Introduction to Economics and Scarcity PDF

INTRODUCTION TO ECONOMICS AND THE CONCEPT OF SCARCITY What is Economics? PREPARED BY CHRISTIAN ALEC A. BORJA 1. Studies Demand and Supply The law of supply and demand combines two fundamental economic principles that describe how changes in the price of a resource, commodity, o...

INTRODUCTION TO ECONOMICS AND THE CONCEPT OF SCARCITY What is Economics? PREPARED BY CHRISTIAN ALEC A. BORJA 1. Studies Demand and Supply The law of supply and demand combines two fundamental economic principles that describe how changes in the price of a resource, commodity, or product affect its supply and demand. Supply rises while demand declines as the price increases. Supply constricts while demand grows as the price drops. PREPARED BY CHRISTIAN ALEC A. BORJA 2. Studies Consumption, Production and Distribution of our Scarce Resources The study of economics is primarily concerned with analyzing the choices that individuals, businesses, governments, and nations make to allocate limited resources. Economics has ramifications on a wide range of other fields, including politics, psychology, business, and law. PREPARED BY CHRISTIAN ALEC A. BORJA 3. Etymologically, “OIKONOMIA” The word "economics" is derived from a Greek word "oikonomia" which means "household management" or "management of house affairs" i.e., how people earn income and resources and how they spend them on their necessities, comforts and luxuries. PREPARED BY CHRISTIAN ALEC A. BORJA 4. Studies of How Society Manages its Scarce Resources (Mankiw, 2018) In most societies, resources are allocated not by an all- powerful dictator but through the combined choices of millions of households and firms. Economists, therefore, study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings. PREPARED BY CHRISTIAN ALEC A. BORJA 5. Efficient Allocation of the Society’s Scarce Resources in Meeting the Unlimited Demands. Scarcity is an economic concept where individuals must allocate limited resources to satisfy their needs. Scarcity occurs when demand for a good or service is greater than availability. Scarcity affects the monetary value individuals place on goods and services. PREPARED BY CHRISTIAN ALEC A. BORJA Economics as a Social Science PREPARED BY CHRISTIAN ALEC A. BORJA  How do people make their decisions? 1: People face trade-offs Mankiw’s Ten Principles of 2: The cost of an item is what we sacrifice to get it Economics 3: Rational people look to maximize their utility 4: People respond to incentives PREPARED BY CHRISTIAN ALEC A. BORJA  How people interact with each other? 5: Trade makes everyone better off Mankiw’s Ten Principles of Economics 6: Markets are a good way of organizing economic activity 7: Governments can sometimes improve market outcomes PREPARED BY CHRISTIAN ALEC A. BORJA  How the entire economy works? 8: A country's standard of living depends on its ability to produce goods and services. Mankiw’s Ten Principles of Economics 9: Growth of money leads to inflation. 10: Society faces a short-run tradeoff between Inflation and unemployment. PREPARED BY CHRISTIAN ALEC A. BORJA Trade-Offs PREPARED BY CHRISTIAN ALEC A. BORJA Trade-Off In economics, a very basic trade-off can be understood as the idea that if you choose one thing, you are going to lose another. The trade-off is taking the opportunity to have something, but in order to get that thing, you have to give up, or sacrifice, something else. PREPARED BY CHRISTIAN ALEC A. BORJA Opportunity Cost PREPARED BY CHRISTIAN ALEC A. BORJA Opportunity Cost Money, time, and energy are such valuable resources, it is important to understand what the opportunity costs are when making a decision so that you can make the most beneficial trade-off for each particular situation. PREPARED BY CHRISTIAN ALEC A. BORJA Unlimited Human Demands PREPARED BY CHRISTIAN ALEC A. BORJA What is the Difference Between Needs & Wants? Needs – We Wants – We cannot live can live without without PREPARED BY CHRISTIAN ALEC A. BORJA PREPARED BY CHRISTIAN ALEC A. BORJA What is Scarcity? PREPARED BY CHRISTIAN ALEC A. BORJA Economic Resources – Finite Economic growth has been defended for its contributions to human well-being and increasing standards of living. Yet, it is becoming more evident that the degree to which economic growth has depended upon increasing use of the Earth’s natural resources is unsustainable. PREPARED BY CHRISTIAN ALEC A. BORJA Factors of Production PREPARED BY CHRISTIAN ALEC A. BORJA Land Land has a broad definition as a factor of production and can take on various forms, from agricultural land to commercial real estate to the resources available from a particular piece of land. Natural resources, such as oil and gold, can be extracted and refined for human consumption from the land. PREPARED BY CHRISTIAN ALEC A. BORJA Labor Labor refers to the effort expended by an individual to bring a product or service to the market. Again, it can take on various