Q1 SS5 Notes (Rafa's Version) PDF

SIGNIFICANCE OF POLITICAL SCIENCE - Concerned with the systematic study of the ECONOMICS -...

SIGNIFICANCE OF POLITICAL SCIENCE - Concerned with the systematic study of the ECONOMICS - state and government. This matters because politics has a great MODULE NO. 1 | LESSON NO. 1.1 - 1.2 influence on economic development. - Political structures of any given system determine to what degree that system’s WHAT IS ECONOMICS? economy will be regulated. - For instance: - Adam Smith, the recognized father of - North Korea’s centrally regulated Economics, stated that Economics is “an Communist system contrasts with inquiry into the nature and causes of wealth American capitalism, a semi-free and and nations.” unregulated economy where the - Is a social science that deals with two marketplace determines winners and extremes: losers. - scarce resource; and - These differences have significant - unlimited human wants. implications for their economies’ economic - Definition: activities and development. The study of the proper allocation and SOCIOLOGY efficient use of scarce resources to produce commodities for the maximum - Analyzes social patterns that result from satisfaction of unlimited human needs numerous individual interactions in the and wants. community. - The term comes from the Greek word - In economics, sociology focuses on social “oikonomia” or “oikonomos”, which means processes and deals with various social “management of a household”: issues and problems, ethnic relations, family - oikos(house) + nomos(managing) life, social mobility, and accessibility of the - The choices we make on the use of our scarce people in the society. resources largely determine what needs and - Economic activities and social relationships wants we should be satisfying and how much are closely interconnected, influencing each satisfaction we would get. other reciprocally. - Economists now analyze social factors like RELATION OF ECONOMICS TO OTHER SOCIAL SCIENCES health and education to study economic growth. HISTORY ANTHROPOLOGY - Economists analyze past social settings and - Defined as “The study of the biological, statuses to understand present-day psychological, social, and cultural aspects of perceptions and social movements. human life whereas economics looks into the - By examining causal factors and explanation of human actions.” determinants, economists can explain past - Economics explains the logical principles economic statuses of societies. underlying human society. - Understanding past social movements and - Economics explains why humans form their recurrences helps economists societies, highlighting the increased comprehend their influence on societal productivity of cooperative labor. mindset, - Economic principles shed light on why PSYCHOLOGY humans evolved to be highly social, with a high degree of division of labor and material - Defined as “The scientific study of the behavior wealth. of living organisms with special attention to human behavior.” IMPORTANCE OF ECONOMICS - This field is very important to economics because it studies society from the viewpoint - Everyone is concerned with allocating scarce of individuals or groups. resources to meet their multiple needs. - Psychology helps economics understand and - The science of economics is necessary explain individual choices, leading to better because it is concerned with a basic and policy and program development. continuing problem that confronts us every day - scarcity.  - It also helps us better understand social MACROECONOMIC GOALS phenomena that affect our daily lives. - Ultimately, economic science aims to - All economies set their own targets to have a improve people’s everyday living conditions. stable economy and they all strive to achieve them. - These targets are called Macroeconomic MICROECONOMICS AND MACROECONOMICS Goals. - The two broad areas of the study of - These guide the society in their economics. The two differ on the scope of decision-making and provide purpose for the their analysis. government. MICROECONOMICS: - These can also be used to evaluate economic - Deals with the economic problems of the systems and assess the impact of individual, the firm, and the industry. government programs and policies. - These small economic units are studied in - The most common Macroeconomic goals of detail to understand consumer behavior, countries are: supply and demand, price determination, - Sustainable Economic Growth market structures, and resource prices and - Full Employment employment. - Stable Prices MACROECONOMICS: SUSTAINABLE ECONOMIC GROWTH - Concerned with the aggregates of - Refers to the increased productive economics, which includes total production, capacities of an economy. total employment, and general price level. - Economic growth can be represented by an - These aggregates are composed of individual outward shift of our production possibilities units. frontier (PPF) - It analyzes the operations and - It can be influenced by either an increase in interrelationships of these aggregates to quantity of resources or the advancement of provide a profile of the economy as a whole. technology. - Focuses on the overall economic problems FULL EMPLOYMENT rather than those of individual entities. - Means ”that all resources and technology are - Suggests ways and means of obtaining a fully employed in production”. high level of employment. - Also means that no one is unemployed or - It is also concerned with the effects of jobless in the economy. interest rates and taxes on the economy - Governments try their best to achieve full employment despite