Economics: Part 1 - The Definition of Economics

Remember the acronym MONEY
- Momentarily Owned, Never Eternally Yours
Price is the mechanism
Scarcity is the heart of economics
Economics is derived from the Greek word oikonomia/oikonomos, which means “household management”
- Oikos means house, and nomos means management
It talks about the management of resources of a family, country, community, and business.
Economics is a social science that deals with the two extremes:
- Limited resources
- Unlimited wants
  - Luxuries: exaggerated needs

There is a need to manage these resources because of scarcity
- People have limited resources, so they must pick which wants to satisfy
The loss of possible gain when we choose an alternative over the other is called the opportunity cost
- Since scarcity exists, there is always an opportunity cost in every choice we make
- TANSTAAFL - There Ain’t No Such Thing As A Free Lunch
- The concept of opportunity cost is essential in the allocation of goods and services
  - Goods
    - Tangible commodities consumed and produced by an individual or groups of people
      - Guns: a term in economics for military goods
      - Butter: a term in economics for civilian goods
  - Services
    - Intangible commodities that are often in the form of action and require innate or required skills
- During Smith’s time, he had a “rival” who advocated for the opposite, Karl Marx
  - Karl Marx, also known as the Father of Communism, proposed that the means of production are collectively owned and controlled by the working class
  - Communism eradicates the haves (wealthy) and have-nots (poor)
Scarcity → kakapusan, shortage → kakulangan

Wealth Definition by Adam Smith
- Adam Smith, the recognized father of economics, stated that economics is an inquiry into the nature and causes of the wealth of nations
Welfare Definition by Marshall
- According to Marshall, economics is a study of mankind in the ordinary business of life; it examines the part of individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being
  .
Scarcity Definition by Robbins
- According to Robbins, economics is a science that studies human behavior as a relationship between ends and scarce means, which have alternative uses
Growth-Oriented Definition by Samuelson
- According to Samuelson, economics is the study of how people and society end up choosing with or without the use of money, to employ scarce productive resources that could have alternative uses, it produce various commodities over time. It distributes them for consumption, now or in the future, among various persons and groups in society. It analyses the costs and benefits of improving patterns of resource allocation

Deals with the economic problems of the individual, the firm, and the industry
Focuses on the behavior of individual economic agents and how they make decisions about allocating scarce resources
- Dwells on the impact of supply and demand, investigates how the price for a product is determined, examines different market structures, and studies the factors that determine the prices and employment of productive resources

Positive economics refers to the facts of an economy, while
Normative economics encompasses value and judgments, like ethical perceptions and norms of fairness
Positive economics also aims to elaborate on how society makes decisions about economic activities such as production, distribution, consumption, spending, and trade
In short, positive economics focuses on looking at the lenses wherein objectivity, scientific explanation, logic, empirical, and factual are the primary considerations. It describes the mechanism of the economy
While normative economics focuses on value, judgment, and opinion