Economic Principles: Micro vs Macro

• Economics originates from the Greek words "oikanomia" or "oikonomus," signifying household management.
• Economics studies rational human behavior in fulfilling needs and wants.
• Economics examines how economies function and how consumers maximize wants within limited means.
• Economics studies the efficient allocation of scarce resources to satisfy unlimited wants.
• Economics is the science of managing scarce resources.

The Three E's of Economics

• Efficiency involves the productivity and proper allocation of economic resources.
• Efficiency is the relationship between scarce factor input and the output of goods and services.
• Effectiveness refers to the attainment of goals and objectives.
• Equity refers to justice and fairness.

Economics as a Social Science

• Economics, as a social science, uses the scientific method to formulate models based on theories.
• These models and theories explain the behavior of people, groups, and organizations in response to human interactions.

Two Branches of Economics

Macroeconomics

• Macroeconomics studies the economic behavior of the economy as a whole, especially the national economy.
• Macroeconomics focuses on the aggregate flow of goods and resources.
• Macroeconomics examines the causes of change in the overall flow of money, the overall movement of goods and services, and the general use of resources.
• Macroeconomics is also known as the analysis of employment and income.
• Macroeconomics covers topics such as gross national product, employment level, national income, gross domestic product, general price level, and economic growth and development.

Microeconomics

• Microeconomics examines economic behavior in specific markets, such as the computer or unskilled labor market.
• Microeconomics focuses on the economic behavior of individuals and businesses.
• Microeconomics studies factors influencing individual economic choices and how markets coordinate decision-makers' choices.
• Microeconomics focuses on the behavior of individual entities, including the consumer, the producer, and the resource owner.
• Microeconomics studies how products move from business to customer and resources flow from resource owner to business.
• Microeconomics known as the Price Theory, focuses on the process of setting prices of goods.
• Microeconomics covers principles and elasticity of demand and supply, individual decision-making, and firm's costs and outputs.

Basic Decision Problems

• Consumption involves deciding the types and amounts of products and services to use.
• Production is concerned with producing goods and services to meet consumer needs, wants, and demands.
• Distribution involves appropriate resource allocation benefiting all members of society, primarily addressed by the government.
• Growth over Time means problems of choice, consumption, production, and distribution must be perceived in context of long-term effects.

Tools of Economics

• Logic is a science dealing with sound thinking and reasoning, requiring facts and evidence.
• Mathematics is a science dealing with numbers and operations, used to solve concrete problems, making economics the most quantifiable social science.
• Statistics is a branch of mathematics that engages with the analysis and interpretation of numerical data.

Economic/Production Resources

• Economic/production resources are inputs used to produce desired goods and services.
• Land is categorized as fixed, finite, exhaustible, and depletable resources.
• Land is all that nature provides freely; rent is its payment to landowners.
• Labor reflects the effort of individuals in producing goods and services, dependent on population growth and labor force participation.
• Labor is referred to as human resources, reflecting human capital in turning resources into consumer products, paid through salary or wages..
• Capital consists of man-made goods used for producing other goods and services, functioning as a medium of exchange.
• Interest is the income earned by the owner of the capital, and capital signifies monetary resources for businesses.
• Entrepreneurship, is an activity that involves organizing, managing, and assuming business risks, potentially earning a profit or incurring a loss, requiring management skills.
• Foreign Exchange involves the dollar and dollar reserves used for international trade and raw material procurement.

Opportunity Cost

• Scarcity arises when limited productive resources cannot satisfy people's unlimited wants, creating a resource allocation dilemma.
• Opportunity cost is what is given up when one chooses the best alternative, perceived in relative price.

No Free Lunch

• There is no such thing as a free lunch (TINSTAAFL) explains the notion of opportunity costs.

Positive and Normative Economics

Positive Economics

• Positive Economics analyzes economic conditions 'as they are', using objective and scientific explanations, and in the study different transactions in the economy.
• Example: The country's unemployment rate stayed at 5.3 percent in January 2020, and underemployment hit its lowest level at 14.8 percent in a decade.

Normative Economics

• Normative Economics judges economic conditions 'as these should be' and focuses on policymaking.
• Example: The Philippine government should initiate political reforms to regain investor confidence and boost the economy.

Ceteris Paribus Assumption

• Ceteris Paribus, meaning all other things held constant, simplifies analysis by focusing on the relationship between two variables.

Economics as an Applied Science

• Applied Science applies scientific knowledge to practical problems.
• Applied Economics studies economics relative to real-life situations, observing how theories work in practice.
• Applied Economics uses economic theory (economic model) as economic reality to make predictions about the real world.
• Econometrics applies of statistical and mathematical theories to economics to test hypotheses and forecast trends.

Applied Economics Application

• Applied Economics is a powerful tool for understanding the current economic situation and planning future actions.
• Applied Economics serves as a mechanism for enhancing the current economic situation.
• Applied Economics teaches lessons about preventing or mitigating negative situations.

Economic Systems

• Economic System is the set of mechanisms and institutions that resolve questions of what, how, and for whom.

Differentiating Standards

• The owner/s of the resources
• The process used in decision-making in the allocation of goods and resources.
• The types of incentives directing the economic decision-makers.

Pure Market Economy

• Pure Market Economy is where private firms account for all production.
• Market Economy is known as the free market economy and the most democratic form of an economic system.

Pure Command Economy

• Pure Command Economy is where all resources are government-owned.
• Command Economy is the authoritative system wherein decision-making is centralized in the government or a planning committee.
• Planned Economy is primarily government-controlled, deciding what is produced, how much, and at what price.

Mixed Economy

• Mixed Economy is a system that mixes central planning with competitive markets.

Transitional Economy

• Transitional Economy is a system in the process of shifting from central planning to competitive markets.

Traditional Economy

• Traditional Economy is shaped largely by custom or religion, and decision are based on traditions and practices.

Basic Economic Problems

• Scarcity causes economic problems, as limited resources prevent people from having all desired products and services.

Three basic economic questions

• What to produce and How Much involves considering resource availability, the physical environment, and people's customs when producing goods and services.
• How to Produce involves the combination of resources and technology used in production.
• For Whom to Produce identifies the individuals or sectors that demand the produced goods.

Economic Problems of the Philippines

• Poverty Level is expected to rise based on the middle-income poverty line.
• Employment, Unemployment, and Underemployment have been affected by the implementation of ECQ.
• Population Growth has seen steady increase in 2015 to 2019.