INTRODUCTION

TO
ECONOMIC
DEVELOPMENT
ECONOMIC AND
SCARCITY

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 ECONOMICS
• The word economics comes from the Greek word oekonomia, which means management of
the household.
• During the past centuries, the science of economics has developed rapidly beyond the boundaries
of a home.
• Economics is a social science concerned with the production, distribution, and consumption of
goods and services.
It studies how individuals, businesses, governments, and nations make choices about how to allocate
resources.

ECONOMICS

Macroeconomics Microeconomics

> Focuses on the behaviour of the economy as a whole. > is a study of individual behaviour and entities.

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 SCARCITY

• Scarcity in tagalog is “kakapusan/kakulangan”

• Scarcity is the foundation of the essential problem of
economics: the allocation of limited means to fulfil
unlimited wants and needs.
• It is also known as paucity, in economics term it refers to
a gap between availability of limited resources and the
theoretical needs of people for such resources.

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 How does Scarcity affect the Economy
Example : Natural Resource Scarcity
❖ Natural resources can fall outside the realm of scarcity for two reasons. Anything available
in practically infinity supply that can be consumed at zero cost or trade-off of other goods
is not scarce. Alternatively, if consumers are indifferent to a resource and do not have any
desire to consume it, or are unaware of it or its potential use entirely, then it is not scarce
even if the total amount in existence is clearly limited. However, even resources take for
granted as infinitely abundant, and which are free in dollar terms, can become scarce in
some sense.

❖ Breathable Air ; From an individual's perspective, breathing is completely free. Yet there
are a number of costs associated with the activity.

❖ If a government decides to allocate resources to making the air clean enough to breathe,
a number of questions arise. Examples are;
1. Which are the most effective in the short term, medium term and long term?
2. What should be the balance between quality and cost?
3. Should the government raise taxes, and if so, on what and for whom?
4. Will the government borrow? Will it print money? How will the government keep track of
its costs, debts, and the benefits that accrue from the project.

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ECONOMIC AND
DISTRIBUTION

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ECONOMICS
- Is a social science concerned with the production,
distribution and consumption of goods and services. It
studies how individual, business, government and nations
make choices about how to allocate resources.

Two Major Type of Economics

Microeconomics- focuses on the behavior of
individual consumer and producer

Macroeconomics- examine overall economies on

a regional, national, or international scale.

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• Production- refers to process of producing or creating goods
needed by the household to satisfy their needs.
• Distribution- the goal in this step is to transport the product
• Consumption- spending money for goods in and services in order
to yield direct satisfaction

Distribution- refers to the sharing of

the wealth that is produced among the
different factors of production

- Is the way total output, income, or

wealth is distributed among
individuals or among the factors of
production(such as labour, land and
capital.
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2 Components of Distribution:

1. Personal Distribution “Micro-concept”

• -D.W Pearce “Personal distribution refers to individual’s
income regardless of the factors from which income is
derived.

• 2. Functional Distribution
• - Refers to distinct share of the national income received
by the people, as agent of production per unit of time.

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Allocation is the process of distributing scarce resources among the different
producers of outputs in the economy, including firms and organizations.

Economies decide what to produce by considering societal needs and wants.

2 Institution Responsible for allocation of resources in the economy:

Market Institution
refers to the institutions where buyers and seller or producers meet. In the
market, bidding between the buyers and sellers occurs until they reach a
compromise and agree on the price for the product.

State Institution
control in economy, the government would determine who gets the product
and how much of it by commanding the seller to sell at a price set by the state and
telling the buyers how much of the product they are allowed to have.

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EFFICIENCY
AND EQUITY

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 Efficiency
• Ability to produce something with a minimum amount of effort. It avoids
wasting of materials, energy, efforts, money and time in doing/producing.

• This also requires reducing numbers of unnecessary resources use to

produce output.

Economic Efficiency
• Relates to how well an economy uses scarce
resources to meet the needs and wants of consumers.

• Typically term used in microeconomics in order to

denote the state of best possible operation of a product
or service market.

> >When an economy is economically efficient,

any changes made to assist one entity would harm another.
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Equity
• It is the quality of being fair.
• Equity in economics corresponds to the issue of
whether the distribution of goods and services to
individuals and the profits to firms are fair.

This picture here is to clarify the difference

between these two that commonly mistaken
and interpreted as one or the same.

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 Why Is Equity Important?
• Some societies view equity as a worthy goal in and of itself
because of its moral implications and its intimate link with
fairness and social justice.

• Policies that promote equity can help, directly and indirectly,

to reduce poverty. Equity-enhancing policies, particularly such
investment in human capital as education, can, in the long run,
boost economic growth, which, in turn, has been shown to
alleviate poverty.

• Heightened awareness of the discrimination suffered by

certain groups because of their gender, race, or ethnic origin
has focused attention on the need to ensure that these groups
have adequate access to government services and receive fair
treatment in the labor market.

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Thank you for
Listening!

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