Eco1a chapter 1
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This document provides an introduction to economics. It defines economics as the study of proper allocation of scarce resources for satisfying human wants and needs. Economics has two main branches: microeconomics, which focuses on individual decision making units like households and firms, and macroeconomics, which looks at the overall economy and factors influencing national income. Positive economics attempts to understand and explain economic behavior without judgment, while normative economics makes judgments on outcomes and policies. The document outlines key economic concepts like scarcity, resources, efficiency and the scientific methods used in economics like observation, analysis and statistics. It concludes by listing various fields within economics.
Eco1a chapter 1
- 1. Introduction to Economic With Taxation, Agrarian Reform and Cooperatives CHRISTOPHER D. BALUBAYAN, AB, MEdALS Instructor St. Peter’s College of Toril 1st Term 1st Semester SY 2014-2015
- 2. Lesson 1 FUNDAMENTALS OF ECONOMICS • Introduction – Man’s activity, since time immemorial, has been devoted to work for his survival – In primitive times, this effort was spent primarily for the protection of their lives – Consciously or unconsciously, they have been working for basic needs commensurate to their lifestyle
- 3. Rationale of Study • Education is an ongoing process to keep its pace with modern times • Researches have been conducted that have led to technological advancement • Man is no longer contented to live a simple lifestyle but he still has to cope with the demands of the time • To respond to this need, man should become economically oriented with his ways
- 4. Definition of Economics • Economics is one of the popular fields of study among the social science since it covers all kinds of topics • However, its core focuses on understanding how society allocates its scarce resources • Due to the concept of scarcity, economics tries to devote most of its time, if not all, on everyday life situations • However, to be more specific and to have a clear picture of what economics is, the
- 5. Cristobal M. Pagoso Philippine Economics, 1989 • Stresses that Economics is the: – Study of wealth – Study of how to go about the business of organizing consumption and production activities – Study on how to improve society and make human civilization possible – Study of ordinary life, earning and enjoying a living – Study of how people choose to use scarce resources or limited productive resources to produce various commodities and how to distribute
- 6. Paul A. Samuelson Economics 1993 • Stressed that economics: – Asks what goods are produced, how these goods are produced and for whom they are produced – Analyses movement in the overall economy – Studies commerce among nations. It help explain why nations export and import goods as well as the effects of putting barriers at national frontiers – Is the science of choice and it helps people choose. It also explains hot to use scarce or limited productive resources and distribute theses goods for consumption
- 7. Generally Accepted Definition of Economics • It is a branch of social science that deals with the study of proper allocation of scarce resources for the satisfaction of mans unending needs and wants • Three Main Concepts in Economics 1. Scarcity 2. Resources 3. Efficiency
- 8. • Scarcity – The quality or state of being limited in terms of the provisions for the support of life • Resources – The natural, economic, political, or military assets enjoyed by the nation such as mineral wealth, labor, capital or military personnel – Anything that is used for man’s satisfaction TWO TYPES Free Resources – Goods that can obtained regardless of quantity and without any cost (e.g. Water, air, sunlight, etc.) Economic Resources – Things that can be obtained with some constraints or limitation due to its cost (e.g. Land, machinery, etc.)
- 9. Economics and Other Sciences • It is a Social Science – Because it undergoes stages of experimentation, observation, hypotheses, testing and verbal reasoning • Achilles C. Costales (Economics: Principle and Applications, 2000) – Cited the relationship of economics with other science
- 10. ECONOMICS PSYCHOLOGY HISTORY SOCIOLOGY POLITICAL SCIENCE BUSINESS MANAGEMENT FINANCE NATURAL SCIENCE
- 11. Importance of Economics • It is important to resolve the problem of scarcity – LAW OF SCARCITY • Goods are scarce because there are not enough resources to produce all the goods that people want to consume • It serves us in managing our personal lives • It help us in understanding society and improving the world around us • It improves knowledge of crucial national issues
- 12. Scope of Economics Paul A. Samuelson (Economics 1993, page 4) • MICROECONOMICS – Deals with the interaction of economic agents such as firms, industries, individuals, government agencies and the like – It looks into the behavior of individual economic decision-making units, business firms and households • MACROECONOMICS – Looks at the economy as a whole and it further examines the factors that determine national product
- 13. Contrast Between Microeconomics and Macroeconomics Microeconomic is concerned with household income; Macroeconomics deals with national income Microeconomics focuses on individual product prices and relative prices; Macroeconomics looks at the overall price level and how quickly these prices rise and fall Microeconomics questions how many people are hired this year by the industry;
- 14. Methods of Economics Positive vs. Normative • POSITIVE ECONOMICS (William J. Baumol & Alan S. Blinder, 2000) – Attempts to understand the behavior and the operation of the economic system without making judgement whether the outcomes are good or bad EXAMPLE: – (The answers to these questions are the subject of positive economics) • How much pay will be given to skilled or unskilled workers? • What happens if the corporate tax will be removed?
- 15. • NORMATIVE ECONOMICS (William J. Baumol & Alan S. Blinder, 2000) – Looks at the outcomes of economic behavior and asks whether they are good or bad and whether they can be made better, therefore, it involves judgement and prescription of courses of action – Offer referred to as policy economics because it deals with the formulation of policies to regulate economic activities EXAMPLE: – (The answers to these questions are the subject of positive economics) • Is it the responsibility of the government to subsidize or regulate the high cost of education? • Should medical benefits to the elderly, under the Medicare Program, be available only to those who have income? • Should the government tolerate the sale of foreign goods to compete with local goods in the market? Methods of Economics Positive vs. Normative
- 16. Scientific Approach Implied in the Acquisition of Knowledge in Economics • Observation of Economic Affairs – Especially drawing historical records, is one of the major sources of economic knowledge • Economic Analysis – Refers to an approach that starts with a set of assumptions, then logically deducing certain predictions about the economic behavior of people, firm or overall economy • Statistical Analysis – Refers to the use of a quantitative inferences of the available data gathered. – Given how situations, like A and B are both rice-producing provinces in the region, how will you come up a more realistic data that, between the two provinces, which is producing more than the other one? – The use of statistical tool is necessary to come up with specific and accurate analysis
- 17. Field of Economics Industrial Organization Urban and Regional Economics Econometrics Cooperative Economic Systems Economic Development Labor Economics Finance International Economics Public Economics Economic History Law of Economics History of Economic Thought
- 18. Assignment 1. What are the various divisions of economic activity? 2. Explain briefly, in your own word, the basic economic problems.