Overview Of Economics PDF

Overview of Economics Week 2  Definition of Economics Ø The word 'economics' comes from two Greek words, 'eco' meaning home and 'nomos' meaning accounts. The subject has developed from being about how to keep the family accounts into the wide-ranging subject of today. ...

Overview of Economics Week 2  Definition of Economics Ø The word 'economics' comes from two Greek words, 'eco' meaning home and 'nomos' meaning accounts. The subject has developed from being about how to keep the family accounts into the wide-ranging subject of today.  Definition of Economics Definition: It is a social science that seeks to analyze and describe the production, distribution, and consumption of wealth. It is “a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment, and with the use of the material requisites of wellbeing”. - (Alfred Marshall) It is “the science which studies human behavior as a relationship between (given) ends and scarce means which have alternative uses”. (Lionel Robbins) A standard definition of economics could describe it as: Ø a social science directed at the satisfaction of needs and wants through the allocation of scarce resources which have alternative uses. We can go further to state that: economics is about the study of scarcity and choice economics finds ways of reconciling unlimited wants with limited resources economics explains the problems of living in communities in terms of the underlying resource costs and consumer benefits economics is about the co-ordination of activities which result from specialization Ø By extension of our basic definition, economics (as applied to agricultural and environmental issues) is concerned with the efficient allocation of natural resources to maximize the welfare of society. Branches of Economics  2 Main Branches of Economics 1. Microeconomics – Microeconomics is the study of how households and firms make decisions and how they interact in specific markets. – It focuses on individual agents' actions within the economy, like households, workers, and businesses.  2 Main Branches of Economics 2. Macroeconomics – Macroeconomics is the study of economy-wide phenomena. – It looks at the economy as a whole. It focuses on broad issues such as the growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports.  Issues Explored by Microeconomics What determines how households and individuals spend their budgets? What combination of goods and services will best fit their needs and wants, given the budget, they have to spend? How do people decide whether to work and if so, whether to work full-time or part-time? How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means? What determines the products, and how many of each a firm will produce and sell? What determines the prices a firm will charge? What determines how a firm will produce its products? What determines how many workers it will hire? How will a firm finance its business? When will a firm decide to expand, downsize, or even close?  Issues Explored by Macroeconomics What determines the level of economic activity in a society? What determines how many goods and services a nation produces? What determines how many jobs are available in an economy? What determines a nation’s standard of living? What causes the economy to speed up or slow down? What causes firms to hire more workers or to lay them off? What causes the economy to grow over the long term?  The Basic Economic Problem The basic economic problem is scarcity. It is the challenge that comes with meeting unlimited needs and wants with limited resources. Scarcity - is a fundamental economic concept that describes the gap between limited resources and the unlimited wants and needs of individuals and society (Mankiw, 2021). It is a natural and unavoidable aspect of the world we live in.  The Basic Economic Problem Types of Scarcity Absolute Scarcity: Ø This occurs when a resource is completely depleted and cannot be replenished. Ø An example would be a species that has gone extinct. Relative Scarcity: Ø This refers to a situation where resources are available but not in sufficient quantities to meet demand. Ø For instance, water may be abundant in one region but scarce in another due to geographical and climatic difference.  The Basic Economic Problem ØD u e to t h e b a s i c e co n o m i c p ro b l e m , t h re e questions arise. These are What, How and for whom. Any given society/country must decide how it will answer these questions. Basic Economic Problem  Basic Economic Problem 1. What should be produced? Considering the economy's scarce resources to produce one thing would mean giving up another. To produce better education, for example, may require cutting back on other services like health care. Every society will have to decide what it will produce with its scarce resources.  Basic Economic Problem 2. How should goods and services be produced? To determine how goods and services should be produced, we need to make all sorts of choices. "Should a firm employ a few skilled or a lot of unskilled workers? Should it produce in its own country, or should it use foreign plants and manufacturing firms use new or recycled raw materials to make their products?  