Economics: Meaning & Nature PDF

BEART **Economics**: Its Meaning and Nature ***Economics*** is a social science that focuses on the production, distribution, and consumption of goods and services, and analyzes the choices that individuals, businesses, governments, and nations make to allocate resources. ***Economics*** is the s...

BEART **Economics**: Its Meaning and Nature ***Economics*** is a social science that focuses on the production, distribution, and consumption of goods and services, and analyzes the choices that individuals, businesses, governments, and nations make to allocate resources. ***Economics*** is the study of the proper allocation and efficient use of scarce resources to produce commodities for the maximum satisfaction of unlimited human needs and wants. **Needs** = essential for human survival like food, clothing, and shelter = basic needs, essential needs, and luxury needs **Wants** = give more satisfaction and make life more pleasant and worth living = public wants and private want ***Economics*** is a [social science]. This means that economics has two important attributes. Economics studies human activities and constructions in environments with scarce resources, and uses the scientific method and empirical evidence to build its base of knowledge. ***Economics*** is a social science concerned with [man's problem] of issuing [scarce/limited resources] to satisfy [unlimited wants (desires and needs).] ***Economics*** is the study of the allocation of scarce resources among [competing uses] in a way that achieves an [inclusive and sustainable progress in human development. ] ***Economists*** analyze many different aspects of human behavior and decision-making within and between markets, organizations and countries. When an economic problem arises? Arises from the scarcity of resources -- e.g. limited inputs available to satisfy unlimited needs and wants What are the **basic/three fundamental economic problems**? 1\. What goods are to be produced or what to produce and how much? 2\. How shall goods be produced? 3\. For whom shall goods be produced? When scarcity happens? When there is a limitation that exist in obtaining all the goods and services that people want **Scarcity** gives rise to [economic problems], and it is the reason why man has to make a choice If all goods were as free as air, there would be no need to **economize**. The ultimate scarce resource is **time** - everyone, rich or poor, has just 24 expendable hours in the day to earn income to acquire goods and services, for leisure time, or for sleep. At any point in time, there is only a finite amount of resources available. What are economic resources? Things which are needed to carry on the production of goods and services, aka **FACTORS OF PRODUCTION** **Land**: Natural resources, which are given by and found in nature, and are, therefore, not man-made; includes soil, river, forests, and mineral deposits **Labor**: Human effort exerted in the production of goods and services (e.g., skills, abilities, and characteristics) **Capital**: Man-made good used in the production of goods and services (e.g., money, buildings, machinery, raw materials, and other physical necessities) **Entrepreneur**: Person who combines the other economic resources for use in the production of goods and services. **Branches of Economics** **Microeconomics** is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. **Macroeconomics** is the study of the whole economy. It looks at 'aggregate' variables, such as aggregate demand, national output and inflation. **MICROECONOMICS** **MACROECONOMICS** -------------------------------- ---------------------------------- Individual Market Whole economy (GDP) Effect on price of a good Inflation (general price level) Individual labour market Employment/unemployment Individual consumer behaviour Aggregate demand (AD) Supply of good Productive capacity of economy **Goals of Economics** 1\. To strengthen economic freedom 2\. To promote economic efficiency 3\. To promote economic stability 4\. To promote economic security 5\. To attain a high level of growth in the economy **Importance of Economics** 1\. Informs decisions 2\. Influences everything in daily life 3\. Impacts industries 4\. Inspires business success 5. International perspective **Economics and Other Social Science** 1\. Anthropology 2\. Political Science 3\. Sociology 4\. Psychology 5\. History **Tools of Economics** *Economic tools (or tools of economic analysis)* facilitate the preparation of a robust decision. An economic assessment basically deals with the following: benefits and costs, usually measured in monetary terms, and with efficiency and effectiveness serving as a sort of a quotient or ratio of both cost and benefits. 1\. **Observation**. An analysis should be able to recognize conditions, behaviors, and events in the environment by simply looking around. 2\. **Definitions and Assumptions**. The analyst should describe the specific uses of the study and the peripheral conditions which affect the economic behaviors which are being studied. 3\. **Deductions.** These are the hypotheses, theories, or temporary conclusions presented for empirical validation/presentation of evidence. 