ECONOMICS

BASIC CONCEPTS
Economics - is an art/science of
efficient allocation and utilization
of scarce resources to produce
goods and services to satisfy
unlimited human wants or
needs.

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 • Art - application of
skills/reflective of confidence
• Science – systematized body of
knowledge that is
related/important to daily life.

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 Art
Ex. Realistic Painting, balanced colors and lines.

Ex. A housewife being able to sustain daily

needs of the family despite meager income
President Aquino skillfully balancing
subsidized fuel (pantawid pasada)/food
(feeding programs) or printing out more
money to lower interest rates with inflation.
 Science
Exact = Facts
Ex. Water at 100⁰C = boils water vapor
at < 100 ⁰C > 0 ⁰C liquid
at < 0 ⁰C solid

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P

Purely competitive
P1 supply curve

Q
P
Monopolistic supply
curve

Q1 Q
Economics - is an art/science of
efficient allocation and utilization
of scarce resources to produce
goods and services to satisfy
unlimited human wants or
needs.
 Time in a day…
• 24 hrs. a day 53
• 8 hrs. sleep 33.3% 17.6 years
• 8 hrs. study/work 33.3 % 17. 6
years
• 3 hrs. commute 12.5% 6.6
• 2 hrs. personal things 8.3% 4.3
• 3 hrs. free available time 12.5% 6.6
• Land, labor, capital, entrepreneur
• 5Ms
M – Method
M – Materials
M – Machines
M – Man
M - Moment
• WWII

• Hitler (Jet plane, V2, smart bombs, …)

• Einstein
• Marx
Efficiency

• less wastes or zero waste

• less input producing the same or
greater output newbreedmarketing.com

• technology driven

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• R&D
• Technology
• < 1% GDP
• 3 – 5% GDP
Allocation Vs. Utilization

Allocation is the setting aside of a certain

amount of resource for an intended purpose.
Utilization is the manner in which these
resources were used.

Ex. A big department store should have a

bigger budget than a small one (allocation).
The manner in which it was used (ex. purchase
of more supply of goods) is utilization.
Economics - is an art/science of
efficient allocation and utilization
of scarce resources to produce
goods and services to satisfy
unlimited human wants or
needs.
Scarcity – resources do not always meet the need.
Why? Because:

1. Demand is greater than supply.

2. Non-renewable resources. Ex. Oil.
3. Resources have competing uses.
Ex. Coconut shell for power generation, cooking fuel
or handicraft?
4. Lack of opportunity – doctors and nurses are going
out of the country for better opportunity in the USA.
At the height of demand for nurses abroad, it was
estimated that only about 15% of our doctors and
nurses are remaining in the country.
Resources

Land
Labor
Capital
Entrepreneur
Economics - is an art/science of
efficient allocation and utilization
of scarce resources to produce
goods and services to satisfy
unlimited human wants or
needs.
• Production is the conversion and/or
combination of resources to create
consumable goods/products/services.
Two types of goods: Economic and Free

Economic – processed or manufactured goods

that has a price tag in the market. Ex. Books,
photocopying machines , paper , pen, food
clothes, hair cut, driving lessons, etc.

Free – Sunshine, Polluted Air, A walk in the

park, flood
Economics - is an art/science of
efficient allocation and utilization
of scarce resources to produce
goods and services to satisfy
unlimited human wants or
needs.
Satisfaction – Very abstract. How do
we know we are already satisfied?
If it becomes a habit (Satisfaction is
related to utility or the usefulness of
the product or service).
• Satisfaction – when you are happy with the
product you consumed, no regrets.
• Satisfied – When the anticipated utility is
achieved with respect/reference to its price.
• “Sulit” “Worth it”

• Fried Chicken – P 80.00

300.00
10.00
6 Types of Utility:
youtube.com

Time
Place
Service
Possession
Form
Biological
• 17-25 F/M - looks suitors
Weak = 24 hrs. 22 years 15 years cliques
Family
Hidilyn Diaz – 92 Gold Medal Sprint
• Attitude – lifetime
• 0-5 - 50% -
• 6-18 – 50%
Social types – monkeys, dolphins, squirrels
Non-social types –snakes, cuttlefish, sharks
 How to Measure Utility
Approaches to measure utility (non-parametric)
• Cardinal approach– give it a numeric value
Beauty – 1 -10
Utils – 1-100
Non-parameters
• Ordinal approach – ranking

• Ex . Pepsi 2nd
Mountain Dew 1st
Coke 3rd
 Two Type of Data According to
Measurability
A. Parametric – can be measured using standard
measuring units – ex. meters, centimeters,
inches (distance)
grams, kilograms, pounds (weight)

B. Non-parametric
then use the cardinal and ordinal approaches
Economics - is an art/science of
efficient allocation and utilization
of scarce resources to produce
goods and services to satisfy
unlimited human wants or
needs.
Unlimited – as long as one person is alive, he
will consume goods and services.

Wants and Needs

Wants: Things that one can live without, ex.

jewelries, mp4 player, watch, etc.
Needs: Things that one cannot live without, ex.
food, water, shelter, clothes, air, etc.
 Externalities
• Externalities – Spill over effects unintended
outcomes of an endeavor

Kinds:
• Positive Externalities
ex. employment/livelihood
• Negative Externalities
ex. pollution/environment
destruction/climate change
• Microeconomics
Managerial Economics

• Macroeconomics
Public Economics
Monetary Economics
Econometrics
 Economics
• It’s all about people, hence a social science.
Law of Diminishing Marginal Utility
Flakes in Oil MU (0-100) Hot and Spicy MU

1 100 1 100

2 90 2 95

3 50 3 60

4 20 4 40

5 10 5 20

6 0 6 8

7 -5 7 0
 Self-Interest
• Invisible Hand by Adam Smith 1776

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 Gov’t – fiscal policies – taxes, spending, borrowing BSP –
monetary policies – rediscounting rate, reserve requirement,
moral suasion, etc.

• P1000/month : P1,000/sack of rice

1 sack
• P1000 : P750/sack
1 1/4 sacks
• P1000 : P500/sack
2 sacks
Reduction or loss in purchasing power. Exodus of
firms, loss of jobs, loss of G/S being produced.