Introduction to Economic Theory - Chapter 1

Vocabulary flashcards covering the economic history of the Philippines, core economic principles, key terms, and the branches of economics as outlined in Chapter 1.

Economic powerhouse (Philippines context)

Before the 70's and 80's, the Philippines was an economic powerhouse second only to Japan among other Asian countries.

Manila

The capital of the Philippines.

Early Filipino Economic Activities

Agriculture, fishing, hunting, and local crafts, along with active trade with China, India, and Malay.

Abaca

A key export of the 20th-century economic development in the Philippines.

Wants

Desires beyond survival, linked to comfort, status, or happiness.

Capital

Assets used in production, including tools, machinery, and money.

Basic needs

Essential requirements for survival such as food, shelter, and clothing.

Economic resources

Inputs for producing goods and services, comprising land, labor, capital, and entrepreneurship.

Markets

Platforms where buyers and sellers exchange goods, services, and resources.

Economics

The study of how individuals, businesses, and governments allocate scarce resources to satisfy unlimited wants.

Scarcity

The problem created by limited resources and unlimited human wants.

Three Fundamental Economic Questions

What should be produced? How should it be produced? Who should receive the goods and services?

Utility

Satisfaction gained from consuming goods/services.

Diminishing marginal utility

The principle that each additional unit consumed provides less satisfaction.

Microeconomics

The branch of economics that studies individual units like households and firms, focusing on demand, supply, and price determination.

Macroeconomics

The branch of economics that examines economy-wide issues such as growth, inflation, unemployment, fiscal and monetary policy.

Production

The economic activity of creating goods and services.

Distribution

The process of delivering goods/services to consumers.

Consumption

The use of goods/services to satisfy needs and wants.

Consumption goods

Goods that directly satisfy needs.

Capital goods

Goods that indirectly satisfy needs by aiding production.

Economic analysis

The systematic study of how entities make decisions about scarce resources by examining patterns, relationships, and causes.

Economic policy

Actions governments take to influence the economy, including fiscal, monetary, trade, and supply-side policies.

Free resources

Resources where supply exceeds demand.

Renewable resources

Resources that are regenerative over time, such as forests and water.

Scarce resources

Resources where demand exceeds supply.

Nonrenewable resources

Finite and exhaustible resources such as oil and minerals.

Economic Theory

A framework of principles used to explain economic activities and behavior, allowing economists to predict outcomes when factors change.

Rationalization

The process of making logical and informed decisions after evaluating all alternatives, costs, and benefits to maximize satisfaction while minimizing cost.