4\. **Empirical Testing**. Deductions have to be tested as to their validity and correctness. The preparation of the empirical evidence will be the basis of rejecting or accepting a hypothesis Methods of Economics 1\. **Deduction/Deductive** [A descending process of reasoning or inference] from the general to the particular or from the universal to the individual. It involves four steps: (1) Selecting the problem. (2) The formulation of assumptions on the basis of which the problem is to be explored. (3) The formulation of hypothesis through the process of logical reasoning whereby inferences are drawn. (4) Verifying the hypothesis. 2**. Induction/Inductive** [An ascending process of reasoning] from a part to the whole, from particulars to generals or from the individual to the universal It involves four steps: (1) Selecting and clearly stating the problem. (2) Collection, enumeration, classification and analysis of data by using appropriate statistical techniques. (3) Observation about particular facts concerning the problem. (4) Deriving at generalization to establish a general truth from particular facts. **Methodologies of Economic**s 1\. *Positive Economics* - Relates to what is 2\. *Normative Economics* - Concerns of what should be Economic Systems Diagram of a diagram of production supply Description automatically generated An economic system defines how goods and services are produced, distributed and at what price. The system (a method used by a society) of production, distribution, and consumption. **The Big Three Questions** Every economic system in the world, past and present, has to answer these three questions: What to produce? (How did economists answer this question?) For whom to produce it? How to produce it? (Who owns the factors of production? **4 Different Economic Systems** Traditional Command/Socialism Capitalism/Market Mixed Traditional Economic System Economic system is based on customs and traditions (handed down from 1 generation to another). Allocation of scarce resources stems from ritual, habit, or customs BARTER!! Means trade! No money! Examples: Africa, parts of India, the Australian Aborigines **Advantages** Economic roles are set Stable, predictable, and continuous **Disadvantages** Discourages new ideas Lack of progress Lower standard of living Does a traditional economy answer the big three questions? What will be produced? Whatever tradition, values, and rituals dictate How will it be produced? However tradition, values, and rituals dictate For whom will it be produced? Whomever tradition, values and rituals dictate **Command Economy** A central authority (government) has to answer the big three questions Government decides the needs of the people, the best way to produce it and for everyone! There is very little if any input from the people. Examples: North Korea, Cuba, China **Advantages** Basic Needs taken care of Education, public health, other services cost very little if anything Very little unemployment **Disadvantages** Doesn't meet wants No incentives Requires a large bureaucracy New and different ideas are discouraged No room for individuality Does a command economy answer the big three questions? What is being produced? Whatever the government decides How is it being produced? The government will tell someone to make it For whom is it being produced? Whomever the government decides needs it **Capitalism/Market** System that relies on consumption choices made by consumers Consumers dictate what is produced, how much is produced, and how much things cost Capitalism/Market Examples: Canada, South Korea, Singapore, Germany, Great Britain, and the UNITED STATES! **Advantages** Individual Freedom for all Lack of government interference Incredible variety to choose from High degree of consumer satisfaction **Disadvantages** Rewards only productive people Workers and businesses face uncertainty (Competition) Not enough public goods (Education, health, defense) Unemployment Must guard against market failure Answer the big three... What will be produced? Whatever the consumer wants How will it be produced? Entrepreneurs will respond to demand For whom will it be produced? Whomever is willing to work for it (or afford it) Mixed Economy A mix of all of the other three economies Some government involvement, consumer driven, aspects of economy based on traditional values This is really what the US is.... Examples: Obama Care, Bail outs yet consumer driven. Family owned stores and corporations **THE BASIC ECONOMIC SYSTEM AROUND THE WORLD**  **THE CIRCUIT FLOW OF ECONOMIC ACTIVITIES AND THE LAW OF SCARCITY** **THE CIRCULAR FLOW OF ECONOMIC ACTIVITY** Within the economy, basic economic activities take place (i.e.,production, consumption, employment, and income generation). Such activities through place the **interrelationship** that is existing between **two economic units:** the **[household]** (aikos) which is the basic consuming unit; and the **[firm]** which is the basic producing unit. A diagram of production process Description automatically generated **Production** is the use of economic resources in the creation of goods and services for the satisfaction of human wants. The use of these economic resources in production is ***employment*.