Chapter 4. Introduction to Economics Economics has its own unique language.

Thus, for a student to truly understand the

different concepts and theories in economics, an understanding of these terms should first be
achieved.
This chapter discusses the general idea of what economics is. This concerned with
Wealth. This term refers to anything that has functional value (usually in money),
how scarce resources are allocated to every individuals in the society for their satisfaction.
which can be traded for goods and services. Welath, therefore, is the stock of net assets owned
This further explains how production, distribution, and used of material goods and services,
by individuals or households. In aggregate terms, one widely used measure of the nation’s
the type of economic system, the economics relationship to other social science, and how
total stock of wealth is that of the ‘marketable wealth’ that is, physical and financial assets
economics founded.
which are in the main relatively liquid (Pass and Lowes, 1993).

Consumption. This refers to the direct utilization or usage of the available goods
B – Desired Learning Outcomes (DLOs) and services by the buyer or the consumer sector. It is also the satisfaction obtained by
consumers for the use of goods and services (Pass and Lowes, 1993).

At the end of the unit, the students must have: Production. It is defined as the formation by firms of an output (products and
services)> It is the combination of land, labor and capital in order to produce outputs of goods
1. Discussed the importance of the need to choose. and services.
2. Discussed the relationship of economics to other social sciences.
3. Determined the different types of economic systems. Exchange. This is the process of trading of goods and/or services for money and/or
4. Explained the nature of Economics as a science and its theories. its equivalent. It also includes the buying of goods and services either in the form of barter or
through market.
C. Topics
Distribution. This is the process of allocating or apportioning scarce resources to be
utilized by the household, the business sector, and the rest of the world. In specific term,
1. Types of Economic system
however, it refers to the process of storing and moving of products to costumers often through
2. Relationship of economics to other social sciences
intermediaries such as wholesalers and retailers (Pass & Lowes, 1993).
3. Foundation of Economics
4. Economic Theories

Introduction

Everyone knows what economics is. They understand that if their income is not
enough for their basics needs, they need to stretch their budget until the next month salary or
next week wages will be received, or the next production of their farm will be harvested and
D – Content Focus sold in the market. The basics in economics were already practiced and some will even define
it.
Important Economic Terms

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 However, as we go along with this topic, I recalled Adam Smith, the Father of
Modern Economics, had said in his book “Wealth of the Nations” publish in 1776 stated that
Economics is ‘an inquiry into the nature and causes of the wealth of nations.” Fajardo (1977)
also described economics as a scientific study on how individuals and the society generally
makes choices.
Thus, the reason why economics was studied is to answer the problem in scarcity.
Since every individual have, unlimited wants and the resources are limited, proper allocation
of available resources was established. The government or a nation has to determine the type
of economic system the society adopts to answer these problems.
U-Multirank image
Economics Defined
The important word in the definition of ‘economics’ according to Niebres (2008) is
coordination. Coordination refers on how the four (4) most important problems facing any
economy are solved. These are: (1) What to produce? (2) How to produce it? (3) how much to
produce, and (4) for whom to produce it? (Marcelino et al, 2010).
Marcelino et al (2010) defined economics as the study of the problem efficiently as
possible to attain the maximum fulfillment of the society’s unlimited demand for goods and
series. Slavin (2005) defined economics as simply as scarcity and choice. Niebres (2008) a
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social science concerned with man’s problem of using scarce resources to satisfy human
wants.
Smith (1776) defined economics as ‘an inquiry into the nature and causes of the
wealth of nations.’ He emphasized that the production and growth of wealth as the subject
matter of economics.
Other contemporary writers also defined economics as part of knowledge which
relates to wealth. John Stuart Mill (1806-73) argued that economics is a science of
production and distribution of wealth. Another classical economist Nassau William Senior
(1790-1864) argued “The subject-matter of the Political Economics is not Happiness but
Wealth.” Thus, economics is the science of wealth. However, the last decade of the nineteenth
century saw a scathing attack on the Smithian definition and in its place another school of
thought emerged under the leadership of an English economist, Alfred Marshall (1842-1924).
Alfred Marshall in his book ‘Principles of Economics published in 1890 placed
emphasis on human activities or human welfare rather than on wealth. Marshall defines
economics as “a study of men as they live, move, and think in the ordinary business of life.”
He argued that economics, on one side, is a study of wealth and, on the other, is a study of
man.
The most accepted definition of economics was given by Lord Robbins in 1932 in
his book ‘An Essay on the Nature and Significance of Economic Science. According to
Robbins, neither wealth nor human welfare should be considered as the subject matter of
economics. His definition runs in terms of scarcity: “Economics is the science which studies
human behavior as a relationship between ends and scarce means which have alternative
uses.”
The American Nobel Prize winner in Economics in 1970, Paul Samuelson, observed
that, “Economics is the study of how men and society choose, with or without the use of
money, to employ scarce productive resources which could have alternative uses, to produce
various commodities over time, and distribute them for consumption, now and in the near
future, among various people and groups in society.”
ECONOMICS and SCARCITY
 The problem Of scarcity gave birth to the study of economics. Their relationship is
such that if there is no scarcity, there is no need for economics. The study of economics was
essentially founded in order to address the issue of resource allocation and distribution, in
Limited Resources Unlimited Wants
response to scarcity.

