Unit 1: Basic concepts

Economics impacts every aspect of our life. It is not merely about

money. It is about making choices. It is about confronting our wants
so that we can allocate scarce resources and value human needs.
Lesson 1: what is
economics?
This lesson discusses the basic concepts
Economics and underscores its applicability
daily life.
of
in

Learning Outcomes:
1.Define economics.
2.Explain the concepts of economics.
3.Explain how applied economics can
be used to solve economic
problems.
ECONOMIC
S
about making choices…
 Economics

 The science which studies human

behavior as a relationship between
ends and scarce means which have
alternatives uses. (Stiegler, 1985)
 Economics

 Study how societies use scarce

resources to produce valuable
commodities and distribute them
among different people. (Samuelson and
Nordhaus, 1995)
 Economics

 Study of given ends and scarce

means. (Lionel Robbins)
 Economics

 The word “economics” comes from the

Greek word “oikonomia”, which literally
translates to household management. It
is also derivative of oikonomeo, “a
steward, managing a household” –
properly, a stewardship management
(administration)
  Our economist need to forecast how the
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country will grow in the current year and
within the next five years and where this
expected growth will come from.
 Will agriculture lead the way? What is
other calamities hit the country? Does the
government need to borrow from the
international community or will its
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 How does the general price level move? Do
we see stable prices or erratic swings to
our commodities?
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 Generally...
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Economics involves wealth, finance,

recessions, and banking, leading to the
misconception that economics is all about
money and the stock market.

Actually...
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It’s much broader discipline that helps us
understand historical trends, interpret
today’s headlines, and make predictions for
the coming decades. boba
 Factors of production

• Land (acreage and raw materials)

• Labor (unskilled, semiskilled, professional)
• Capital (machines, factories, transportation equipment,
and infrastructure)
• Entrepreneurship (organizing the other factors of
production and risk-taking)
 Scarcity

 Refers to a physical condition where the

quantity desired of a particular
resource exceeds the quantity available
in the absence of a rationing system.
 Potential candidates for rationing systems include:
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• Tradition and Culture, where the problem of
allocation is addressed via social norms, customs
and past history.
• Planning and Central Government Command, making use
of complex mathematical tables to determine output
goals and input requirements.
• Voting and Political Procedures, communication
about resource allocation among individuals
boba thorough the development of a consensus or perhaps
majority rule.
• Markets, using a system of prices to act as a means
of communication about the availability of
resources and the desire for those resources.
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 Goods and services refer to: boba

• Final Goods and Services – those

products that are directly consumed
by individuals to satisfy their needs
and wants.
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• Intermediate or Capital Goods – are
those goods used to produce other
goods.
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 Main Branches of Economics

Microeconomics – deals with the behavior of individual

components as an economic agent such as household, consumer,
worker, firm, and individual owner of production (producer). It
also refers to the study of choices by individuals, like how
someone decides on the budget.
 Main Branches of Economics

Macroeconomics – deals with the behavior of economy as a whole

with the view to understand the interaction between economic
aggregates such as employment, inflation, and national income/country’s
gross national product (GNP). It also deals with the study of
governments, industries, central banking, and the boom and bust
of the business cycle.
 Main Branches of Economics (Economic Behaviour)
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Normative Economics – has something to do with “what
ought to be.” Hence it involves ethics and value
judgement. Normative economics cannot be settled by a
mere appeal to facts. However, this does not mean that
they are unimportant. Normative economics is concerned
with what values judgements are needed by the economy
and reasons for such judgements.
boba Positive Economics – on the other hand has something
to do with “what is.” It describes facts and data in
the economy. It gives policy recommendation to
positive economics.
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Group activity:
Give examples of how economics
affects your life as a student and
as a member of the household.
Explain to class your answer and
realization.

(Form 4 groups per class)

Assignment:
1. Clip an economic news article from the
newspaper or magazine. Explain why and how the
issue being discussed is economic in nature.
2. Examine the problems of the following social
issues and explain why/how do such problems
exist.
a) Housing Shortage
b) Unemployment

Note: Do all this in your notebook.

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