** Whenever resources are used in production, a price is ***paid*** to the resource owners. The landowners ***earns*** **rent**, the [capitalist, interest, and labor his wages]. When the goods and services produced are ready for use, this leads to another economic activity called ***consumption.***  **ECONOMIC MODEL** Diagram of a diagram of goods Description automatically generated  A diagram of a company\'s resources Description automatically generated  A diagram of a circular flow of income Description automatically generated  Diagram of a diagram of a house Description automatically generated  **THE MULTIPLIER EFFECT AND THE CIRCULAR FLOW** An amount of spending that goes into the economic stream generates a corresponding amount of income which is greater than the original inflow. This is due to the **multiplier effect.** The multiplier is a number that determines the increase in income resulting from a given amount of income, but in a higher amount. The multiplier, in effect, increases the resulting income depending on the consumption behavior of the people (Pagoso &Villasis,2006). The **multiplier effect** refers to how an initial injection of money into the circular flow of income can stimulate economic activity in excess of the initial investment (Boyce,2021). A diagram of a diagram of a financial system Description automatically generated with medium confidence  **INFLOWS AND OUTFLOWS** **Consumption** is the mainstream of circular flow. When the outflows in the economy equal the inflows, the level of economic activity is maintained. However, an excess of inflows over outflows will be expansionary since it will increase the level of economic activity. The opposite effect will hold when outflows exceeded inflows. The result is a contracting effect since it results in a decrease in the level of economic activity. - **Outflows** (factors that decrease the level of economic activity) - Savings - Taxes - Imports - **Inflows** (factors that increase the level of economic activity) - Investment - Government spending - Exports A diagram of a circular flow of economic activity Description automatically generated **LAW OF SCARCITY**  The *law of scarcity* defines that human wants are unlimited and resources available are limited and have alternative uses. Therefore, there will be always some wants which will remain unsatisfied, since the available resources will have to be allocated so as to produce those goods which will maximize satisfaction. A diagram of a diagram Description automatically generated with medium confidence SNSI **Social Networking** ❖ People built relationships with people we came in contact with; ***networking*** was tied to **deep, in-person** **relationship building** (Wallace, 2019) ❖ People all strive [to create and foster networks that are ever-growing, dynamic, and impactful], and often we are unsure how to do that (Wallace, 2019) ❖ **Social networking** is about [establishing and maintaining meaningful relationships] (Wallace, 2019) ❖ **Social networking** is the practice of [using a dedicated online platform to maintain contact, interact and collaborate] with like-minded individuals, peers, friends and family **Purposes of Social Networking** **Sharing** - Friends or family members who are geographically dispersed can connect remotely and share information, updates, photos and videos. Social networking also enables individuals to meet other people with similar interests or to expand their current social networks **Learning** - Social networks serve as great learning platforms. Consumers can instantly receive breaking news, get updates regarding friends and family, or learn about what\'s happening in their community. **Interacting** - Social networking enhances user interactions by breaking the barriers of time and distance. With cloudbased video communication technologies such as WhatsApp or Instagram Live, people can talk face to face with anyone in the world. **Marketing** - Companies may tap into social networking services to enhance brand awareness with the platform\'s users, improve customer retention and conversion rates, and promote brand and voice identity. **Advantages of Social Networking** ** Brand Awareness** - Social networking enables companies to reach out to new and existing clients. This helps to make brands more relatable and promotes brand awareness. ** Builds a Following** - Organizations and businesses can use social networking to build a following and expand their reach globally. ** Increases Website Traffic** - Businesses can use social networking profiles to boost and direct inbound traffic to their websites. They can achieve this, for example, by adding inspiring visuals, using plugins and shareable social media buttons, or encouraging inbound linking. ** Instant Reachability** - By erasing the physical and spatial boundaries between people, social networking websites can provide instant reachability. ** Business Success** - Positive reviews and comments generated by customers on social networking platforms can help improve business sales and profitability. **Disadvantages of Social Networking** ** Rumors and Misinformation** - Incorrect