economic imperfections DISTINCTION BETWEEN MACROECONOMICS AND and control unemployment by adjusting their MICROECONOMICS fiscal policies to provide or create job - The study of individual economic behavior opportunities for their people. and the study of the overall economy are very much interrelated and are separated STABLE PRICES primarily for convenience purposes. - This means a low and stable inflation rate. - One cannot get a firm grasp of economics - Price stability is important because for a without an understanding of both scopes, as market to function properly, prices should they are complementary, not competitive. accurately convey information about relative - The distinction between the two is relative. scarcities of available goods and services in - City municipal corporations face macro the market. problems compared to individual citizens, - High inflation rates devalue our peso thus but a city unit is micro compared to the decreasing our purchasing power. state, and the state unit is micro compared - Deflation is also costly since it could mean to the nation. that there are very few market activities. - The national unit can be considered micro in the global economy. DEFINITION - Reasons why Economics is considered a OF social science: 1. Economics tries to explain various ECONOMICS events or activities of people in a society. 2. Economics addresses several social MODULE NO. 2 - 4 | LESSON NO. 2.1 - 4.2 issues 3. Economics investigates more on how to allocate limited resources. DEFINITION OF ECONOMICS 4. Economics answer the questions on - A lot of Economics authors shared numerous what, how, and for whom to produce definitions of economics such as: commodities. PAUL SAMUELSON AND WILLIAM NORDHAUS (2011) 5. Economics provides the government - “Economics is the study of how societies use key tools to form policies to achieve scarce resources to produce valuable economic growth and development. commodities and distribute them among different people.” COMMON FALLACIES IN ECONOMIC REASONING MCCONNEL AND BRUE (2009) - “Economics is a social science concerned with 1. POST HOC FALLACY how individuals, institutions, and society make - Occurs when we assume that an event was optimal choices under conditions of scarcity.” caused by another event just because the PARKIN AND BADE (2002) first event occurred before the second event. - “Economics as a social science that studies the 2. FALLACY OF COMPOSITION choices that individuals, businesses, - Happens when we assume that what is true governments, and entire societies make as they for one individual will be true for all others. cope with scarcity.” 3. FAILURE TO HOLD OTHER THINGS CONSTANT - Occurs when we analyze the effect of a EXTENT OF ECONOMICS variable on another variable without holding - It boils down to two very specific elements: other things constant. - Limited or scarce resources; and - Unlimited human desires or wants. PRINCIPLES IN ECONOMIC REASONING - In a nutshell, Economics as a discipline: 1. Is the use of scarce resources to HOW INDIVIDUALS MAKE DECISIONS: produce valuable commodities. 1. People face trade-offs 2. Highlights that all produced products Limited resources implore people to make must be equitably distributed to choices. people. 2. People Economize 3. It involves proper allocation of scarce Individuals choose the alternative that resources to satisfy limited wants. maximizes benefits over costs. 4. It deals with production, 3. All choices involve costs consumption, and distribution. The opportunity cost of a choice is the best 5. It examines how to attain maximum alternative foregone. Efficiency and to obtain the desired 4. Rational decisions occur at the margin level of output. Most decisions involve comparing expected benefits to expected costs of the next best ECONOMICS AS A SOCIAL SCIENCE choice. - Social Science is a “branch of science that 5. People respond to incentives deals with the institutions and functioning of Peoples’ behavior changes in a predictable human society and with the interpersonal way when incentives are also changed. relationships of individuals as members of 6. Prices are extremely powerful incentives society.” Changing prices alter people’s opportunity costs, influencing their choices. HOW PEOPLE INTERACT REASONS FOR DISAGREEMENT 7. Trade can make everyone better off - There are three reasons for disagreement Trade happens when all parties involved will among economists: benefit from the exchange. - Differences in scientific judgements. 8. Markets are usually a good way to organize - Differences in values. economic activity - Perception versus reality. Markets facilitate exchange and increase individual freedom. 9. Governments can sometimes improve market outcomes KEY CONCEPTS IN Government economic functions are sometimes needed to produce better economic outcomes. ECONOMICS HOW THE ECONOMY WORKS AS A WHOLE MODULE NO. 5 | LESSON NO. 5.1 - 5.2 10. Individual and national standards of living depend on the ability to produce goods and services. SCARCITY Increasing productivity increases income “The first lesson of economics is scarcity: there is never and standards of living. enough of anything to satisfy all those who want it.” - Scarcity has been a part of our lives since the POSITIVE & NORMATIVE ECONOMICS resources we have are finite or limited. - As an economic problem, it does not exist - These are the two branches of economic just because resources are limited physically. reasoning. The problem arises mainly because of our - While they are distinct, these two work nature as humans. together. - We never get content with the things that