Economics- is a SOCIAL SCIENCE
concerned with the explanation and
prediction of observed phenomena in the
society.
Economics is also, a social science
because it deals with human behavior and
problems of the society to solve by which
reconciling the unlimited desires of
individuals with scarcity of resources and
susceptible to numerous alternative uses.
Economics, on the other hand, is an
APPLIED SCIENCE because it utilizes the
scientific method with its accurate
explanations, which consists of observing
reality and presenting questions and
problems to arrive based on the formulation
of theories and models. It follows a
systematic procedure to solve contemporary
issues and problems of the society.
Economic problems have four stages:
1. Define the problems
2. Identify the objectives
3. Look for the principal alternative ways of
attaining the objectives
4. Analyze the consequences (cost-benefit
analysis)
THE FIELDS OF ECONOMICS
• Microeconomics: concerned with the
study of individual decision-making units
within an economy: a consumer, firm, or
industry.
• Macroeconomics: concerned with the
study of whole (aggregate) economies or
systems including government income and
expenditure, the balance of payments, fiscal
policy, investment, inflation, and
unemployment. Macroeconomics has two
types of policies for pursuing these goals:
monetary policy and fiscal policy.
The Economic Agents/Stakeholders:
1. Consumers
• Consume goods and services /offer factors
of production.
• Maximize utility
2. Producers
• Produces of goods / demand a productive
factor of production.
• Maximize profit
3. The public sectors
• Attempt to maximize the economic welfare
of the society.
• The agents interact among themselves in
a specific territorial, social, natural and/or
cultural framework that determines
relationships → Market.
BASIC TERMS TO UNDERSTAND
ECONOMICS
Consumers Goods – goods for the
ultimate consumption of the consumers.
(Ex: toothpaste, bath soap, etc.)
Essential Goods- used to satisfy the basic
needs of individuals. (Ex: Foods and
Medicine)
Capital Goods/Industrial Goods - used in
the production of other goods and services.
(Ex: Buildings, Machinery and Equipment)
Luxury Goods - goods man may do
without, but may give comfort and
satisfaction. (Example: expensive cars,
watches, bags perfumes, and jewelries.)
Economic Goods - are goods which are
useful and scarce; with value attached and
a price has to be paid off for its use. If a
good is abundant and it can satisfy
everyone’s needs without anybody paying
for it, then, that good is free. The air is free,
but the air coming from the air conditioner is
an economic good. (Ex: Buildings,
Machinery, and Equipment)
ECONOMIC RESOURCES
Land as a Factor of Production natural
resources like mineral, water, air, rain and
wildlife (Macalinao, E.M., 2016).
Labor as a Factor of Production
Physical and mental abilities to create
commodities. (Macalinao, E.M., 2016).
Capital as a Factor of Production
Goods like building, machines, tools,
equipments, and software used in producing
commodities (Macalinao, E.M., 2016).
Pilipinas. It also involves policies that affect
bank lending, interest rates, and financial
capital markets. Added to that, monetary
policy primarily concerned with the
management of interest rates and the total
supply of money in the circulation and it is
generally carried out by Bangko Sentral ng
Pilipinas.
Fiscal Policy - setting the level of
government spending through infrastructural
development to stimulate demand and
create jobs and taxation by government
policymakers towards business sectors.

Entrepreneurship as a Factor of
Production
The managerial and organizational skills
needed to create goods and services.
(Macalinao, E.M., 2016).

