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NATURE OF ECONOMICS AND APPLIED 7: Governments can sometimes improve ECONOMICS market outcomes Nature of Economics - how the entire economy works Studies demand and supply...

NATURE OF ECONOMICS AND APPLIED 7: Governments can sometimes improve ECONOMICS market outcomes Nature of Economics - how the entire economy works Studies demand and supply 8: A country’s standard of living depends on studies the three economics process - its ability to produce goods and services consumption, production and distribution of 9: Growth of money leads to inflation goods and services 10: Society faces a short-run tradeoff etymologically, comes from the term between Inflation and unemployment “oikonomia,” which means “household Nature of Applied Economics management.” Applied Science - is a discipline that deals What is Economics? with applying existing scientific knowledge Is the study of how society manages its based on scientific studies and developing a scarce resources (Mankiw, 2024) practical application of science - such as is a social science that deals with the technology, methodology, inventions. efficient allocation of the society’s scarce Applied Economics - problematizes that resources with alternative uses in meaning means to utilize economics theories, the unlimited human demands.(Robbins) concepts, laws, and methods to real-life What is Science? situations. is a systematic way of understanding the SCOPE OF ECONOMICS AND APPLIED structure and behavior of the physical and ECONOMICS natural world through unbiased observation Scope of Economics and experimentation Microeconomics In general, science if the pursuit of - is a branch of economics that studies a knowledge. particular unit of economy Economics as Science - Units of the economy - individuals, 1. Observation households, firms, or the government 2. Ask a question Macroeconomics 3. Hypothesis and gather data - is a branch of economics that deals with 4. Examine test result and form a conclusion how the economy works as a whole 5. Report findings social science - in its broadest sense, it is the study of society and the manner in which people behave and influence the world around us. Economics a social science - It is a social science because it deals with people and their behavior Mankiw's ten principles of economies - how do people make their decision 1: people face trade-offs BASIC ECONOMIC CONCEPTS 2: The cost of an item is what we need to Unlimited Human Demands sacrifice to get it needs - we cannot live without 3: Rational people look to maximize their Wants - we can live without utility Scarcity & Opportunity Cost 4: People respond to incentives Scarcity - how people interact with each other Economic resources - finite 5: Trade makes everyone better off Factors of production - land, labor, capital, 6: Markets are a good way of organizing and Entrepreneurship economic activity ○ Land - natural resources  ○ Labor - efforts and skills ○ Command economy ○ Capital - man-made factors ○ Transitionary economy ○ Entrepreneurship - management of Traditional Economic System (old ways) the use of other factors A primitive system which functions basics of Scarcity - central problem of economics the basics and generate and utilize few No scarcity, no economics resources they produce - Opportunity cost Government - tribal system only what they Referring to the value of gun. Value that you Nomadic resource gathering need have sacrificed Barter system The cost of giving up an alternative by No Surplus - produces what to consume selecting another Market Economic System ○ When going to school, do you walk Factors of production and distribution are or ride in a car? owned and managed by the people ○ When deciding where to work, will Private property you choose to work here or outside Free competition money exist- the country Economic freedoms they - buy they can what afford Opportunity Cost: Production Possibilities Profit motive can Frontier Presence of laissez faire government -walang nagcocontrol na A 50/50 equal productions - ; Ideals and philosophy: Capitalism ap B - Increase guns Decrease butter Command Economic System C- Decrease Increase guns butter Factors of production and distribution are owned and managed by the state (central planning D - Equal ; larger quantity 70/70 No private property people - only will consume impossible No free competition what is offered to them X - beyond PPF , to produce No economic freedoms Public motives Presence of central planning Ideals and philosophy: Communism Mixed Economic System Circular Flow Model Factors of production and distribution are owned and managed publicly and privately Some private property · general public · consumers Quasi-free competition Economic freedoms Dose Comic owners Public and profit motive Presence of central planning then laisses faire Ideals and philosophy: Socialism Basic Economics Questions What and how much goods and services to produce? How to produce the goods and services? For whom are the goods and services? Economic Systems An organized way in which a state or nation allocate its resources and distributes goods Transitionary Economic System and services in the national community A transition economy or transitional ○ Traditional economy economy is an economy which is changing ○ Market economy ○ Mixed economy  from a centrally planned economy to a market economy Transition economies undergo a set of structural transformations intended to develop market-based institutions. Macroeconomics Goals What are the different macroeconomics goals? Full employment [employment stability] - transpires when the economy maximizes its productive resources, including labor Fair income distribution - is concerned with how to distribute income in the economy among the population Price stability - is concerned with maintaining currency’s purchasing power High and sustainable economic growth - essential to increase people’s income and standard of living Balance of Payments (BoP) equilibrium [external stability] - The foreign currency entering a country is equal to the foreign currency leaving the same country. NOTES: Economics can be used in evaluating the choices and alternatives in our lives. Economics can be defined as a social science that studies the allocation of limited resources to satisfy unlimited human wants The notion of scarcity is central to the study of economics and because of scarcity, people must make choices. The satisfaction of our unlimited wants as a society vis-à-vis the scarcity of our rsources gives rise to the economic problem of allocation.