Economics Introduction PDF

ECONOMICS Objectives: By the end of this class, we should know the following: ❑ Differentiate economics as an applied and social ❑ science Major division of economics and the concept of ❑ macro-economics & micro-economics Understanding the gr...

ECONOMICS Objectives: By the end of this class, we should know the following: ❑ Differentiate economics as an applied and social ❑ science Major division of economics and the concept of ❑ macro-economics & micro-economics Understanding the graph in economics and the concept of three basic economic questions.  ECONOMICS ◇ It is the study of human efforts to satisfy what appear to be unlimited and competing wants through the careful use of relatively scarce resources. ◇ The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. 3  ECONOMICS ◇ Proper allocation and efficient use of available resources for the maximum satisfaction of human needs/wants. 4  ECONOMICS ◇ Oikonomos ￭ household management ￭ proper management of city- state 5  Resources/Inputs/Factors of Production: ◇ LAND - consists of free gifts of nature which includes all natural resources above, on, and below the ground. ◇ LABOR - human resources / all human efforts, be it mental or physical ◇ CAPITAL - represent money resources and major physical assets. 6  Resources/Inputs/Factors of Production: ◇ MANAGEMENT/ENTREPRENEUR – organizer and coordinator of the other factors of production: land, labor and capital. ◇ FOREIGN EXCHANGE - refers to the dollar and dollar reserves that the economy has. ￭ Part of economic resources because we need foreign currency, particularly dollars for international trading and buying raw materials from other countries. 7  IMPORTANCE? It guides us how to: 1. make a living; 2. use our money wisely; 3. run a business; 4. distribute properly our available scarce resources; and 5. maximize our profits and consumers satisfaction. 8  ECONOMICS ◇ ADAM SMITH – Father of Economics ￭ Wealth of Nations (1776) ◇ JOHN MAYNARD KEYNES – Father of Modern Economics (Macroeconomis) 9  Contributors: ◇ PLATO – Productivity and Efficiency ◇ ARISTOTLE – Allocation of scarce resources ◇ ST. THOMAS AQUINAS – Theology, Property rights, labor theory. 10  MAJOR DIVISION / ACTIVITIES: ◇ PRODUCTION - process of producing or creating goods needed by the households to satisfy their needs. ◇ DISTRIBUTION - marketing of goods and services to different outlets for allocation to individual consumers. 11  MAJOR DIVISION / ACTIVITIES: ◇ EXCHANGE - process of transferring goods or services to person or persons in return for something. ◇ CONSUMPTION - proper utilization of economic goods. ◇ PUBLIC FINANCE - activities of the government regarding taxation, borrowings, and expenditures. 12  4 SECTORS IN THE ECONOMY: ◇ H – HOUSEHOLD (consuming unit) ◇ F – FIRM (producing unit) ◇ G – GOVERNMENT ◇ RW – REST OF THE WORLD 13  SCOPE: ◇ MICROECONOMICS ◇ MACROECONOMICS 14  MICRO & MACRO Microeconomics Macroeconomics Deals with the Deals with the economic behavior of economic behavior of individual units (H, F). the whole economy or its aggregates (H,F,G,RW) 15  What is true in micro may not be true in “ macro. 16  TABLE 1 Examples of Microeconomic and Macroeconomic Concerns Divisions of Economics Production Prices Income Employment Microeconomics Production/output in Price of individual Distribution of Employment by individual industries and goods and services income and individual businesses businesses wealth and industries How much steel Price of medical care Wages in the auto Jobs in the steel How much office Price of gasoline industry industry space Food prices Minimum wage Number of employees How many cars Apartment rents Executive salaries in a firm Number of accountants Macroeconomics National Aggregate price level National income Employment and production/output unemployment in the economy Total industrial output Consumer prices Total wages and Total number of jobs Gross domestic Producer prices salaries Unemployment rate product Rate of inflation Total corporate Growth of output profits 17 ECONOMICS AS A SOCIAL SCIENCE  QUESTION: Why is economics considered as a social science? 