Characteristics of Resources:
1. Scarcity refers to insufficient
productive resources to supply all
the unlimited needs and wants of
individuals.
2. Land is a productive resource that
can be used in many ways in multi-
cropping to produce different variety
of agricultural products.
3. Resource can be considered
partially replaceable in the
production process of goods and
services (e.g., substituted manual
labor to advanced technology).
MACROECONOMICS HAS TWO TYPES
OF POLICY
Monetary Policy - setting the money supply
by policymakers in Bangko Sentral ng
The Basic Economic Problems
What to produce?
Society encountered a scarcity of goods;
firms must think of ways on what product or
service to produce and to determine the
quantity to produce.
How to produce?
Firms decide on how to use the resources
efficiently to produce goods and services.
Firms also decide what combination of
resources and technology will be used to
produce goods and services at a lower cost.
For whom to produce?
Firms always considered the benefits of the
societies in producing goods and services.
What provision/laws should be made for
economic growth?
Capital accumulation and technological
progress implies sacrifice of some current
consumption. Therefore, a society has got
to decide what proportion must be save and
invest (that is, what proportion of sacrifice
on current consumption) ought to be
created for future economic progress.
APPLIED ECONOMICS ON BASIC
ISSUES AND PROBLEMS
Applied Economics finds solution to address
the problems on scarcity. It occurs when
people want for goods and services go
beyond the existing supply. In the present
Philippine economy context, firms
domestically produce limited goods and
services because of the limited resources.
That is why, the Philippines imports of
goods to address the unlimited wants and
needs of the Filipino consumers.
• Economics can be a means to solve
economic problems on the production of
goods and services.
• Production is the process by which
resources are changed into useful forms.
• Resources are things provided by nature
that can be used directly or indirectly to
satisfy human needs.
• The basic economic problems on
production includes: what to produce, whom
to produce, how to produce and what
provisions on production for economic
growth.
• Strategic options/decisions to economize
the problems include: economic growth –
ability to produce goods and services;
reduce expectation- reduce our wants -
lessening consumption; improve the use of
resources - use our existing resources
wisely; don't waste the limited resources;
productive efficiency; allocate efficiency; full
employment and equity of resources; and
reduce expectations – reducing wants.
DEMAND
Refers to the willingness and ability of
consumers to buy a given quantity of a good
or service for a
particular period of
time. Market
demand, however,
is the sum of all
individual demand
Law of Demand
The law of demand
states that as the
price increases, quantity demanded
decreases, conversely, as the price
decreases, quantity demanded is also
increases and vice versa, holding all other
factors constant (Patindol, 2012). The law of
demand shows an inverse relationship
between the price and the quantity
demanded.
Quantity Demanded
The total number of goods and services that
buyers are willing and able to purchase at a
given price is called quantity demanded.
Demand Schedule
Presented in table 1 shows the relationship
between the price of a good and the
quantity demanded for a product purchase
by the buyers at various prices at a given
time.
Elasticity of Demand
It measures on the responsiveness of
quantity demanded to one of its
determinants (factors). Price elasticity of
demand measures of how much the
quantity demanded of a good respond to a
change in the price of that good.
➢ Quantity moves the same amount
proportionately as price
• Perfectly Inelastic /εd/ = 0
➢ Demand curve is vertical regardless of
the price, the quantity demanded stays the
same
• Perfectly Elastic /εd/ = ∞
➢ Price elasticity of demand approaches
infinity and the demand curve becomes
horizontal

Demand Curve
The demand curve is a graph of the
Calculating the Price Elasticity of demand schedule which shows the
Demand relationship between the price and the
quantity demanded.

Change in Quantity Demanded

Change in quantity demanded is the

Variety of Demand Curve and its movement from one point to another point
implications: on the demand curve based on the given
price. The movement resulted on the
• Elastic /εd/ > 1 changes in price (Dinio & Villasis, 2017).
➢ Quantity moves proportionately more
than the price

Change in Demand
• Inelastic /εd/ < 1
Shifting of the demand curve from the right
➢ Quantity moves proportionately less than
(outward) to the left (inward) which is
the price
brought by the non-price factors
(determinants) of demand such as income
• Unitary /εd/ = 1
levels, taste and preferences, buyer’s
expectations, and prices of related goods
and services (Dinio & Villasis, 2017).
Shifts in Demand and its Determinants
Consumers Taste and Preferences
Taste and preferences of a consumers
change overtime caused by the trends (fab
and popularity) of the product. When the
consumer’s preferred to a goods and
services, it denotes to a higher demand.
Otherwise, if the taste and preferences of
the consumers is not particular of the
products offered in the market will result to a
lower demand for goods and services (Dinio
& Villasis, 2017).
Consumer`s Income
Individual incomes may change depending
on economic situation of the country based
on the present situation that every Filipino’s
experience due to pandemic (COVID-19)
occurred for 2020-2021 worldwide. A
change in income its either increase or
decrease can cause to a rise or fall of a
demand for a particular goods or services
(Dinio & Villasis, 2017). Inferior goods are
goods whose demand decreases when
consumer`s income rises while normal
goods are goods that the demand
increases when incomes increase.
Population
Population growth also affects the demand
of a product. A larger population means a
higher demand and fewer populations’
means a lower demand for a particular
product (Dinio & Villasis, 2017).
Prices of Related Goods
Demand for related goods tends to increase
or decrease resulted to a change of one
possible factor which is the price of related
goods that the consumers shift to the other
goods that is called substitution effect.
Substitution effect, happens when the price
of a products rise and the consumer will
shift to another product with a lesser value
but with the same benefits. For example, a
price of Brand A toothpaste goes up, people
will substitute Brand X to Brand A. The
demand for Brand X will increase since the
price is lower than Brand A. In
Complementary of goods perspective, two
goods for which an increase in the price of
one lead to a decrease in the demand for
the other. In other words, complementary
goods are often pair of goods that are used
together, such as gasoline and automobiles,
computers and software’s, coffee and
sugar.
Expectation of Future Prices
Future expectation of prices will affect the
demand for a particular product. For
instance, consumer expects that the prices
of Noche Buena products will increase
during Christmas season, presumably, the
demand for Noche Buena products will also
increase.
SUPPLY
It is a basic concept in economics that
describes the total amount of a specific
good or service that is available to
consumers. Hence, suppliers are willing and
able to sell a number of units of items in the
market at different prices for a specific
period (Dinio, 2017).
Law of Supply:
The laws of supply associated with the price Calculating the Price Elasticity of Supply
and quantity supplied have the same Economists compute the price elasticity of
direction with direct relationship. It asserts supply as the percentage change in the
that all other factors remaining constant, as quantity supplied divided by the percentage
the price of a good rises, the quantity of change in the price
goods that supplier’s offers to the market
will also rises, and vice versa (Chappelow,
2019). Thus, businesses or suppliers seek
to increase revenue to produce more
products and maximize profits.

