INTRODUCTION

INTRODUCTION
TO
TO ECONOMIC
ECONOMIC
THEORY
THEORY
CHAPTER 1
 OBJECTIVES
OBJECTIVES

01
01 Explain Economics

Define the basic terms in

03
03 Economics

Discuss the types of

05
05 Economic System
“To acquire knowledge, one must
study;
but to acquire wisdom, one must
observe.”
―
― Marilyn
Marilyn vos
vos Savant
Savant
 What
What is
is Economics?
Economics?
When they hear the word "economics," many people assume that it is all
about money. Money is only one aspect of economics. It involves
weighing several options or alternatives. Some of those crucial decisions
include money, but not all of them. Even if most of your daily, monthly,
and life decisions have nothing to do with money, economics
nevertheless applies to them. Economics is the study of scarcity and
how it affects how resources are used, how commodities and services
are produced, how production and welfare increase over time, and a
wide range of other complicated concerns that are extremely important
to society. Adam Smith, the recognized father of Economics, said that
Economics is “an inquiry into the nature and cause of the wealth of the
nations.”
 Basic
Basic terms
terms of
of Economic
Economic

Economic
Goods
Resource

Items that fulfill human needs, have

It is a manufacturing process to create
utility or usefulness, and are rare are
output, which includes products like
referred to be goods. It is tangible
goods and services. According to the
products. An economic good must also
relationship known as the production
be able to be created and consumed, as
function, the amounts of the various
well as transferred from one person to
inputs used influence the amount of
another. Based on the pleasure they
output.
receive from products, people assign
economic values to them.
 Basic
Basic terms
terms of
of Economic
Economic

Labo
r l
A measure of the effort put in by
people. It is typically compared to other
production inputs like land and capital.
Capita
It is a general term for anything that
provides its owner with benefit or
worth, such as a factory and its
machinery, intellectual property like
patents, or a person's or a company's
financial assets. Despite the fact that
money itself can be referred to as
capital, the term is typically used to
refer to cash used to buy items or
make investments.
 Basic
Basic terms
terms of
of Economic
Economic

Entrepreneur Scarcity

Is a person who starts a new business,

taking on the majority of the risks and
reaping the most of the gains. The allocation of finite resources to
Entrepreneurship is the practice of starting satisfy infinite wants and needs is the
a business. The entrepreneur is frequently fundamental issue in economics, and
viewed as an innovator, a source of fresh scarcity is its underlying cause.
concepts for products, services, businesses,
and operational methods. A measure of the
effort put in by people. It is typically
compared to other production inputs like
land and capital.
 Types
Types of
of Economic
Economic System
System

1. The Traditional Economy

Is an economic system where traditions,

practices, and beliefs influence the production
of products and services as well as the policy
and method of distribution.
Types
Types of
of Economic
Economic System
System

2. The Command Economy

An economic system where the means of
production are held by the government and
economic activity is governed by a central body
that sets quantitative production targets and
distributes raw materials to productive businesses.
In such a system, the political choice to allocate a
certain portion of the total output for investment
rather than consumption falls under the purview of
the central government.
 Types
Types of
of Economic
Economic System
System

3. The Market Economy

Is a sort of economic system where supply and

demand, rather than government intervention,
control the economy. An economy with a fully
free market is one in which every resource is
privately owned.
 Types
Types of
of Economic
Economic System
System

4. The Mixed Economy

It is a framework that blends elements of
socialism and capitalism. A mixed economy
protects private property and permits some
economic freedom in the use of capital, but it
also permits government intervention in the
economy to further social objectives. Is an
economic system where traditions, practices,
and beliefs influence the production of
products and services as well as the policy and
method of distribution.
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