Basic Economic Problem 3. For whom should goods and services be produced? If a good or service is produced, a decision must be made about who will get it. A decision to have one person or group receive a good or service usually means it will not be available to someone else" (University of Minnesota, 2020).  Basic Economic Problem Factors Affecting Scarcity: Ø Limited Resources: The fundamental cause of scarcity is the finite nature of resources. Whether it's land, labor, capital, or natural resources, there's a limit to what's available (Mankiw, 2021).  Basic Economic Problem Factors Affecting Scarcity: Ø Unlimited Wants and Needs : Human desires and needs are virtually boundless. As societies progress and populations grow, the demand for resources and goods increases, exacerbating scarcity (Mankiw, 2021).  Basic Economic Problem Factors Affecting Scarcity: Ø Production Possibilities : The ability to produce goods and services is constrained by available technology, resources, and labor. Scarcity arises when production can't keep up with demand. (Mankiw, 2021).  Basic Economic Problem Factors Affecting Scarcity: Ø Distribution and Allocation: How resources and goods are distributed and allocated within a society plays a significant role in scarcity. Inequitable distribution can create artificial scarcity, where some have abundance while others lack basic necessities. (Stiglitz, 2012)  Basic Economic Problem Factors Affecting Scarcity: Ø Natural Disasters and Unforeseen Events: Events like natural disasters, pandemics, and conflicts can disrupt supply chains and resource availability, leading to sudden scarcity. (UN, 2023)  Basic Economic Problem Factors Affecting Scarcity: Ø Environmental Degradation and Resource Depletion: Overexploitation and unsustainable practices can deplete natural resources and damage ecosystems, reducing the availability of essential resources and contributing to scarcity (UN, 2023).  Basic Economic Problem Factors Affecting Scarcity: Ø Technological Advancements and Innovation: Technological progress can both alleviate and exacerbate scarcity. New technologies can increase efficiency and production, making resources more available. However, they can also create new demands and lead to the depletion of other resources. (Acemoglu & Restrepo, 2018)  Basic Economic Problem Shortage is a temporary market situation where the quantity demanded for a good or service exceeds the quantity supplied at the current price (Hubbard & O'Brien, 2017). It is a market imbalance that can be corrected over time. Basic Economic Problem  Difference Between Needs and Wants Ø Essential goods or services that are required for human survival and basic well-being (Mankiw, 2021). They are fundamental to maintaining a healthy and functional life. Ø Examples of needs include food, water, shelter, clothing, and healthcare.  Difference Between Needs and Wants Ø ants are desires for goods and services that enhance our quality of life but are not essential for survival (Hubbard & O'Brien, 2017). They are often shaped by personal preferences, cultural influences, and societal trends. Ø Examples of wants include entertainment, luxury items, travel, and the latest technological gadgets. Difference Between Needs and Wants Difference Between Needs and Wants Schools of Thought in Economics Schools of Thought in Economics Schools of Thought in Economics Schools of Thought in Economics Schools of Thought in Economics Schools of Thought in Economics  Schools of Thought in Economics 7 Group Activity: Raising Awareness About Scarcity in the Philippines What to do: 1.Team Up: Form groups of 3-4 students. 2.Choose a Scarcity Issue: Pick one specific scarcity problem in the Philippines: water shortage, food insecurity, lack of electricity, deforestation, and others. 3.Research: Use the internet to find out: What causes this problem? Who is affected and how? What solutions are being tried? What can people do to help? 4.Create a Facebook Post (A short video or an infographics) : Make a post to share on your own Facebook wall about the issue. Include: A short, clear message about the problem An image or video that gets people's attention Information from your research Ask people to do something specific to help (like save water, support local farmers, etc.) Remember: Use reliable websites for your research. Make your post interesting and easy to understand. Be respectful and responsible when posting online. References and suggested Readings: https://www.britannica.com/topic/economics https://www.soas.ac.uk/cedep-demos/000_P542_EP_K3736-Demo/unit1/page_07.htm https://www.astro4dev.org/lesson-4-review-of-classical-economic-theory/ https://www.astro4dev.org/lesson-5-departure-from-classical-economics/ https://www.economicsonline.co.uk/Economic_schools.html Mankiw, N. G. (2021). Principles of economics (9th ed.). Cengage Learning. Based upon: Macroeconomics, 12th edition by Roger A. Arnold and “A cheat sheet for understanding the different schools of economics” by Cullen Roche Hubbard, R. G., & O'Brien, A. P. (2017). Microeconomics (6th ed.). Pearson. Acemoglu, D., & Restrepo, P. (2018). The race between man and machine: Implications of technology for growth, factor shares, and employment. American Economic Review, 108(6), 1488-1542 UN. (2023). Sustainable development goals report 2023. United Nations.