ALLOCATION

This figure depicts the relationship of limited resources available and the
unlimited wants of the society. This shows that when limited resources fail
to meet the unlimited wants of the society, economics comes into play in
order to effectively and efficiently allocate resources.

Origin of the term ‘economics’

Figure 1. Problem of Scarcity The two Greek roots of the word economics are oikos meaning household-and
nomus-meaning system or management. Oikonomia or oikonomus therefore means the
“household management.”

Limited Resources Unlimited Wants With the growth of the Greek society until its development in city-states, the word
become known or was referred to as “state management”. Consequently, the term,
“management of household” now pertains to the microeconomic branch of economics
(Fajardo 1977). Because of its far-reaching significance, in the early years, economics
covered other scholarly fields such as religion, philosophy, and political science.
SCARCITY
Adam
This figure illustrates the interaction of limited resources available and
the unlimited wants of the society, it will create a problem, which is called, Ceteris Paribus Assumption
‘scarcity’.
The assumption “Ceteris Paribus” is important in studying economics. Ceteris
paribus means “all things held constant or all else equal.” This assumption is used as a device
to analyze the relationship between two variables while the others held constant or
unchanged. It is widely used in economics as an explanatory technique as it allows
Figure 2. Economics
economists to isolate the relationship of the two variables.

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 For instance, with the question “What is the impact of a change in the price of rice
on consumption behavior, ceteris paribus? If the price of rice change by 20 percent (20%),
how much consumption will there be, assuming no simultaneous change in other variables-
that is, assuming that income, number of family members, population, laws and so on all
remain constant.
Brief History: The Classical, Keynesian and Modern Economics
This brief historical introduction aims to give a background on most profound names
in the study of economics and their important contributions in this field of study
Birth of Economic Theory: Classical Economics
Economic Theory saw its birth during mid 1700s and 1800s. During this era, two
important economists emerged. First, Adam Smith of Scotland. He is considered the most
important personality in the history of economics being regarded as the “Father of
Economics”. He was responsible for the recognition of economics as a separate body of
knowledge.
His book, “Wealth of the Nations” published in 1776 became known as “the bible in
economics” for a hundred of years. One of his contributions was his analysis of the
relationship between consumers and producers through demand and supply, which ultimately
explained how the market works through the ‘invisible hand.’
John Stuart Mill was the heir of David Ricardo who developed the basic analysis of
the political economy or the importance of the state’s role
in the national economy. The term political economy is an
older English term that applies mismanagement to the
entire polis (state). Moreover, Karl Marx, a German, also
emerged during this period. He is much influenced by the
conditions-brought about by the industrial revolution upon
the working classes. His major work, Das Kapital, is the
centerpiece from which major socialist thought was to
emerge (Sicat, 1983).
Neoclassical Economics (1870)
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Neoclassical economics was believed to have
transpired around the year 1870. Its main concern was
market system efficiencies. It brought recognition to the
economist Leon Walras, who introduced the general
economic system, and Alfred Marshall, who became the
most influential economist during that time because of
his book Principles of Economics. Leon Walras
developed the analysis of equilibrium in several markets.
On the other hand, Alfred Marshall developed the
analysis of equilibrium of a particular market and the
concept of “marginalism” (Sicat, 1983).
Keynes’ General Theory of Employment, Interest and Money
John Maynard Keynes is an English Economist who explained mass
unemployment and suggestion for government policy to cure unemployment in his influential
book: The General Theory of Employment, Interest and Money (1936). Keynes’ concern
about the extent and duration of the worldwide interwar depression led him to look for other
explanations of recession (Pass & Lowes, 1993).
Keynes argued that classical political economists were concerned with the relative
shares in national output of the different factors pf production, rather than the forces, which
determine the level of general economic activity, so their theories of value and distribution
related only to the special case of full employment. Concentrating upon the economic
aggregates of National Income, Consumption, Savings, and Investment, Keynes provided a
general theory for explaining the level of economic activity. He argued that there is no
assurance that savings would accumulate during a depression and depress interest rates, since
savings depend on income and with high unemployment incomes are low.
Furthermore, he argues that investment depends primarily on business confidence
which would be low during a depression so the investment would be unlikely to rise even if
interest rate fell. Finally, he argues that the wage rate would be unlikely to fall much during a
depression given its ‘stickiness’, and even if it did fall, this would merely exacerbate the
depression by reducing consumption.
John Maynard Keynes (1883-1946)

