APPLIED ECONOMICS payment.

The factor income on the use

of land is rent
THINKING LIKE AN ECONOMIST (Lesson 1)

Definition

ECONOMICS

- Economics is the study of how society

manages its scarce resources (Mankiw,
2019).
- Economics is a study of how society
chooses to allocate efficiently its scarce
FACTORS OF
Examples:
resources to the production of goods
and services in order to satisfy needs
PRODUCTION
and wants.
FACTORS OF
Concerns of Economics
PRODUCTION
1. Scarcity
- is the condition in which human wants 2. Labor
are forever greater than the available - Labor represents human capital such as
supply of time, goods, and resources. workers and employees that transform
2. Efficiency raw material and regulate equipment to
- using scarce resources with little or no produce goods and services. The return
wastages. on labor is wage.
3. Needs
- not necessarily desires but are for
survival 3.
4. Wants Capital
- are desires but not for survival -
Capital
represents physical assets such as
Types of Products
production facilities, warehouses,
1. Product/ Goods – Tangible equipment, and technology used in the
2. Services – Intangible production of goods and services. The
term may also refer to investment
Factors of Production
capital used in production. The factor
1. Land income for capital is interest.
- Land and similar natural resources
available such as farms and agricultural
land. Land is typically cultivated or
improved for use in production. Use of
land is paid in the form of rent
4. Entrepreneurship
- This is sometimes referred to as
enterprise. It represents the factor that
decides how much of and in what way
the other factors are to be used in
production. The return on
entrepreneurship is profit.
Branches of Economics
a. Microeconomics (Individual or
sector level)
- branch of economics that examines the
individual or company level. It deals
with households and rms, such as the
buying behavior of consumers and prot-
maximizing behavior of sellers.
b. Macroeconomics (Aggregate or
country wide level)
- studies the aggregate or country level.
The framework focuses on the effect on
a larger scale, such as the national
economy. Major macroeconomic
indicators include national income
account, GDP, inflation, and interest
rate.
Perspective of Economics
a. Normative Economics (Subjective)
- Evaluates economic decisions, policies,
or outcomes as good or bad. It is based
on opinions and is subjective. For
instance, eliciting your opinion on
whether the Philippine economy is
doing good or not is normative
economics.
b. Positive Economics (Objective)
- Evaluates economic scenarios and
policies based on qualitative and
quantitative analysis. This makes
positive economics factual and
objective. An example is observing the
economic growth of the Philippines
based on data for the past three
quarters.
The ECONOMIC QUESTIONS (3E of Economics)
 WHAT to produce (Effectivity)
Factors of Production (Input) 
Product (Output)  Satisfied NEEDS &
WANTS (Outcome)
 HOW {and HOW MUCH} to produce?
(Efficiency)
SUPPLY AND DEMAND
 For WHOM to produce? (Equity)
Sectors:
 Household
 Business and Firms
 Government
 The Rest of the World (Other
Countries)
ECONOMIC FLOW
ECONOMIC SYSTEM

Traditional Economic System

 Primitive System
- Can function basics of the basics
- Generate and utilize few resources
 Traits:
- Government - Tribal System
- Nomadic Resource Gathering
- Barter System

Market Economic System

 Economic Freedom is fluid

 People can own most property

Note:

Competition is High, Innovation is High

Command Economic System

 Economic freedom is strictly limited

 Government owns most of the property

Note:

Competition is Low, Innovation is Low

Mixed Economic System

 Economic freedom is regulated

 Quasi regulated by government and
business
 People and government can own
property

Transitionary Economy System

 Temporary system