19  Economics is classified as a social science because it deals with the study “ of man’s life and how he lives with other men. 20  ECONOMICS is concerned with human like: ◇ Psychology- science of mind ◇ History- science that records and explains past events ◇ Sociology- science that deals with the development of society ◇ Political Science- science of government 21  ECONOMICS is concerned with human like: ◇ Geography- science that determines the main sources of a region ◇ Religion- related to economics, it can discourage or encourage economic development 22  Major tools used by economists: ◇ 1. Logic- science that deals with sound thinking and reasoning. ￭ Reasoning- facts and proofs should be presented. ￭ With the wise application of logic, one may be able to arrive at a conclusion. 23  Economics is the most “ quantifiable discipline among social sciences. 24  Major tools used by economists: ◇ 2. Mathematics- science that deals with numbers and their operations ￭ mathematical operations and equations- used in economics and helps economists solve concrete problems ￭ mathematical tools- include matrix algebra, linear equations, econometric models, optimization and differential questions ￭ Geometry- science that explains relationships 25  Major tools used by economists: ◇ 3. Statistics- branch of mathematics that engages with the analysis and interpretation of numerical data. ￭ helps economists calculate a nation’s GDP or allows them to better configure a manufacturing process to reduce costs ￭ statistical tools- regression and correlation analysis and calculation of possibilities 26 ECONOMICS AS AN APPLIED SCIENCE  QUESTION: Why is economics considered an applied science? 28  Economics is the study of economics in relation to real “ world situations. 29  APPLIED ECONOMICS ◇ Study of economics in relation to real world situations, as opposed to the theory of economics. ◇ Application of economic principles and theories, and trying to predict what the outcomes might be. ◇ Study of observing how theories work in practice. ◇ May be practiced at macroeconomic or microeconomic 30 levels.  APPLIED ECONOMICS ◇ Believed to have started being used nearly 200 years ago, in the writings of French economists and businessman JEAN- BAPTISTE SAY (1767-1832) and British political economists, philosopher and civil servant JOHN STUART MILL (1806-1873). 31  APPLIED ECONOMIC APPLICATION It can be extremely helpful for three key reasons: 1. A powerful tool that enables the true and complete picture to emerge, so that it becomes possible to decide what to do and where to go from the current position. 2. Acts as a mechanism to determine what steps can reasonably be taken to improve the current economic situation. 3. How to avoid the recurrence of a negative situation, or at least minimize the impact. 32 POSITIVE VS. NORMATIVE ECONOMICS  POSITIVE ECONOMIC SYSTEM ◇ "The unemployment rate in the Philippines on January 2016 was 5.8 percent." ◇ It is a statement about economic reality that can be supported or rejected by reference to the facts. 34  NORMATIVE ECONOMIC SYSTEM ◇ "The unemployment rate in the Philippines should be lower“. ◇ It reflects someone's opinion. ￭ An opinion cannot be shown to be true or false by reference to the facts 35  SOURCES: ◇ Leano, R. (2017). Applied Economics: For Senior High School. Manila: Mindshapers Co., Inc. ◇ McEachern, W. & Burrow, J. (2017). Applied Economics an Introduction. Quezon City: Abiva Publishing House, Inc. ◇ Case, Fair (2009). Principles of Economics. Retrieved from https://www.google.com/search?ei=V_85X4XVJ9GSr7wP0sWHYA&q=Principles+of+Ec onomics+by+Fair+%26+Case+ppt+&oq=Principles+of+Economics+by+Fair+%26+Case+ ppt+&gs_lcp=CgZwc3ktYWIQAzoECAAQR1CmFlimFmD0GWgAcAJ4AIAB4wGIAeMBkgE DMi0xmAEAoAEBqgEHZ3dzLXdpesABAQ&sclient=psy- ab&ved=0ahUKEwjF3NzDq6HrAhVRyYsBHdLiAQwQ4dUDCAw&uact=5 ◇ https://www.youtube.com/watch?v=sdsz-t540WI 36  Thank You! Any questions? 37