ECONOMICS

CONCEPT AND DEFINITION

Economics is a social science that deals with
the study of how people and society allocate
scarce resources among their alternative uses
in order to satisfy unlimited wants and needs.
Key concepts:
1. It is a science of human behavior.
2. Resources are scarce or limited.
3. Wants and needs are unlimited.
4. Resources have alternative uses.
5. Resources must be properly allocated.

 Economics is all about making choices.

Individual choices
Social choices
the brief examination of peoples choice is the
essence of economics.

ETYMOLOGY:
ECONOMICS came from the Greek term
oikonomia, which means management of
the household.

BRANCHES/DIVISIONS OF ECONOMICS

MACROECONOMICS
Study of the economy as a whole, the aggregate or the
behavior of the entire economy.
It refers to the management of income, expenditures,
wealth, or resources of a nation.
It answers the questions:
What factors determine the total level of production?
Should the government increase taxes?
How will an increase of money supply affect the
economy of the nation?
Problems and issues include:
Inflation, unemployment, growth, and international
finance

 MICROECONOMICS
Study of activity in individual markets.
It tackles the behavior of the consumers, producers and
the market.
It studies the actions of individual firms and households.
It involves specific markets such as those for rice, sugar,
coconuts, shoes, clothes, appliances, etc.
Issues and problems include:
Pricing
Monopolies
Business empires
Labor unions and disputes

Unlimited
Needs and
Wants

Scarce
Resources

CHOICES

ECONOMICS
MICROECONOMICS

MACROECONOMICS

EMERGENCE OF ECONOMIC THOUGHTS

THE GREEKS
Xenophons instructional treatise on efficient
management and leadership entitled Oeconomicus
The Greek economy as a premarket, wherein products
were neither uniform nor traded on organized exchange
or analyzed for their own sake.
Emphasis on human contract through the practical nature
of leadership and policy
PLATO
Presented a blueprint for an economy in which cities are
founded on key principles of specialization and division of
labor that creates mutual interdependence and further
leads to reciprocal exchange.
The Republic

 ARISTOTLE
Did not agree with Plato, his teacher, about the concept of an
ideal state. He defended private property for all classes and
not just for the established leaders.
Exchange is a way to satisfy individual and collective wants
and not as means for the state to accumulate wealth.
Topics and Rhetoric
THE MERCANTILISTS
Preocupied in the accumulation of wealth; emphasis on the
utilization of all available lands for agriculture, mining and
manufacturing.
All raw materials should be used for domestic production
because finished products have a higher price than raw
materials.
Ultimate goal is to accumulate silver and gold by selling
finished products and keeping domestic money in local
circulation.

 THE PHYSIOCRATS
Francois Quesnay and the physiocrats believed in the
importance of nature in the economic development of a
country.
Man should use his natural resources wisely and properly to
attain maximum advantages from it.
THE CLASSICISTS
Composed of economists from the Classical School led by
Adam Smith.
The laissez faire doctrine or let alone policy
government should not interfere with the activities of man
towards the free market.
DAVID RICARDO
Known for his law of diminishing returns the increasing
number of people will drive man to cultivate even the idle
lands to support his necessities in life. This will happen due
to the depletion of fertile lands.

 THOMAS MALTHUS
Discussed the effects of the rapid increase of
population Malthusian theory
NEOCLASSICISTS
John Maynard Keynes
Law of Supply and Demand
COMMUNISM
Karl Marx
All industries should be nationalized so as to achieve
equality among the people

The Economic Way of Life

Importance of the Study of Economics
1. Economics provides people an opportunity to
practice decision-making.
Intelligent decision-making

2. The Study of economics contributes to national

development.
One will know and understand the importance
of doing and performing his responsibilities and
role as an individual because in his hands lie the
future of our economy.

 What are your responsibilities as a

citizen?
Patronizing our own products
Paying the right amount of taxes
Supporting the economic and
environmental programs of the
government
Choosing the best business in town
Following the laws set by the
government
Observing self discipline.

Scientific Method in Economics

Observation
/Identify the
Problem

Make
Assumptions
or
Hypothesis

Make Conclusions
and
Recommendations

Gathering
of data and
Information

Analysis of
Data/Test
Theories

Relationship of Economics with

other Sciences
HISTORY

SOCIOLOGY

ETHICS

ECONOMICS

CHEMISTRY

POLITICAL
SCIENCE

MATHEMATICS

BIOLOGY
PHYSICS

Fundamental Emphases or
Concerns of Economics
Economics is concerned with Production
Production use of inputs to produce outputs.
Economics is concerned with Distribution
Distribution allocation of the total product
among members of society.
Economics is concerned with Consumption
Consumption - use of a good or service.
Economics deals with Public Finance
Public Finance concerned with government
expenditures and revenues.