Economics Lesson 1 PDF

## Applied Economics ### Revisiting Economics as a Social Science - Lesson 1 **Economics** - Study of what constitutes rational human behavior in the endeavor to fulfill needs and wants. - Understanding how society allocates its scarce resources. - Almost always, human activities involve economics...

## Applied Economics ### Revisiting Economics as a Social Science - Lesson 1 **Economics** - Study of what constitutes rational human behavior in the endeavor to fulfill needs and wants. - Understanding how society allocates its scarce resources. - Almost always, human activities involve economics. ### Economics from Different Perspectives - **Fajardo:** Economics is the proper allocation and efficient use of available resources for the maximum satisfaction of human wants. - **Nordhaus:** Economics is the science of choice. It studies how people choose to use scarce resources to produce various commodities. - **Sicat:** Economics is a scientific study which deals with how individuals and society make general choices. - **Webster:** Economics is a branch of knowledge that deals with production, distribution and consumption of goods and services. ### Economics in a Process - Unlimited wants → Scarcity → Make Choices ### Economic Activities - Earning money - Buying goods and services - Depositing and withdrawing money in bank ### Economics from "Οἰκονομία" - Household management ### Economics as a Branch of Social Science - Economics is classified as a social science because it deals with the study of human's life and how he lives with other men. - It deals with the following: - Human geography - Linguistics - Political science - Anthropology - Communication - Economics - Sociology - Psychology - Criminology - Law - Development studies - Cultural studies ### Macroeconomics and Microeconomics - Economics can be divided into two main branches: Macroeconomics and Microeconomics. - **Macroeconomics:** Deals with the economic behavior of the whole economy or its aggregates (composed of individual units). Macroeconomics focuses on: - Aggregates: - Households - Business - Government - **Microeconomics:** Deals with the economic behavior of individual units such as consumers, firms, and landowners. Microeconomics focuses on: - Price of rice - Number of workers in a certain firm - Income of Mr. Fu - Expenditures of PLDT ### Divisions of Economics - The study of economics can further be divided into five divisions: 1. **Production:** Refers to the process of producing or creating goods needed by the households to satisfy their needs. - **Inputs:** - **Factors of production:** Land, labor, capital, and entrepreneurship. - **Outputs:** - **Goods:** Something that can be seen and felt and used. - **Services:** Something done for someone else, sometimes paid for and sometimes not. 2. **Distribution:** Refers to the marketing of goods and services to different economic outlets. 3. **Exchange:** Refers to the process of transferring goods and services to a person in return for something. The present medium of exchange is money. 4. **Consumption:** Refers to the proper utilization of economic goods. It could also be spending money for goods and services. 5. **Public Finance:** Pertains to the activities of the government regarding taxation, borrowings and expenditures. It deals with the efficient use and fair distribution of public resources. ### Economic Resources - Economic resources are factors of production or inputs. - Different economic resources are: 1. **Land:** Consists of free gifts from nature, including soil, rivers, lakes, oceans, forests, mountains, and mineral resources. Land is considered an economic resource because it has a price attached to it and we usually pay for it through rent or lease. Land is a limited resource and physical land is a fixed resource. 2. **Labor:** Refers to all human efforts, be it mental or physical. It helps to produce satisfying goods and services. In turn, labor earns an income in forms of wages and salaries. Labor is a flexible factor of production and workers can be allocated to different areas of the economy for producing goods and services. 3. **Capital:** Can represent the monetary resources used to purchase natural resources such as land and other goods. - It also represents the major physical assets individuals and companies use in producing goods and services such as: - Buildings - Vehicles - Equipments. - Income derived from capital is interest. 4. **Entrepreneurs:** Organizers and coordinators of the other factors of production: land, labor, and capital. They use initiative, talent, and resourcefulness to create economic goods. 5. **Foreign Exchange:** Refers to the dollar and dollar reserves that the economy has. It is part of economic resources because we need foreign currency for international trading and buying materials from other countries. The international medium of exchange is the dollar.