information can slip through the cracks of social networking platforms, causing havoc and uncertainty among consumers. Often, people take anything posted on social networking sites at face value instead of verifying the sources. **Negative Reviews and Comments** - A single negative review can adversely affect an established business, especially if the comments are posted on a platform with a large following. A tarnished business reputation can often cause irreparable damage. **Data Security and Privacy Concerns** - Social networking sites can inadvertently put consumer data at risk. For instance, if a social networking site experiences a data breach, the users of that platform automatically fall under the radar as well. **Time-consuming Process** - Promoting a business on social media requires constant upkeep and maintenance. Creating, updating, preparing and scheduling regular posts can take a considerable amount of time. MISINFORMATION, DISINFORMATION AND MALINFORMATION (MDM)  A group of colorful boxes with text Description automatically generated Types of Social Networking [Social Connections ] This is a type of social network where people stay in touch with friends or family members through online profiles and updates, or find new friends through similar interests. Popular examples include Facebook, Instagram, Twitter, Yelp and Myspace. [Professional Connections ] Geared toward professionals, these social networking sites may include a general forum where professionals can connect with coworkers or offer an exclusive platform based on specific occupations or interest levels. LinkedIn and Twitter are the most common examples. [Sharing of Multimedia ] Various social networks provide video- and photographysharing services, including YouTube and Flickr. [Informational ] This type of social networking includes communities of people who are looking for answers to everyday problems. Fostering a sense of helping others, members provide answers to questions, conduct discussion forums or teach others how to perform various tasks and projects. Popular examples include Reddit, Quora and DoItYourself.com Community Forums. [Educational ] Educational social networks promote remote learning, enabling students and teachers to collaborate on school projects, conduct research, and interact through blogs and forums. Google Classroom, LinkedIn Learning and ePals are popular examples. **Social Integration** ❖A positive process about **encouraging harmonious interactions** between diverse communities in society, and providing equal rights and opportunities for everyone. ❖**Two-way process between immigrants and locals**; immigrants experienced change upon arrival in their new host countries, and natives adapted to the presence of immigrants. What is acculturation? - The process by which individuals or group adopts the practice and values of one culture while still retaining their own culture of origin.  A screenshot of a cell phone Description automatically generated **Issues on Social Integration** ❖ UNRISD (1994) called for a thoughtful consideration of whether the **nature of the current process of development**, which immigrants were to be integrated into, was **viable or just.** ❖ UNRISD (1994) also stated that for others, increasing integration had a negative connotation of **threatening to impose an undesirable conformity on people**. This was understandable, as Putnam (2007) outlined in his landmark study, that while immigration generally strengthened advanced nations, the introduction of diversity into the host country challenged community cohesion in the near term. ❖ The UK Social Integration Commission (2014) expressed the ethical dilemma of its remit as, "Do too little and we could drift into segregation, be too heavy handed and we could cause **a backlash against social engineering**". ❖ Putnam (2007) stated that racial and ethnic lines of divisions were **artificial social constructs** which could be deconstructed, and he pointed to the wave of immigration between late 1800s to early 1900s, during which US managed to successfully integrate immigrants and locals, by building a broader sense of "we". Types of Integration **Cultural** Consistency among the standards of a culture **Normative** Conformity of the conduct of the group to cultural standards **Communicativ**e Exchange of meanings throughout the group **Functional** Interdependen ce among group members through the division of labor. Measurement Approaches in Assessing Social Relationships  Sociological Perspectives in Social Networking and Social Integration The Sociological Perspective: Sociology is the systematic study of human society; its point of view is "seeing the [general] in the [particular]" ◦ Sociologists identify general social patterns in the behavior of particular individuals. ◦ Individuals are unique, but... ◦ Society acts differently on various categories of people. The Sociological Perspective (Cont'd) "seeing the [strange] in the [familiar]" ◦Giving up the idea that human behavior is simply a matter of what people decide to do. ◦Understanding that society shapes our lives. The Sociological Perspective (Cont'd) "seeing individuality in social context" ◦ Emile