Supply Schedule
A table that exhibits the relationship
between the price of a good and the
quantity supplied.

Quantity Supplied Price (Php)

Variety of Supply Elasticity and its

implications:

• Elastic /εs/ > 1

➢ Quantity supplied responds substantially
to changes in price

• Inelastic /εs/ < 1

➢ Quantity supplied respond only slightly to
changes in price

• Unitary /εs/ = 1
➢ Quantity supplied respond equally to a
change in price
10 200
15 300
20 400 Supply Curve:
25 500 A graph shows the relationship between the
30 600 price of a good and the quantity supplied.

Quantity Supplied:
Quantity supplied described the amount of a
good that seller (producers) is willing and
able to sell during a particular period (Dinio
& Villasis, 2017). Determinants of quantity
supplied will be considered but price plays a
significant role in the analysis. When the
price of slipper rises, selling of slipper is
profitable and expectedly the quantity
supplied is large.
Change in Quantity Supplied:
A change in quantity supplied refers to a
movement along the supply curve.
However, the only factor that can cause the
movement of the supply curve is the change
in price (Dinio, 2017).
Change in Quantity Supply
Shifting of supply curve in connection to the
determinants of quantity supplied other than
non-factor price. This means that the entire
supply curve moves left (inwardly) or right
(outwardly).
Variables (Determinants) Shift the
Supply
Technological progress – It denotes
technological innovations is possible to
produce mass productions and quality of
products offered in the market in a lower
price that the supply curve will shift to the
right. On the other hand, obsolete
technology will shift the supply curve to the
left.
Number of sellers – Market supply
depends suppose there are many sellers in
the market, there is a probability also an
increase of supply of goods and services,
thus, the supply curve will shift to the right.
Conversely, a decrease in the number of
sellers will shift the supply curve to the left.
Cost of production – A change in cost of
production will also affect the change of
supply for a particular product. For instance,
an increase of the cost of raw materials,
lessen the production of goods. Hence,
supply curve will shift to the left while a
decrease in the prices of raw materials will
shift the supply curve to the right.
Expectation of future prices – Producers
predict that prices will rise in
the future, they will also
increase production with the
intention to gain higher profit
and to put some of its current
production into storage and
supply less to the market today
(Dinio & Villasis, 2017).
Market Supply:
The sum of all quantity of goods and
services that sellers are willing and able to
supply at different prices of a given period of
time. (Dinio, 2017)
MARKET EQUILIBRIUM
A condition wherein the supply curve and
demand curve intersect and the market is in
the market equilibrium point. It occurs when
the amount of goods and services
purchased by buyers is equal to the amount
of goods and services produced by the
sellers (Dinio & Villasis, 2017).

2.
3.
4.
CHANGE OF EQUILIBRIUM PRICE AND
5.
QUANTITY SUPPLY
Equilibrium price and quantity are
determined by supply and demand curves.
Price and quantity supplied or both changes
of equilibrium price and quantity.
1. Demand Increases, supply remain
constant- The demand curve shifts
6.
outwardly from the original demand
curve D to a new demand curve D1,
the supply curve remains constant
as a result of an increase in quantity
demanded and constant supply. The
equilibrium price rises from P to P1,
and the equilibrium quantity also
rises from Q to Q1.
Demand decreases, Supply
remains constant- The demand
curve shifts inwardly from the
original demand curve D0 to a new
demand curve D1, the supply curve
remains constant expectedly a
decrease in quantity demanded and
stable in quantity supply. The
equilibrium price decreases from P1
to P2 while the equilibrium quantity
decreases from Q1 to Q2.
Supply increases, Demand
remains constant- The supply
curve shifts outwardly from S1 to S2
and the demand curve remains the
same, hence, an increase in quantity
supply with a constant quantity
demand. The equilibrium price from
P1 to P2 and the equilibrium
quantity increase from Q1 to Q2.
Supply decreases, demand
remains constant- The supply
curve shifts inwardly from S1 to S2
and the demand curve remains the
same as a result of decrease in
quantity supply and constant
quantity demanded. The equilibrium
quantity decreases from Q1 to Q2.
Demand increases, supply
decreases- The demand curve
shifts outwardly from D1 to D2 and
the supply curve shifts inwardly from
S1 to S2 by an equal amount. As a
result, the equilibrium prices rise
from P1 to P2 and the equilibrium
quantity decrease from Q1 to Q2.
Demand Decreases, Supply
increases- The demand curve shifts
inwardly from D1 to D2 and the
supply curve shifts outwardly from
S1 to S2 by an equal amount. As a
result, the equilibrium price
decrease from P1 to P2 and the
equilibrium quantity is constant.