ECONOMICS

● From the ancient Greek word, OIKOS - meaning House, and NOMOS - meaning
Custom or Law.
● Economics is the study of the allocation of resources at a household level.
- In short, it is a study that deals with how to use resources efficiently and
effectively to satisfy the needs and wants of people.

HISTORY, DEVELOPMENT OF ECONOMICS AND IMPORTANT PERSONS

● It starts around 350 BCE, in which Kautilya or most commonly known as
“Chanakya”, published a treatise called, Arthashastra.
● Arthashastra proposed of methods that could be of use to efficiently manage an
economy under a dictatorial reign.
- Some of the economic concepts that were present in this treatise are welfare
state, economic diversification, and labor inequality.
● St. Thomas Aquinas, an Italian theologian and philosopher who made summa
theologica.
● An important economic concept that Thomas Aquinas wrote was in his book summa
theologica. It was the concept of “Just Price”.
- Indicated that traders at the time should sell their products at a fair price by
lowering the margin of profit without the loss of labor cost in order to make
them affordable.
● Adam Smith, a scottish philosopher and most known for being the Father of
Modern Economics. He published a book in which he called the, “Wealth of the
Nations”.
● The economic concept that stands out is the “Concept of FREE MARKET”.
- Free Market is where economic exchange is unregulated and its laws of supply
and demand are not intervened by the government.
- With this concept, it assisted in promoting a healthy competition in the market
by providing societal benefit of having availability and self-regulated prices of
goods.
● This process of economics was made possible by what Smith calls “Invisible Hand”.
● A British economist and one of the major critics of Smith, Alfred Marshall published
his work “Principles of Economics”.
- It focuses more on analyzing one’s individual action in relation to his/her
environment.
● Marshall also defined Economics - a study of man in ordinary business of Life. In
other words, the Principles of Economics is a study of wealth and study of man.
● Thomas Malthus, he created the “Malthusian Theory” on population.
- It is a theory that with the continuous increase in population, the demand
should also increase in production hence adding more labor force.
● This comes with problems such as population increases much faster than production
and so even with the use of uncultivated lands. There was still a problem with the
increase in the labor force.
 ● This is where David Ricardo’s handy works come in. David Ricardo is an English
economist who made the book “Principles of Political Economy and Taxation”.
- He proposed that product importation may be a sustainable and an efficient
way to solve the growing demand of the public, in relation with the inability
for productive sectors to provide those needs.
- He also said that one must still consider the extent of its efficiency to avoid
loss in profit through labor in which he called, “Comparative Advantage
Theory”.
- As a solution he proposed, “Concept of Specialization” in where a country
must export goods that it is most known for or specializes in and import
products that it doesn’t specialize on.

FIELDS OF ECONOMICS
● Microeconomics
- Micro meaning “small”
- It focuses on small scale business or market transitions that happens between
individuals.
● Macroeconomics
- Makro meaning “large”
- Focuses on analyzing the factors that determines of a National income or a
whole country.
- John Maynard Kaynes. He presented the concepts of consumption function. It
is a mathematical equation that computes consumer spending within an
economy.
● Mainstream Economics
- Refers to the neoclassical tradition of economics. In where markets are moved
by the “Invisible Hand”.
● Heterodox Economics
- Goes beyond the normal beliefs of the mainstream. Example is Karl Marx’s
Theory in economics.
● Economic Theory
- A theory that is in relation with the consumption and production of goods
within a market system.
● Applied Economics
- It is a field in which economics is applied into the real world with the goal of
predicting possible outcomes.
● Positive Economics
- More focused on to describing an economic event or behavior.
● Normative Economics
- Focused on the distribution of explanations on a phenomena and arguments
that corresponds to economical policies.

KEY CONCEPTS
 ● Market
- Has three meanings:
- The Place itself on where the exchange of buyer and seller happens,
- The System on where the exchange of goods happens,
- The Arena of Merchants to compete for customers or consumers.
● Supply
- Referred to as the availability of goods that a market can offer.

● Demand
- The needs of the goods that the public requires.
● Specialization
- It is divided into three parts:
1. A particular group of individuals is expected to produce a concentrated
product of goods.
2. Based on their own capacity as human beings.
3. Export of goods a nation specializes in.
- Also covers the concept that David Ricardo has proposed.
● Production
- Is a process where natural raw materials are converted into usable items.

RESEARCH METHODS
● Behavioral Economics
- Which provides an analysis that combines economic principles and
psychological systems together.
● Classical Economics
- Derived from three personalities; Adam Smith, Thomas Malthus, and David
Ricardo.
- This approach maintains the market to be free from intervention for it to
receive a self-perpetuating trajectory.
● Computational Economics
- Consists of computation or involves development of mathematical methods
with the use of computers.
● Econometrics
- is the analysis of economic data using statistical and mathematical methods to
develop theories in economics.
- It was first coined in 1910 by Pawel Ciompa.
● Evolutionary Economics
- Influenced by Darwin’s concept of development.
- It presents that economic methods evolve with the determinants of individuals
and society.
● Experimental Economics
- It uses experiments to analyze the applicability of a theory in real life
scenarios.
● Praxeology
- A method that analyze an economic phenomenon based on individuals actions
in relation with their objective.
APPLICATIONS OF ECONOMICS
● Economics on Education
- It is applied in reality by considering the impact of education in analyzing the
economic behaviors of individuals.
● Environmental Economics
- It is being applied in the real world because the material production of the
society depends on the environment hence there is a need to study the
connection of environment and economical development.
- Environmental and Economical connection.

● Welfare Economics
- It is a study to help understand how the allocation of resources and also goods
may affect social welfare.