Non-Walrasian Economics (1939)
During the Non-Walrasian Era, John Hicks was recognized for his analysis of the IS-
LM Model, which is considered as an important macroeconomic model. IS refer to the goods
market for a given interest rate, while LM mean money market for a given value of aggregate
output or income. The IS-LM Model is a theoretical construct that integrates the real, IS
(investment-saving), and the monetary, LM (demand for, and supply for money), sides of the
economy simultaneously to present a determinate general equilibrium position for the
economy as a whole (Pass and Lowess, 1993).
Post Keynesian Economics (1940 and 1950s)
After World War II, the Post – Keynesian Period saw the development of rules and
regulations of different private and public institutions. This period introduced major post-
Keynesian, neoclassical economists, whose views are known as the post-Keynesian
“mainstream economics”. This period welcomed various economists like Paul A. Samuelson,
Kenneth J. Arrow, James Tobin and Lawrence Klein, to mention some recognized leaders and
others are Joan Robinson; Michael Kolechi. Another stream of thought was introduced by
liberal market post-Keynesians, mainly the monetarists, led by Milton Friedman (Sicat, 1993).
New Classical Economics
New classical Economics highlighted the importance of adherence to national
expectations, hypothesis and analysis, which included various economic phenomena in
formulating different kinds of studies and new theories in economics. This development in
economics is applicable to concerns of developing countries, and was largely an outcome of
concern for the growth of developed countries. The great economists like Smith, Ricardo, and
Malthus addressed this problem.
Microeconomics and Macroeconomics
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Economics has two major branches of study: one is concerned with individual
decision making; and the other is involved in understanding the behavior of the society as a
whole.
Microeconomics
This is the branch of economics, which deals with the individual decisions of units of
the economy- firms, households, and how their choices determine relative prices of goods and
factors of production. The market is the central concept of microeconomics. It focuses on its
two main players – the buyer and seller, and their interaction with one another.
Among the topics discussed in microeconomics are theories of demand and supply,
individual decision making, theories of production, output and cost of firms, a firm’s profit
maximization objective, different types of business organizations, and kinds of market
structures (Case, 2003).
Macroeconomics
It is a branch of economics that studies the relationship among broad economic
aggregates like national income, national output, bank deposits, total volume of savings,
investment, consumption expenditure, general price level of commodities, government
spending, inflation, recession, employment, and money supply (Kapur 1997). The term
macro, in contrast to micro, implies that it seeks to understand the behavior of the economy as
a whole.
Macroeconomics focuses on four (4) specific sectors of the economy: the behavior of
the aggregate household (consumption); the decision making of the aggregate business
(investment); the policies and projects of the government (government spending); and the
behavior of external/foreign economic agents, through trading (export and import).
Positive and Normative Economics
Positive economics is an economic analysis that considers economics conditions “as
they are”, or considers economics “as it is”. It uses objective or scientific explanation in
analyzing the different transactions in the economy. It simply answers the question ‘what is’.
EXAMPLES of Positive Economics:
 The economy is now experiencing a slowdown because of too much politicking and
corruption in the government.
 The economy is now on a slowdown because the world is experiencing a financial
and economic crisis. Other reasons are also due to the financial problem of the US,
increase on the prices of crude oil and lack of investors or capital deficiency.
On the other hand, normative economics is an economic analysis that judges
economics conditions “as it should be.” An aspect of economics that concerned with human
welfare. It deals with ethics, personal value judgments and obligation analyzing economic
phenomena (Kapur 1997, cited by Marcelino et al 2010). It answers the question ;what should
