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**The origin of economics** Economics came from the Greek word **Oikonomia** which means household management. With the growth of Greek society until its development into-states, the Greek word oikonomia became known as state management. As a distinct science or discipline, economics was recognize...

**The origin of economics** Economics came from the Greek word **Oikonomia** which means household management. With the growth of Greek society until its development into-states, the Greek word oikonomia became known as state management. As a distinct science or discipline, economics was recognized only in 1776 when Adam Smith wrote his book "An inquiry into the Nature and Causes of the Wealth of Nations". **Economics Defined** **Some others Great Economist defines Economics.** **Adam Smith-** the Father of Economics, states that economics as an inquiry about the nature and causes of the wealth of the nations. **Paul Samuelson-** economics is a study of how the society could possibly use and share the limited resources into different items of product and services. **Paul Wonnacott-** it is study of how man works, looks for food and finds material needs. Economics emphasizes problem in production of how to solve or minimize the problem. **Lloyd Reynolds-** it is study of production management and use of scare resources. **Cristobal Pago so-** economics is concerned with the wise allocation of scarce resources. **Roger Le Roy Miller-** the situation that needs the decision of how, when and where the scarce resources be used. **Gerardo Sicat-** a scientific study that point out how people society decides. People have unlimited needs. **Microeconomics vs. Macroeconomics** **Logic-** It is the science of good and sound reasoning. Conclusion must be drawn from good reasoning or logical reasoning. **Mathematics-** its answers the economic problems which are best solve with the use of numbers and quantitative description. **Statistics-** some of the theories are based on observation and experimentation through the use of statistics. It is the tool use in empirical validation. The Problem of **SCARCITY** Economics resources are scare and limited in supply. What are the economics resources? These are resources that are used for the production of economic goods. These are what we call factors of production. **These resources are: Land, Labor, Capital and Entrepreneur.** **Four Factors of Production** **Land-** considered the natural resources. **Labor-** refers to the labor force. **Labor Force is divided into Two Categories:** **Physical Exertion-** labor using mostly hand and body or actual manpower action. **Mental Exertion-** labor using mostly brain for decision making and planning. **Capital-** anything that is man-made like machineries and equipment that are used in the production of another product would be under capital. **Entrepreneur-** although it can be classified as under labor, it has a special type of work and is therefore, not ordinary labor. **Four Economic Problems.** What are the product and services to be produced How to produce For whom to produce Availability of the produce **Types of Economic System** **Traditional Economy-** this is a very backward type of economy. **Command Economy-** the government owns the means of production. **Some of essential characteristics of communism are:** **No economic freedom** **No free competition** **No profit motive** **No religion** **Market Economy-** the resources are privately owned and the people themselves make decision. **Presence of economic freedom** **Presence of profit motive** **Presence of competition** **Presence of religion** **No central planning** **Mixed Economy-** there are only few country that has a pure economic system **The Different Kinds of Goods** 1. **Goods** materials or tangible things which are consumed that gives satisfaction. 2. **Economic Goods** are tangible things which are useful but scares. 3. **Free Goods** are things which are useful but abundant. 4. **Consumer Goods** are those things which are ready for consumption and gives direct satisfaction. 5. **Producers Goods** are good which are used for the production of other goods and service. These are also known as capital goods. **Classification of Goods as Necessity.** 1. **Luxury Goods** are things which are not really needed. They give prestige and adds status symbol. One can live even without it. Example: Branded cars such Benz, BMW, Ferrari, branded cell phones, mansions and resort. 2. **Basic Goods** are things which are really needed. One cannot live without them. Example: Food, clothing, shelter. 3. **Basic Luxury Goods** it should be emphasized here that some of the luxury goods are now being classified as basic luxury goods like the use of energy or electrical power. **Bilateral Transaction in Barter Economy** A direct exchange of goods or services between two parties without using money. **Bilateral Transaction in Money Economy** An exchange of goods or services for money between two parties. **Multilateral Transaction in Money Economy for Consumer Good** An exchange involving multiple parties using money to buy and sell goods meant for personal use. **Multilateral Transaction in Money Economy for Producer Goods** An exchange involving multiple parties using money to buy and sell goods used in the production of other goods or services. the government pays salary to the laborers who render service. The government rent building and equipment (known as capital) necessary in putting up its business transaction. The government also pays interest to other lending institutions whenever there is a need for additional budget for a government project to push through. The household pays goods and services received from the business firm and the government. Any household and firm receiving income should pay tax to the