ANASARIAS, KIMBERLY SHANE B.

2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1

TOPIC 1 • There are trade-offs between the

environment and the material
Introduction: Economics as a science
standard of living. Consider having a
Economics – involves the society as it sustainable packaging in every good
allocates scarce resources and decides who that exists in the market. What do we
will consume a resource and its substitutes have to give up achieving this goal?
Scarcity – the society doesn’t have the ability Do we give up our trees for paper
to produce goods and services that people packaging? Then, we must take the
wish to have due to limited resources readily risk of being vulnerable to many
available for consumption disasters such floods and lesser
oxygen.
Microeconomics – tackles how firms and
• One trade-off can be between
individuals make decision in relation to
efficiency and equality.
scarcity
Principle No. 2 – The cost of something is
Trade-offs – firms and individuals present
what you give up getting it.
themselves to trade-off different substitutes
given scarce resources to make themselves as • As people face trade-offs, they are
well-off as possible required to make comparisons
between the costs and benefits of the
alternative course of action.
Ten Principles of Economics • Some expenditures are not really
HOW PEOPLE MAKE DECISIONS costs if they cannot be avoided.
• Not all costs involve financial
Principle No. 1 - People face Trade-offs.
expenditures.
• Economics is considered as the • Whatever you give up obtaining
“dismal science” because wanting something is the opportunity cost
more of one thing means that you got
Principle No. 3 – Rational people think at the
to have less of something else.
margin.
• There is no such thing as a free lunch.
ANASARIAS, KIMBERLY SHANE B.
2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1
• People who effectively and willfully
do the best they can to achieve their
goals are rational people.
• People make decisions at the margin
incrementally.
• Choices are desirable if the marginal
benefits exceed the marginal costs.
Principle No. 4 – People respond to
incentives.
• Incentives motivates people to act.
• The price effects the behavior of
buyers and sellers. Thus, incentives
are crucial to analyzing how markets
work because their behavior may
change when incentives change.
HOW PEOPLE INTERACT
Principle No. 5 – Trade-off can make
everyone better off.
• Trading with other countries through
businesses make everyone better off
because people can access goods and
services that are not locally available.
• Trade permits countries to specialize.
Principle No. 6 – Markets are usually a good
way to organize economic activity.
• Decentralized markets tend to create
and use information more efficiently.
• Market economy allocates resources
through the decentralized decisions of
many firms and households as they
interact in market for goods and
service.
Principle No. 7 – Governments can
sometimes improve market outcomes.
• Governments must enforce rules and
maintain order to make markets
operate more smoothly.
• To promote efficiency and equality, a
government should intervene in the
economy and change the allocation of
resources.
• Sadly, at times, policies are designed
to reward the politically powerful.
HOW ECONOMY AS A WHOLE
WORKS
Principle No. 8 – A country’s standard of
living depends on its ability to produce goods
and services.
• The differences in the standards of
living are attributable to a country’s
productivity.
ANASARIAS, KIMBERLY SHANE B.
2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1

• Productivity should be increased Product and Factor Markets

through policymakers.
Market Seller Buyer
Principle No. 9 – Prices rise when the Product Market Individuals Firms
government prints too much money. Factor Market Firms Individuals

• The growth in the quantity of money

circulated in a country is almost Types of Markets Based on Influence on
always the reason of persistent PRICE
inflation.
1. Competitive Market
• An increase in the overall level of
2. Monopolistic Market
prices in the economy is called
3. Oligopoly
inflation.
4. Monopoly
Principle No. 10 – Society faces short-run 5. Monopsony
trade-off between inflation and 6. Oligopsony
unemployment.
Two roles of Economists
• Phillips Curve is the trade-off
1. Scientist – when trying to explain the
between inflation and unemployment.
world
• Low employment rates due to higher 2. Policymakers – when trying to
prices of goods and services. change the world

Consumer theory – its goal is to maximize Descriptive Analysis – positive statements,

preference describes the world as it is
Producer theory – its goal is to maximize Prescriptive Analysis – normative
profit statements, how the world should be
ANASARIAS, KIMBERLY SHANE B.
2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1

The Role of Assumptions The Production Possibilities Frontier

1. Simplifying facts about the world
around us
2. Identifying the essential elements
of the few to generalize about
many
Being in a mixed market economy, we must
make choose how to spend our resources
How to represent opportunity cost?

