INTRODUCTION

TO
ECONOMICS
ECONOMICS
 “oikonomia” means
“household management”

 Aristotle: “science of
household management”

 Alfred Marshall: “Economics

is the ordinary business of life”
ADAM SMITH
 Father of Economics

 termed that “Economics

is the Science of Wealth”
WANTS ARE UNLIMITED,
BUT THE MEANS TO
SATISFY THOSE WANTS
ARE SCARCE.
SCARCITY

 insufficiency of resources
to meet the wants to
consumers and insufficiency
for producers that hamper
enough production of goods
and services.
 a condition where there
are insufficient resources
to satisfy all the needs
and wants of a population.
Types of Scarcity:

RELATIVE SCARCITY
- this happened when good is
scarce compared to its demand.
ABSOLUTE SCARCITY
- this happened when supply is
limited.
CHOICE AND DECISION-MAKING

OPPORTUNITY COST
- refers to the value of
the best foregone
alternative.
ECONOMIC
RESOURCES
 also known as factors of
production.

 these are the resources

used to produce goods
and services.
 these resources, by
nature, limited and
therefore, command a
payment that becomes the
income of the resource
owner.
a. LAND
 soil and natural
resources that are found
in nature and are not man-
made. Owners of land
receive a payment known
as “rent”.
b. LABOR
 physical and human
effort exerted in
production.

 they are the “wage-

earners”
c. CAPITAL
 man-made resources used
in the production of goods
and services, which include
machineries and
equipments.

 the owner of capital earns

an income called interest.
ECONOMICS
AS A
SOCIAL SCIENCE
 Economics is a social
science because it studies
human behavior just like
psychology and sociology.
 It is broadly speaking,
the study of society and
how people behave and
influence the world around
them.
 As a social science,
economics studies how
individual make choices in
allocating scarce
resources to satisfy their
unlimited wants.
MACROECONOMICS
 it is a division of
economics that concerned
with the overall
performance of the entire
community.
MICROECONOMICS
 on the other hand, is
concerned with the
behavior of individual
entities such as the
consumer, producer and
the resource owner.
 It is also concerned with
the process of setting
prices of goods known as,
“Price Theory”.
BASIC
ECONOMIC
PROBLEMS OF
SOCIETY
a. What to produce and how
much.

 society must decide

what goods and services
should be produced in the
economy.
b. How to produce.
 a question on the production
method that will be used to
produce the goods and
services.

 refers to the resource mix

and technology that will be
applied in production.
c. For whom to produce.

 it talked about your

target market of goods
and services.
ECONOMIC
SYSTEMS
TRADITIONAL ECONOMY
 decisions are based on
traditions and practices
upheld over the years and
passed on from generation
to generation.
COMMAND ECONOMY
 this is the authoritative
system wherein decision-
making is centralized in
the government or a
planning committee.
 MARKET ECONOMY
 the most democratic form of
econ. System.

People’s preferences are

reflected in the prices they are
willing to pay in the market
and are therefore the basis of
the producers’ decisions on
what goods to produce.
WHY ECONOMICS
IS IMPORTANT
WHY DO WE
NEED TO
STUDY ECONOMICS?
 Economics will help the
students understands why
there is a need for
everybody, including the
government, to budget and
properly allocate the use of
whatever resources are
available.
SCIENTIFIC
APPROACH IN THE
EMPIRICAL TESTING
OF AN ECONOMIC
THEORY
1. State the propositions or
conditions that are taken as
given and do not need
further investigation, as the
basic starting point of
investigation. These
propositions will serve as
the premises upon which the
theory is established.
2. Observe facts in
connection with the activity
that we want to theorize.
3. Apply the rules of logic to
the observed facts to
determine causal
relationships between
observed factors and to
eliminate facts that are
unnecessary and irrelevant.
4. Establish a set of
principles such that
formulated hypothesis may
be tested as to whether
they are valid or not.
5. Use statistical and
econometrics as empirical
proof in testing the
hypothesis.
POSITIVE ECONOMICS
vs.
NORMATIVE ECONOMICS
POSITIVE ECONOMICS
- it deals with what is– things
that are actually happening such
as the current inflation rate, the
number of employed labor, and
the level of the GNP.

- an overview of what is
happening in the economy that is
possibly far from what is ideal.
NORMATIVE ECONOMICS
- refers to what should be–
that which embodies the ideal
such as the ideal rate of
population growth or the most
effective tax system.

- focuses on policy formulation

that will help to attain the ideal
situation.
MEASURING
THE
ECONOMY
COUNTING
ALL
THROUGH
GDP
GROSS NATIONAL PRODUCT

- is the market value of

final products, both sold
and unsold, produced by
the resources of the
economy in a given period.
GNP/GDP: EXPENDITURE
APPROACH

GNP= C + I + G + (X-M)
GNP/GDP: INCOME APPROACH
ECONOMICS
AS AN
APPLIED SCIENCE
APPLIED ECONOMICS
- is the application of
economic theory and
econometrics in specific
settings with the goal of
analyzing potential
outcomes.
JOHN NEVILLE KEYNES
 attributed to be the first
to use the phrase “applied
economics” to designate
the application of
economic theory to the
interpretation and
explanation of particular
economic phenomena.
APPLIED ECONOMICS
IN RELATION TO
PHILIPPINE ECONOMIC
PROBLEMS
The Philippines’ Basic
Economic Problems

 Economic growth rate

 Unemployment
 Hunger
 Poverty
ASEAN ICON
LEE KUAN YEW
 an economic icon and an
example of how a leader of
a previously undeveloped
country can lead to
overcome its country’s
basic economic problems
and more toward
economic growth.
 prime minister of
Singapore from 1959-1990,
making him the longest-
serving prime minister in
history.