be.’ It also refered to as policy economics because it deals with the formulation of policies to
regulate economic activities (Omas-as, 2008).
EXAMPLES of normative economics:
 The Philippine government should initiate political reforms in order to regain
investor confidence, and consequently uplift the economy.
 In order to minimize the lash of global recession, the Philippine government should
release a stimulus package geared towards encouraging economic productivity.
The Concept of Opportunity Cost
Because people cannot have everything they want, they are forced to make choices
between several options. Opportunity cost refers to the forgone value of the next best
alternative. It is a value of what is given-up when one makes a choice. The thing thus given-
up is called the opportunity cost of one’s choice.
When one makes choices, there is always an alternative that has to be given up. A
producer, who decides to produce shoes, gives up other goods that he could have produced
using the same resources. A student, who buys a book with his limited allowance, gives up the
chance of eating our or watching movie.
Opportunity cost is expressed in relative price. This means that the price of one item
should be relative to the price of another.
Example:
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If the price of coke is 30.00 per one liter bottle and one piece of cupcake is 10.00
then the relative price of coke is 3 pieces of cupcakes. Is a consumer only has 30 pesos, and
chooses to buy a bottle of coke with it, the we can say that the opportunity cost of that bottle
of coke was the 3 pieces of cupcakes, assuming that the cupcake was the next best alternative.
Figure 3. Opportunity Cost
Saving (Firm Individual)
Credit (Interest) Investment (Profit)
This figure illustrates the concept of opportunity cost. The savings of the firm/individual is subject
to two choices between credit and investment. If the savings of an individual will be put on credit,
there is a possibility of earning interest or bad debt (not getting the money back), on the other
hand, when savings of an individual is invested, it may earn profit or may subject to loss. With this
mind, what do you think is the best choice or next best alternative?
Four basic economic questions
To address the problem of scarcity, the society must answer the four basic questions.
These questions are as follows:
1. What to produce?
An economy must identify what are the commodities needed to be produced for the
utilization of the society in everyday life. A society must also take into account the
resources that it possesses before deciding what goods or services to produce.
2. How to produce?
There is a need to identify the different methods and techniques in order to produce
commodities. The society must determine whether to employ labor-intensive
production or capital-intensive production.
Labor-intensive production use more of the human resource or manual labor in
producing goods and services than capital resources. This kind of production is
advisable to a society with large population. In countries where labor resources are
 abundant, the cost of labor is usually cheap, for instance the Philippines and
Vietnam. Goods are produced by employing more of cheaper resources and less of
inputs that are more expensive.
On the other hand, capital-intensive production employs more technology and
capital goods like machineries and equipment in producing goods and services than
labor resources. This type of production should be utilized by countries with high
level of capital stock and technology, and with scarce labor resources, like japan,
Germany, Canada, and, Israel, and USA.
3. How much to produce?
This identifies the number of commodities needed to be produced in order to answer
the demand of the society. The optimum amount od production must be
approximated by producers. Underproduction will result to a failure to meet the
needs and wants of the society. On the other hand, overproduction result to excess
goods and services foing to waste.
4. For whom to produce?
This question identifies the people or sectors who demand the commodities produced
in a society. Economists must determine the “target market” of the goods and
services that are to be produced to understand their consumption behaviors and
patterns. An understanding of these result to higher sales of goods, and ultimately to
increased profits. For those who can pay the highest price is for whom goods and
services are produced.
Economics in relation to other social sciences
