon facts to present a description of economic activity.

Importance and Aims of Economics

In the study of economics, a person might be able to know how to decide in
relation to his economy. To be able to understand and explain economic events and
economic theories, the student of economics must be able to have the basic tools of
economics:

a. Logic- It is the science of good and sound reasoning. Conclusion must be drawn
from good reasoning or logical reasoning.
b. Mathematics- its answers the economic problems which are best solve with the
use of numbers and quantitative description.
c. Statistics- some of the theories are based on observation and experimentation
through the use of statistics. It is the tool use in empirical validation.
The Problem of SCARCITY
Economics resources are scare and limited in supply. What are the economics
resources? These are resources that are used for the production of economic goods.
These are what we call factors of production. These resources are: Land, Labor,
Capital and Entrepreneur.

Four Factors of Production

1. Land- considered the natural resources.
2. Labor- refers to the labor force.
Labor Force is divided into Two Categories:
a) Physical Exertion- labor using mostly hand and body or actual
manpower action.
b) Mental Exertion- labor using mostly brain for decision making and
planning.
3. Capital- anything that is man-made like machineries and equipment that are used
in the production of another product would be under capital.
4. Entrepreneur- although it can be classified as under labor, it has a special type
of work and is therefore, not ordinary labor.

Four Economic Problems.

1) What are the product and services to be produced
2) How to produce
3) For whom to produce
4) Availability of the produce

Types of Economic System

Traditional Economy- this is a very backward type of economy.
Command Economy- the government owns the means of production.
Some of essential characteristics of communism are:
a. No economic freedom
b. No free competition
c. No profit motive
d. No religion
Market Economy- the resources are privately owned and the people themselves
make decision.
a) Presence of economic freedom
b) Presence of profit motive
c) Presence of competition
d) Presence of religion
e) No central planning

Mixed Economy- there are only few country that has a pure economic system.