government. Foreign countries are also included in the circular flow because some of the raw materials for the production of goods are imported. The buying of imported products thus makes dollar outflow. The exportation of manpower through the overseas contract workers and the selling of exported products contribute to the dollar inflow. **Demand and Supply** This lesson seeks to uncover the factors affecting demand and supply. It presents day to day economic problems in the country in search for better strategies and policies that will enable an ordinary Filipino to make some practical consideration and insights into living a decent life. **Needs** These are the things that we must have for us to live like food, clothing or shelter. It could be met. **Wants** These are the things that will give us the state of ease and contentment. We really do not need a thing but we ought to have it because it gives us satisfaction. There are times that it would make us suffer more. It could not met. Results of human\'s unsatisfied nature. **Market, Demand and Supply.** **Market** It is a place where all goods and services are bought. A place where the buyer (who demands) and seller (who supply) exchange transaction with the agreement that one must pay with willingness of the good and accept the agreed price. Government also plays an important role in determining the price especially if the products are considered basic commodities. **Price Ceiling** The maximum price to be imposed by the sellers to its commodity. Help buyers Creates a shortage **Price Floor** The minimum price government also plays an important role in determining the price to be imposed by the sellers. Help sellers Creates a surplus **Demand** Willingness and capacity of a consumer to purchase the goods regardless of whether it is a need or a want over a period of time at a given price. **FACTORS THAT INFLUENCE DEMAND:** **Income** The higher the income the more demand there will be. Having a full labor force employment, more demand is created. **2. Taste and Preferences** There is favorable change in taste and preferences because of advertisement and fashion which leads to an increase in demand. **3. Population** Whenever there is an increase in population or where there are a large number of people in an area, increase in demand abounds. **4. Changes in the prices of related goods** **Substitute Goods** - goods are those that give the same value but differ in price, brand, form or shape yet gives the same satisfaction. - an increase in the price of one leads to an increase in the demand for the other. ex. Dalandan and orange, juice and soft drinks, bread or rice. **Complimentary Goods** - goods are goods that go hand in hand or always together. - an increase in the price of one leads to a decrease in the demand for the other. ex. Film and camera, sugar and coffee, sandwich and beverage. **5. Expectation in future price** As there will be an increase in the price of a commodity the natural reaction is for people to buy more today to save. **6. Availability of credit facilities** Since credit used as medium of exchange, people are tempted to demand more because of easy terms of payment. **7. Climate and weather** If there is a natural disaster, typhoon and change in weather conditions demand for commodities are affected. **Demand Curve** A demand curve is a graphical representation of a demand schedule or between the price of a good or service and the quantity demanded for a given period of time. As the price of the commodity increases, the quantity demand decreases or if the price of the commodity decreases, the quantity demand increases. **Law of Demand** This means that as price increases, quantity demanded decreases, and as price decreases, quantity demanded increase. **Supply** The willingness of the people to sell or produce the goods regardless whether it is a need or a want over a period of time at a given price. **Price of goods** Increase in the price of goods especially raw materials will discourage producers to produce more. **2. Cost of production** The higher cost of production like raw materials, labor, and electricity will decrease number of supplied products. However, if the cost of production decreases, the suppliers will maximize production then store them for higher price as they are expecting another price hike. **3. Availability of raw materials** There will be shortage of supply once the raw materials needed for the production is not obtainable. **4. Number of Sellers** More sellers means an increase in supply. On the other hand, less sellers mean less supply. **5. Technology** Enables more efficient production of goods and services Fast increase of supply of goods and services are indebted to the advance technology around. Due to advance machineries and equipment that number of supply increases geometrically. **6. Taxes** The imposition of low taxes will encourage producers to sell more while a high tax will discourage producers to supply more. **Law of Supply** As the price increases, the producers are willing to sell more, increasing quantity supply or as the price decreases the producers are not willing to sell more, decreasing the quantity supply. **The Equilibrium Point and the Law of Demand and Supply:** **Equilibrium Point**- is a point where the sellers and the consumers agree to pay the price of the commodity. It is actually the point of the intersection and where demand is equal to supply. **Law of Demand and Supply** - It is the price where the buyers are willing to buy at the price of the seller\'s willingness to sell. **Surplus -** A surplus causes businesses to lower their prices, which forces their competitors to do the same. In turn, the market experiences an increase in demand and moves toward price and quantity equilibrium.  **Shortage -** A shortage will cause businesses to raise the price and quantity of a product.