Economics is considered the “queen” of all social sciences because it covers almost
every activity of man in relation to the society. Because of its multifarious applications,
various sciences are closely related to the study of economics (Marcelino, et al 2010).
Economics is a social science that deals with human wants and their satisfaction. It is
related to other social sciences like sociology, politics, history, ethics, jurisprudence and
psychology.
For example, the economic development of a nation depends not only on economic
factors but also on historical, political and sociological factors. Our country did not have
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much of economic progress during the British rule owing to historical reasons. Again, we had
slow but steady economic growth in our country because of political stability. However, in
many other countries, there was no steady growth because of political instability. If there is
one government today and another government tomorrow, there will not be economic
development in that country.
We shall discuss, in some detail, economics in its relation to other social sciences.
Economics and Sociology. Sociology is the study of the behavior of the societies. In
relation to sociology, economics essentially deals with human behavior in relation to scarce
means and unlimited wants. We cannot properly understand the economic conditions of a
society without considering its sociological aspects. Though economics is a branch of
sociology, we must look at it as a separate and distinct branch.
Economics and Politics. Both economics and politics are social sciences and there is
a close connection between them. Politics is the science of the State or political society. It
studies about man in his relation to the State. The production and distribution of wealth are
influenced to a very great extent by the government. We have economic planning in our
country. And the main aim of planning is to increase the national income by increasing
production and by a proper distribution of income.
Elections are fought often in many countries on economic issues. Unemployment,
labour disputes are all economic issues. Nevertheless, government has to tackle them. The
relationship between economics and politics is so great that the early economists described
economics as political economy.
Economics and History. Economics and history are closely related. History is a
record of the past events. The history of economic ideas provides information regarding
theories that can be revisited in order to evaluate present and future economic issues. In
economics, we make use of historical data to formulate economic laws. We make use of
history in economics to study the material conditions of people in the past. There is a separate
branch of economics known as 'Economic History'.
Economics and Ethics. Ethics is a social science. It deals with moral questions. It
discusses the rules that govern right conduct and morality. It deals with questions of right and
wrong. It aims at promoting good life. There is connection between economics and ethics.
While economics, according to Marshall, aims at promoting material welfare, ethics aims at
promoting moral welfare. When we discuss economic problems, often we consider ethical
issues. The government introduced prohibition in many states for ethical reasons, though there
was heavy loss of revenue to it.
 But Lionel Robbins strongly believes that an economist as an economist should not
consider ethical aspects of economic problems. But many economists do not agree with him.
They believe that economics cannot be dissociated from ethics. Even Marshall considered
economics as a handmaid of ethics. He looked at economics as a study of means to better the
conditions of human life.
Economics and Jurisprudence. Jurisprudence is the science of law. The economic
progress of a nation depends to a great extent on its legal system. Good laws promote
economic progress and bad laws act as an impediment to growth. For example, in the past
when we welcomed foreigners to invest in our country, they used to say our taxation was
complex and not good. Of course, now things have improved. So we must have simple and
clear laws in the fields of taxation and labour legislation to promote economic progress.
Economics and psychology. Psychology is the science of mind. It deals with all kinds
of human behavior. However, economics studies one aspect of human behaviour on the
