Introduction to

Economics
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Father of Modern Economics
Adam Smith
BEST explanation of Marshall’s
definition
It includes the study of labor, land and capital,
investment of money, income and production,
taxes and government.
He defined economics as the science
which studies human behavior as a
relationship between ends and
scarce means which have alternative
uses

Lionel Robbins
Statement/s is/are definition/s
of Gerardo P. Sicat on
economics
I. study of how economic units or agents make
choices
II. involve the use of scarce resources
III. relate to the solution of economic problems
the economic units and
agents
I. Individuals
II. Families
III. Firms
IV. Industries
 the economic
problems

Production
Consumption
Importance Distribution
of Economics
 How economics uses logical and
evidence-based approach in analyzing
problems?
by using current information to
make empirically supported
decisions

Importance of Economics
Studying economics is vital on the study of the
complex society where there are interactions
and relationships with other people. Therefore,
______.

Economics deals with people.

Importance of Economics
 BEST definition of
demand
curves of several numbers of
goods and services that the
buyers willing to buy at different
prices at a given time

Demand and Supply

relationship exists between price and
quantity demanded
inverse

Demand and Supply

How do the consumers’ tastes affect
the mobility of demand?
taste increases on a certain
product or service, the demand
will also increase (vice-versa)

Demand and Supply

When Joe’s income increases, he
stops buying cheap cars. What type
of elasticity is Joe’s situation?
Income Elasticity

Economic Elasticity
If the price of Cola A doubles, the quantity
demanded for Cola A will fall when
consumers switch to less-expensive Cola
B. This is example of
Price Elasticity

Economic Elasticity
If the price of coffee increases, the quantity
demanded for tea (a substitute beverage)
increases as consumers switch to a less
expensive yet substitutable alternative. What
elasticity emphasizes on the situation?
Cross Price Elasticity

Economic Elasticity
When fuel prices increase suddenly,
consumers may still fill up their empty tanks in
the short run. But when prices remain high
over several years, more consumers will
reduce their demand for fuel by switching to
carpooling or public transportation or
investing in more fuel-efficient vehicles.
Time horizon

Economic Elasticity
Normal goods have a positive income
elasticity of demand so as consumers'
income rises,
more is demanded at each
price

Economic Elasticity
Inferior goods have a negative income
elasticity of demand meaning that demand
falls as

Income decreases

Economic Elasticity