we - Policymakers use these to formulate policies have, making our wants unlimited. by trying to understand the “what is” - Given the scarcity of resources, this leads to (positive) and “what should be done” the problem of allocation. (normative). - A positive standpoint seldom has room for debate while normative economics allows ECONOMIC EFFICIENCY room for personal judgment, thus, debates - Efficiency is concerned with employing are more prone. resources in the best possible way. - Economic Efficiency requires that an POSITIVE ECONOMICS economy produce the highest combination of quantity and quality of goods and services - Refers to the facts of an economy. given its technology and scarce resources. - Targets to elaborate as to how society makes - Pareto-efficiency states that economic decisions about economic activities. efficiency will only be achieved if the allocation - In short, it focuses on looking at the lenses of resources is at the point where no individual wherein objectivity, scientific explanation, can be better off without making anyone else logical, empirical, and factual are the prime worse off. considerations. - Efficient allocation of resources while dealing - Uses the scientific method to reveal the with scarcity is what makes economics mechanism of the economy or describe what important, especially in addressing the it is, and to streamline rules. needs and wants of the people and the NORMATIVE ECONOMICS society. - Encompasses value judgements and opinions like ethical precepts and norms of OPPORTUNITY COST fairness. - This branch of economic reasoning focuses - Defined as the value of the foregone option on what we people perceive as correct and - Due to resource scarcity, we often face true, it includes subjectivity in every line of choices. reasoning. - We usually have several good options, - Used to recommend ways to change the making us choose the best, prioritize it, and world, have fairness and equality. accept the next best.  - In economics, the value of the foregone - Ex. Even with complete labor inputs and physical option is called opportunity cost. ingredients, making Turon requires tools like a stove, ladle, wok, and plates, which are capital. GOODS & SERVICES - Pre-processed ingredients like lumpia wrappers, sugar, cooking oil, and bamboo - The concept of opportunity cost also stickers qualify as capital goods because becomes an essential guide in the allocation they are composed of physical capital of goods and services in an economy. (building, machinery, and equipment) and GOODS human capital (skills and training). - Are the tangible commodities produced and ENTREPRENEUR consumed by an individual or group of - Someone who initiates the entire people. production process. SERVICES - He/she is primarily responsible for the - Are intangible and often are actions that delivery of goods and services in the involve innate or acquired skills offered and economy. availed by an individual or groups of people. - Without the management skills and talents of the entrepreneur, we will never get those CHOICE EVALUATION products and services that we enjoy in the - It is essential to evaluate the choices market. presented to us since every choice we make is at the expense of the other choice. RESOURCES - It is important to remember that resources - Defined as things that are useful for the used to produce the chosen goods or services economy. will no longer be available to produce another - They can be gathered by producers to set of goods or services. generate the goods and services available in - The notion of opportunity cost should always the economy. be involved in our daily decisions. - There are three: FACTORS OF - Natural Resources - Human Resources - Capital Resources PRODUCTION NATURAL RESOURCES - Those resources created by nature. MODULE NO. 6 | LESSON NO. 6.1 - 6.2 - Some of these cannot be recreated or recycled. - Can be used as raw materials or factors of FACTORS OF PRODUCTION production to create meaningful goods and - Also known as Production inputs. services that benefit the economy. - Are those resources or things what we use to - Not immune to destruction due to overuse produce goods and services. and human abuse, such as deforestation, - The four main factors of production are: fish kills, and pollution. - Land - Nonrenewable Natural Resources: - Labor - Once it is used up it cannot be - Capital recreated anymore. - Entrepreneur - Ex. Oil, gold. (although even when gold LAND has been used it can still be recycled) - Renewable Natural Resources: - Consists of the physical space on which - Are classified as ‘land’ in the factors production takes place, as well as the natural of production. resources found under it or on it. - Ex. Trees, water, air, and soil, and various LABOR types of energy, such as geothermal, - It is the period of time human beings spend wind, and solar or the number of persons needed to produce HUMAN RESOURCES goods and services. - Apart from natural resources, our people are CAPITAL important resources of the country too. - Also known as durable goods. - According to the Philippine Statistics - Are produced to produce other goods. Authority (2019), 45.2 million Filipinos,  comprising over half our population, are - There is no end to how much quantity of employed in various sectors. goods and services each individual wishes to - The services sector employs the majority, consume. followed by agriculture. - Our population provides the necessary THE ECONOMIC SOLUTION manpower for productive activities, - The answer to the economic problem, though transforming raw material into valuable not easy