ECONOMICS 2.

Macro economics
 Is the overall view of the
 The usage and allocation of scarce
economy.
resources to meet man’s unlimited
 Studies national income
wants and needs.
 Analyzes total employment in
SCARCITY the country
 Deals with aggregate
 Is the insufficiency or inadequacy of decisions
economic resources and as a result,
 Studies overall price level
we have to decide and choose.
 Analyzes aggregate demand
 The reason why people study
and aggregate supply
economics
LAW OF SCARCITY

 An economic system cannot

produce all goods and services that
consumers want, and most
consumers do not have the
resources to purchase everything
they want.
TRADE-OFF

 The exchange or choosing between

alternative. It is the reality of life that
getting one thing would give up
another thing.
OPPORTUNITY COST

 Is the value or cost of the next

forgone choice/alternative.
 It represents the benefits that could
have been gained by taking a
different decision.
POSITIVE AND NORMATIVE
ECONOMICS

 Positive Economics describes and

explains various economic
phenomena or the “what is”
scenario. Positive economics is
based on facts.
 Normative Economics concerns
itself with what should be. It is an
economic statement that makes
recommendations to economic
theory. Normative economics is
based on value judgement.
TWO BRANCHES OF ECONOMICS
1. Micro economic
 Is the close-up view of the
economy.
 Studies individual income
 Analyzes demand and supply
of labor
 Deals with households and
firms’ decisions
 Studies individual prices
 Analyzes demand and
supple of goods.