reference to unlimited wants and limited means. In microeconomics, it seeks to understand the
decision making individuals. And a good businessman must understand the psychology of
buyers whenever he wants to change the price of his good.
Economics, mathematics and statistics. Among other sciences, economics is related
to mathematics and statistics. Statistics is the science of averages. It is the science of counting.
Many tables and diagrams used in economics are based on statistical analysis. Mathematical
methods are largely used in modern economics.
Economics and Physics. Innovations and output brought about by physics greatly
affect the study of economics. A country’s economic activity speeds up through inventions
and technological advancement in energy, transportation, and communication. These new
creations and discoveries help the society to make the day-to-day activity easier.
What is an Economic System?
Any system that involves the mechanism for production, distribution, and exchange
of goods apart from consumption of the goods and services within the different entities can be
classified as an Economic System. The various kinds of economic systems and their
classifications broadly follow the methods by which means of ownership are established.
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Thus, the mode of ownership of capital leads to the different kinds of economic systems in
vogue.
The different kinds of economic systems are Market Economy, Planned Economy,
Centrally Planned Economy, Socialist, and Communist Economies. All these are
characterized by the ownership of the economics resources and the allocation of the same.
a. Capitalist Economy (CAPITALISM) - the capital is privately owned and
distributed with governmental oversight and regulation.
b. Communist Economy (COMMUNISM) - the state itself takes on the task of
allocation of resources according to the needs of the different sectors.
c. Socialism – is an economic system where everyone in the society equally owns
the factor of production. Ownership is usually through a democratically-elected
government.
d. Mixed economy - the state looks after some sectors whereas it frees up the other
sectors for private participation.
Apart from this, the extent of governmental or state intervention determines the kinds
of economic systems that are classified accordingly. In many ways, each of these systems has
their own pros and cons when it comes to the welfare of the citizens.
Capitalist System
This is the predominant economic system in the world today. In this system, the
capital is privately owned and distributed. The distribution mechanism is left to the market to
allocate the resources with the emphasis being on efficient allocation of capital. Going by the
“Invisible Hand” of Adam Smith that guides the allocation of resources, it is deemed that the
market does a good job of determining which sectors receive the capital and how much.
Thus, perfect knowledge and perfect competition are assumed to be given and the
market mechanism is taken to determine the beneficiaries and the recipients. In the modern
context, this kind of system has come to be associated with the laissez faire mode of
capitalism where the state has minimal responsibility and is seen as a “hands off” player
rather than being interventionist.
 Of course, the state is expected to have regulatory mechanisms in place and ensure
that the market corrections are supervised and the state steps in whenever there is a crisis of
liquidity or other market failures.
As we are currently witnessing the different kinds of state interventions arising out of
the credit crunch, it becomes apparent that this kind of economic system may not be the ideal
one as was being propounded over the last few decades.
In this economic system, land, labor, capital, and entrepreneurship are the types
of production (or so-called as Factors of Production-FOPs) that make up the mechanism
for production and distribution of resources.
and essential goods and services whereas the entrepreneurs are provided incentives to
contribute in other sectors that the state thinks fit.
This kind of economic system was followed in countries like India till the 1990’s
when the economies were liberalized and full private sector participation allowed and also
adopts in the Philippines. This parallels the demise of the centrally planned economy where
the command and control of the economy is top down rather than bottom up. This has often
led to several imbalances in the distribution and allocation of resources.