to accomplish: outputs. - As labor is a vital factor of production, Balance unlimited needs and wants with developing human resources can steer and limited resources by sustain economic growth. a) Tanning down or reducing people’s - In countries with limited natural resources, needs and wants; and human resources drive innovation and b) Making better, more efficient use of development resources. CAPITAL RESOURCES THE THREE BASIC ECONOMIC QUESTIONS - Crucial for supporting the economy. - Investments in infrastructure and public 1. What to Produce? goods help local firms produce goods and 2. How to Produce? services, attract investors, and sustain 3. For whom to Produce? international trade. WHAT TO PRODUCE? - Farm-to-market road projects enable farmers - Due to limited resources, society must to transport produce to markets, generating decide the combination of goods and other products and services. services to produce that which best meets - Human capital investments, such as its members’ wants and needs, as well as the improvement in education and healthcare, type and quantity of goods and services to be also significantly contribute to development. produced. THE ECONOMIC HOW TO PRODUCE? - Society has to determine who will do the production, what resources to use, and what PROBLEM production techniques to apply. FOR WHOM TO PRODUCE? MODULE NO. 7 - LESSON NO. 7.1 - 7.2 - Since not all of the needs and wants of its members can be met, society must decide on the distribution of goods and services among THE ECONOMIC PROBLEM its members. ALTERNATIVE - All societies, regardless of situation, size, or political system, face the economic problem of and stemming from scarcity. - Sometimes referred to as the basic, central, or fundamental economic problem. ECONOMIC SYSTEMS - As society’s limited resources cannot satisfy Module No. 8.0 - 9.0 | Lesson No. 8.1 - 9.2 the unlimited human needs and wants. - The economic problem is essentially the ECONOMIC SYSTEM problem of how to maximize the use of limited resources to satisfy people’s unlimited needs - Describes how the economy of a particular and wants as much as possible. country is organized LIMITED RESOURCES - The way a society answers the three basic economic questions determines its - Since resources are limited, which means economic system. they are finite and can run out, there can only - The different types of economic systems: be a limited amount of goods and services - Traditional Economy that can be produced. - Command Economy UNLIMITED NEEDS & WANTS - Market Economy - In theory, everyone has unlimited needs and - Mixed Economy wants, it is in our very nature to need or want infinitely. TRADITIONAL ECONOMY MARKET ECONOMY - Economic decisions are based on customs - The opposite of command or planned and traditional beliefs. economy. - Most of the time the exchange of goods is - The answers to the basic economic done through barter. questions are highly dependent on market - The problem of production is done by using behavior the mechanism of culture and tradition. - Also referred to as laissez-faire economy or - Advantages: free market, it literally translates as “allow (1) Traditional economy is family-oriented, [them] to do”. passing skills from generation to generation - Such implies a complete absence of to keep families together. government involvement in the economy. (2) People are often nomadic, hunting and - The interaction between buyers and sellers gathering for food. determines the price of a good or service. (3) They produce only what they need, with - Individuals and firms pursue their surpluses rare. self-interest without government direction or (4) It's predictable, answering questions of regulations. WHAT, HOW, and FOR WHOM based on - What is a Market? customs and traditions. - A term used in economics to mean - Disadvantages: an institution or method through (1) Discourages new ideas and new ways of which buys and sellers interact and doing things, the word change is not a engage in exchange. common word in this kind of society. MIXED ECONOMY (2) Punishes its members by simply - There is no economy today that uses a pure deviating or breaking the strict rules and form of economic system. regulations of the traditional society. - All real systems are in some sense “mixed”. (3) Lower standard of living and stagnation. - In this economic system, all the three basic COMMAND ECONOMY economic questions are addressed by both the - The use of economic power to coherently government and private institutions in mobilize the people to productive activities consideration of their mutual benefit. in answering the problems of production and - Elements of the three previous economic distribution of goods and services. systems are present in varying degrees where - Under this type of economy, the basic both private and public sectors exercise economic questions are answered by the government control. central planning authority (CPA). - The private sector works on how the market - Advantages: works, whereas the public sector (1) It’ s strength lies in its ability to (represented by the government) works on drastically transform society to achieve a policies and regulations. nation’s goals. (2) People are less concerned about their studies, jobs, or future prospects. (3) Education, public health, and other basic services are at a low cost. - Disadvantages: (1) Innovation, new and different ideas are discouraged. (2) Designed to provide the basic needs and not the wants. (3) Incentives or rewards are not common, people receive similar wages even though workers have different skills and responsibilities.