Durkheim's research on suicide showed that some categories are more likely to commit suicide than others. Society affects even our most personal choices. ◦ [More likely] to commit suicide: **males**, Protestants, wealthy, and unmarried. ◦ [Less likely] to commit suicide: **females**, Jews, Catholics, the poor, and married. Importance of Global Perspective The study of the larger world and our society's place in it, e.g., level of economic development \- Societies throughout the world are increasingly interconnected through technology and economics. - Many problems that we face in our country are more serious elsewhere. - Thinking globally is a good way to learn more about ourselves. **Applying the Sociological Perspective** ***Social marginality***: the more marginal people are the more likely they are to embrace this perspective, when others take it for granted. Social crisis: ◦ With change or crisis the vision is stimulated ◦ Sociological thinking can lead to wanting to change "the system" **Benefits of the Sociological Perspective** 1\. Helps us assess the truth of "common sense" 2. Helps us assess both opportunities and constraints in our lives 3\. Empowers us to be active participants in our society 4\. Helps us to recognize diversity and live in a diverse world **Sociological Theory** **Theory**: a statement of how and why facts are related **Theoretical paradigm**: a set of fundamental assumptions that guides thinking and research ◦Structural-functional ◦Social-conflict ◦Symbolic-interaction **Structural-Functional Paradigm** Views society as a complex system whose parts work together to promote solidarity and stability Our lives are guided by: **◦ Social structure** refers to any relatively stable patterns of social behavior found in social institutions **◦ Social functions** refer to the consequences for the operation of society as a whole**. Manifest functions** are intended; **latent functions** are unintended; and **social dysfunctions** are undesirable. **Social-Conflict Paradigm** Views society as an arena of inequality that generates conflict and social change. Sociologists study ◦How factors such as ethnicity, race, sex, class, and age are linked to social inequality ◦Dominant group vs. disadvantaged group relations Some want to change society. **Symbolic-Interaction Paradigm** Unlike the two previous **macro-level** paradigms this is **micro-level** Views society as the product of everyday interactions of individuals Sociologists view society as ◦the shared reality that people construct as they interact with one another. ◦a mosaic of subjective meanings and variable response. Critical Evaluation of Paradigms **Structural-functional** ◦ Assumes "natural" order, ignores inequalities of social class, race and gender, focuses on stability at the expense of conflict. **Social-conflict** ◦ Ignores how shared values and mutual interdependence unify society ◦ If it pursues political goals, it cannot be scientific **Symbolic-interaction** ◦ Ignores larger social structures, effects of culture, factors such as class, gender, ethnicity, and race. **Evolution of Social Networking** A timeline of social media icons Description automatically generated Throughout history, people came up with various **ways of communicating**: through **post**, **pigeons**, **telegraph**, **light signals**, and **telephone**. Getting responses a few hundred years ago meant waiting for months or a year. Thankfully humans never stopped looking for a faster method to communication. The 20th century brought us the internet. Social networking was born one day in 1971, when the ***first email*** was sent. The two computers were sitting right next to each other. The message said **"qwertyuiop"** **Traditional social networking methods** involve **high touch -- people** connecting in-person with others. Different high-touch methods have been used throughout the years. Today the **power of social networking** is more effective than ever because it is possible to [combine high touch with high tech]. This power brings both opportunities and risks. We are going to be discussing both of these today. Social networking methods have been a constant for **1000s** of years. People have been making human connections through high touch since as far back as Methuselah. The dawn of the tech era in the 70's introduced some new social networking tools. Both e-mail in the 80's and then websites in the 90's enhanced social networking. Efforts through better communication. The millennium ushered in the social media phenomena. Social networking framework now includes the use of social media. Social media is only one part of the social networking framework. Social media can work on its own to perform social networking or it can support hi-touch methods. Social networking today can involve both hi-tech and hitouch methods. Both hi-tech and hi-touch methods for social networking should be used according to your brand strategy.  A screenshot of a computer Description automatically generated  A screenshot of a computer Description automatically generated  A screenshot of a social media profile Description automatically generated  A close-up of a screen Description automatically generated