The capitalist system of production and distribution has proved to be highly

E – Self-Check/Assessment
successful in western countries and it has spawned several clones in the east as well.
PART I. Multiple Choice
Instructions: Fill the blank with the letter of your answer before the number.

_______1. The “ceteris paribus” means

Communist System
a. All things are equal
In this kind of economic system, the state takes upon itself the allocation and b. scarcity or limited
production functions as well as distribution of the goods and services. In this system, capital c. absence of government intervention
cannot be privately held and there is communal ownership or what is known as
d. closed economy
_______2. The basic subjects that economics seeks to deal is.
“Communism”. The workers are paid uniform wages and what Marx called the “participation
a. markets
of the workers in the collective bargaining” is a feature of the system. b. profit
This model was pursued in the erstwhile USSR before it broke up and has been c. money
d. Scarcity
considered a failure though there is debate whether it was an ideological failure or an
_______3. Which of the following can be classified under macroeconomic problem?
implementation failure. Like capitalism, communism also had several takers in the newly
a. The Philippines balance of payment
independent economies of the east. Thus, the Cold war was fought as much between two b. The yearly inflation rate
blocs as between two competing ideologies. c. The annual salaries of government employees
d. All of the above
Socialist and Mixed Economic Systems
_______4. Oikos and nomus are Greek words means…
In these forms of economic systems, the state has control over some areas which it a. House, keeping
deems to be of primary importance as regards national security and importance to the welfare b. Farm, cultivation
c. Household, system
of the citizens. Thus, the state does not allow private participation in sectors such as defense
d. Household, management

9
_______5. The economic problem “what to produce?” refers to _______10. ‘In order to minimize the lash of global recession, the Philippine government
a. The amounts and types of commodities produced in an economy should release a stimulus package geared towards encouraging economic productivity.’ Is
b. The beneficiaries from the choices made in a society an example of..
c. The tastes and preferences of economic agents
d. The amount in which resources are combined in order to produce the a. Normative Economics
commodities b. Positive Economics
c. Microeconomics
d. Macroeconomics
_______6. What is the opportunity cost to you of driving to a free rock concert in some
outlying farm area? PART II. Fill in the Blanks
a. There is none since the concert is free ________________________1. Considered the Father of Modern Economics.
b. The soft drinks you buy from the vendor on the grounds
c. Enjoyment of the music ________________________2. The Greek word for Economics.
d. The cost of the gasoline
________________________3. Considered the bible of economics.
_______7. A field of economics that deals with the study of individual economic units
operating within the economy
________________________4. Developed the concept of IS-LM model.
a. Microeconomics
b. production economics
c. Macroeconomics ________________________5. Refers to ‘economics as it is’
d. agricultural economics
________________________6. Developed the theory of political economy.
_______8. An economic system which own all the country’s resources
a. Socialism ________________________7. Refers to the creation of utility.
b. Communism
c. Capitalism ________________________8. It means justice or fairness.
d. Mixed Economy
________________________9. The forgone value of what you give up when you make
_______9. An English Economist who explained mass unemployment and suggestion for
government policy to cure unemployment in his influential book: The General Theory of choices.
Employment, Interest and Money (1936).
a. John Maynard Keynes ________________________10. Refers to ‘economics, as it should be.”
b. Thomas Malthus
c. Karl Marx
d. Adam Smith F – Self-Reflect

1. As a consumer, what are the thing/s you need you consider have a greater portion of
your monthly budget and why? (10 points)

10
 ____________________________________________________________________ Course Instructor
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________

Rubrics for Essay Question

Criteria for Written Exercises (As Agreed by the whole class)

Content (Correctness and Appropriateness of Ideas Presented) – 10

point
Convention (Linguistic Appropriateness – Grammar, Phonology, Semantics)
– 5 point
Quality (Neatness, refinement and skillfulness) – 5 points
Total = 10
References:

Fajardo, Feliciano. 2008, Third Edition. Entrepreneurship. Philippine Copyright (1994).

Reprinted and Published by National Bookstore.

Marcelino, et al. 2010. Principles of Economics. National Book Store. Mandaluyong City. Pp
1-17

Pagoso, C., et. al (2015). Principles of Economics. Rex Book Store, Manila, Philippines. pp.
2-11

Prepared by:

MARY GRACE ARCENAL-APOLONA

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