The Role of Models Opportunity cost can be represented by the

Production Possibilities Curve (PPC), it
1. Models are used to describe the way
represents all possible maximum
the world works
combinations of total output that could be
2. It consists of diagrams and equations
produced. PPC slopes downward from left to
right.
Graphs used by economists to reveal
Moreover, PPC doesn’t only represent PPC
relationships between variables
but also measure it.
1. Time-series graph
2. Cross-section graph
3. Scatter diagrams Efficiency – achieving a goal as cheaply as
possible

Two of the Most Basic Economic Models

The Circular Flow Diagram Inefficiency – getting less output from inputs

Diagram – a schematic representation of the

organization of the economy

Decisions are made by households and firms

ANASARIAS, KIMBERLY SHANE B.
2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1

TOPIC 2 claims to future interests, to firms that

Firm – an organization that transforms inputs
into outputs. It is the primary producing unit
of a market economy
Entrepreneur – a person who innovates
something and turns it into a successful
business, but it is not without risks and
resource allotment
Households - the consuming units in an
economy
Market – a group of firms and households
that produces and consumes the same product
Competitive Market – one with many
buyers
Perfectly Competitive Market – all goods
are the same
Output Markets – Goods and services are
exchanged here
Input Markets – markets where resources
used to produce goods are exchanged
demands funds to buy capital goods
• Land Market – households which
supply land or other real property in
exchange for rent
Demand – comes from the behavior of
buyers
Quantity Demanded – the amount of a
product that consumers are willing and able
to purchase
The Law of Demand – inverse relationship
between price and quantity, an increase in
price causes a decrease in quantity demanded
Income Effect – at a lower price, consumers
can buy more of a product without giving up
other products, thus, means that the
purchasing power of real income has
increased
Substitution Effect – consumers would
exchange a good with a higher price for a
similar good that is sold a lower price

• Labor Market – households supply Diminishing Marginal Utility – the more

work for wages to firms that demands you consume a product or service, the lesser

labor the satisfaction you get from consuming that

• Capital Market – households supply product or service

their savings for interests, or for

ANASARIAS, KIMBERLY SHANE B.
2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1
Demand Schedules – shows the relationship
between price and demand
Demand Shifts due to changes in
1. Consumer tastes and preferences
2. Income
3. Market Size
4. Price of Related Goods
5. Consumer Expectations
Supply – comes from behavior of sellers
Quantity Supplied – the amount that sellers
are willing and able to sell
The Law of Supply – direct relationship
between price and quantity supplied
Profit – the amount of money remaining after
producers have paid all their costs
Supply Shifts due to changes in
1. Price of resources
2. Government Tools
3. Technology
4. Competition
5. Prices of related goods
6. Producer Expectations
A supply shift to the right means an
increase. Meanwhile, a supply shift to the
right, means a decrease.
Market Equilibrium – occurs when quantity
demanded is equal to quantity supplied
Shortages – happens when quantity
demanded is greater than quantity supplied
Surplus – happens when quantity demanded
is lesser than quantity supplied
Consumer surplus – the value of a good
minus the price paid for it, summed over the
quantity bought.
Marginal Cost – the cost of one more unit of
a good or service
Supply Curve – a marginal cost curve,
shows the quantity supplied at each price
Producer Surplus – the price of a good
minus the marginal cost of producing it,
summed over the quantity sold
Underproduction and Overproduction –
obstacles to efficiency leads to
underproduction or overproduction
Deadweight loss – the decrease in consumer
and producer surplus and caused by
underproduction or overproduction
Elasticity – a numerical measure of the
responsiveness of quantity demanded or
quantity supplied to one of its determinants
ANASARIAS, KIMBERLY SHANE B.
2019-02176
BS in Management 3
ECON 102 – C
Monthly Log 1

Price Elasticity of Demand – how sensitive Subsidies – a form of financial assistance

the quantity demanded is to a price change in paid to a business or economic sector, mostly
goods, used for measuring the size of the made by the government to producers or
change in quantity demanded distributors in an industry to prevent the
decline of that industry
Price Elasticity of Supply – how sensitive
the quantity supply is to a price change in
goods

Price controls – are legal restrictions on how

high or low a market price may go

Price Ceilings – a maximum price sellers are

allowed to charge for a good, an upper limit
for the price

Price Floors – a minimum price buyers are

required to pay for a good, a lower limit for
the price

Black Market – a market in which goods or

services are bought and sold illegally–either
because it is illegal to sell them at all or
because the prices charged are legally
prohibited by a price ceiling

Minimum Wage – a legal floor on the wage

rate, which is the market price of labor