Nature and Scope of

Economics

By Engr. Ma. Nerissa P. Sangalang, RCE,LPT,MBA

ECONOMIC
CONCEPTS &
MODELS
 Law of Scarcity

The resources that we need in

production are not infinite. At any
given moment, the amount of
each factor of production reaches
its limit and therefore becomes
scarce.
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 Factors of Production
(RESOURCES)

• The “cell” of Economics (main unit)

• Factors of Production:
1. Land
2. Labor
3. Capital
4. Entrepreneurship

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 Land
• refers to all natural resources including the
landscape, water resources, the flora and
fauna, mineral ores and potential renewable
(solar and wind energy) and non-renewable
(fossil fuel) sources of energy
• Some can be directly consumed
• Some are classified as raw materials which are
combined to produce final or finished goods
and services

Payment for resource: RENT

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 Labor
• Refers to all human activity involved in
• extracting materials from land;
• processing these materials into final goods and
services; and
• distributing them to their ultimate users
(households and firms)

Payment for resource: SALARY/WAGE

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 Capital
• also called “fixed assets”, “fixed
investment” or “permanent capital”
• Examples:
Factories, Machinery, Equipment and Tools

Payment for resource: INTEREST

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 Entrepreneurship
• this factor refers to people’s gift or talent for
recognizing the potential gains from an idea,
a breakthrough, a discovery, or an invention
• Entrepreneurs are the ones who run
businesses; they receive both profits and
losses experienced by the firm

Payment for resource: PROFIT

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 Needs and Wants

• Needs are things we cannot live without

• Wants are non essential things we can live
without

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 Four factors affecting
unlimited human wansts
• Increase in population
• Changing tastes and preferences
• Increase in income
• One time speculations of consumers

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 Branches of economics
• Microeconomics – deals with the
economics of the firms. It focuses on the
behavior of a particular unit of the
economy such as the consumers, producers
and specific markets.
• Macroeconomics – deals with the
aggregates. Its scope is wider and it studies
the entirety of an economy.

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END