BASIC MICROECONOMICS (REVIEWER)

CHAPTER 1

 ECONOMICS- the study of the proper allocation and efficient use of scarce resources to be able
to satisfy the unlimited needs and wants of humans.
 Why do we need allocating resources?
- To satisfy our unlimited wants and needs over the limited resources.
 GOALS OF ECONOMICS
- Economic Efficiency
 Derived the greatest amount of enjoyment from the resources available.
- Economic Equity
 Matter of necessity
- Economic Freedom
 Refers to a society’s ability to make economic decisions.
- Economic Stability
 Allows people the ability to access resources essential to life, including financial
resources, food, and a job.
- Economic Security
 Cornerstone of well-being. Strong inclusive political system.
- Economic Growth
 Increases state capacity and the supply of public goods.

3 H’s: Principles of Economics

 How people make decisions?

1. People Face Trade-Offs
2. The Cost Something Is What You Give Up to to Get It
3. Rational People Think at the Margin
4. People Respond To Incentives

 How people interact?

5. Trade Can Make Everyone Better Off
6. Markets Are Usually a Good Way to Organize Economic Activity
7. Governments Can Sometimes Improve Market Outcomes

 How the economy as a whole works?

8. Prices Rise When the Government Prints Too Much Money
9. A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services
10. Society Faces a Short Run Trade-off Between Inflation and Employment
CHAPTER 2

THINKING LIKE AN ECONOMIST

Science of Choices

 BASIC ECONOMIC PROBLEMS ( nagawa na natin to sa asynch activity hehe)

1. What goods and services should be produced and in what quantities?
2. How these goods and services should be produced?
3. For whom these goods and services be produced?

 FACTORS OF PRODUCTION
 LAND- source of all materials, and food whether in liquid, solid, gaseous for, in or above the
earth.
 LABOR- available physical and mental talents of the people who have to produce goods and
services
 CAPITAL- tangible physical good that a person or society creates in the expectation that its use
will improve or increase future production.
 ENTREPRENEURSHIP- people are combining the other three factors of production to create
some products or services to tell.

 THE ECONOMIC SYSTEM

 Traditional Economy- economic decisions are made with great influence from the past.
 Command Economy- factors of production are owned and managed by the state. Decisions in
answering the basic economic problems are planned, done, and directed by the government
economy.
 Market Economy- individual consumers and businesses interact to solve the economic problem.
 Mixed Economy- elements of traditional, command, and free market.

 CIRCULAR FLOW OF ECONOMY

- The household sector owns the factors of production, such as, land, labor, capital, and
entrepreneurship while the business sector produces goods and services out of the
production that the households supply
CHAPTER 3

LAW OF DEMAND- although it is normal to regard the quantity demanded and the quantity supplied as
functions of the price of goods, the standard graphical representations, usually attributed to Alfred
Marshall, has price on vertical axis and quantity on the horizontal axis.

(So generally kapag yung price is nagtataas, people are willing to supply more and demand less. Kapag
bumaba naman ang price tataas and demand. )

FIVE DETERMINANTS OF DEMAND

 Consumer’s Choice
 Consumer’s Expectation of Future Prices
 Prices of Related Products
 Consumer’s Taste and Preference
 Population

There are two types based on how demand works when income increases. Normal goods and
inferior goods. Basic necessity are rice, utility, medical and dental services are normal goods. In
other hand, inferior goods is when income falls. For example, increases of price of gasoline
which causes the panic buying to the car owners.