forms. For example, the construction worker at a hotel site is part of the labor, as is the waiter who serves guests or the receptionist who enrolls them into the hotel. PREPARED BY CHRISTIAN ALEC A. BORJA Capital In economics, capital typically refers to money. However, money is not considered part of the capital factor of production because it is not directly involved in producing a good or service. Instead, it facilitates the acquisition of things that are considered capital such as capital goods. PREPARED BY CHRISTIAN ALEC A. BORJA Entrepreneurship Entrepreneurship is the secret sauce that combines all the other factors of production. Entrepreneurs use land, labor, and capital in order to produce a good or service for consumers. Entrepreneurship is involved with establishing innovative ideas and putting that into action by planning and organizing production. PREPARED BY CHRISTIAN ALEC A. BORJA Gross Domestic Product PREPARED BY CHRISTIAN ALEC A. BORJA GDP Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health. PREPARED BY CHRISTIAN ALEC A. BORJA PREPARED BY CHRISTIAN ALEC A. BORJA Understanding Gross Domestic Product The calculation of a country’s GDP encompasses all private and public consumption, government outlays, investments, additions to private inventories, paid-in construction costs, and the foreign balance of trade. Exports are added to the value and imports are subtracted. PREPARED BY CHRISTIAN ALEC A. BORJA What Does GDP Tell You? A country's GDP represents the final market value of all the products and services that a country produces in a single year. Another way to measure GDP is as the sum of four factors: consumer spending, government spending, net exports, and total investment. PREPARED BY CHRISTIAN ALEC A. BORJA GROSS NATIONAL INCOME (GNI) AND GROSS DOMESTIC PRODUCT (GDP) BY INDUSTRY BANKO SENTRAL NG PILIPINAS PREPARED BY CHRISTIAN ALEC A. BORJA  GDP Formula GDP=C+G+I+NX where: C=Consumption G=Government spending I=Investment NX=Net exports PREPARED BY CHRISTIAN ALEC A. BORJA Gross National Prodcut PREPARED BY CHRISTIAN ALEC A. BORJA GNP GNP is commonly calculated by taking the sum of personal consumption expenditures, private domestic investment, government expenditure, net exports, and any income earned by residents from overseas investments, then subtracting income earned by foreign residents. PREPARED BY CHRISTIAN ALEC A. BORJA PREPARED BY CHRISTIAN ALEC A. BORJA Understanding Gross National Product (GNP) GNP measures the total monetary value of the output produced by a country's residents. Therefore, any output produced by foreign residents within the country's borders must be excluded in calculations of GNP, while any output produced by the country's residents outside of its borders must be counted. PREPARED BY CHRISTIAN ALEC A. BORJA The Difference Between GNP and GDP GNP and GDP are very closely related concepts, and the main differences between them come from the fact that there may be companies owned by foreign residents that produce goods in the country, and companies owned by domestic residents that produce goods for the rest of the world and revert earned income to domestic residents. PREPARED BY CHRISTIAN ALEC A. BORJA QUESTIONS? PREPARED BY CHRISTIAN ALEC A. BORJA THANK YOU!  Resources https://www.investopedia.com/terms/l/law-of-supply-demand.asp https://www.investopedia.com/terms/e/economics.asp https://www.toppr.com/ask/question/discuss-the-origin-of-the-word-economics/ chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://zalamsyah.staff.unja.ac.id/wp- content/uploads/sites/286/2020/10/Principles-of-Microeconomics-8th-Ed.-GREGORY-MANKIW-1.pdf https://www.investopedia.com/terms/s/scarcity.asp https://www.linkedin.com/pulse/what-kind-principles-decision-making-exist-economics-normuradova https://www.simplypsychology.org/maslow.html https://www.investopedia.com/articles/investing/120515/infinite-economic-growth-finite-planet-possible.asp https://www.investopedia.com/terms/f/factors-production.asp https://corporatefinanceinstitute.com/resources/economics/factors-of- production/#:~:text=Entrepreneurship%20as%20a%20factor%20of%20production%20is%20a%20combination%20of,by%20pl anning%20and%20organizing%20production. https://study.com/academy/lesson/trade-offs-in-economics-definition- examples.html#:~:text=A%20trade%2Doff%20is%20when,economic%20or%20real%2Dlife%20situations https://www.investopedia.com/terms/g/gdp.asp https://psa.gov.ph/statistics/national-accounts/sector3/Gross%20Domestic%20Product chrome- extension://efaidnbmnnnibpcajpcglclefindmkaj/https://psa.gov.ph/sites/default/files/infographics/%5BINFOG%5D%20Q2%202 024_NAP.pdf?width=950&height=700&iframe=true https://www.statista.com/statistics/1404032/philippines-gdp-share-by-sector/ https://www.bsp.gov.ph/Statistics/Real%20Sector%20Accounts/tab29_giu.aspx https://www.investopedia.com/terms/g/gnp.asp PREPARED BY CHRISTIAN ALEC A. 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