ECONOMICS 

Studies how people use the scarce resources to satisfy unlimited wants and needs.

Scarcity – core problem of economics; unlimited wants, and limited resources.

Fundamental questions in economics

·       What to produce?

·       How to produce it?

·       For whom to produce?

2 divisions of economics

·       Micro - studies the behavior of single entity such as the consumers and producers (Supply & Demand)

·       Macro - studies the overall performance of the economy; aggregate

FAMOUS ECONOMIST

Adam Smith

·       Father of economics

·       Laissez faire (let alone policy)

·       Capitalism

·       Invisible hand

John Maynard Keynes

·       Keynesianism

·       Father of Macroeconomics

Thomas Malthus

·       The population increases faster than the increase in the supply food

David Ricardo

·       Law of Comparative Advantage - produce a given or service in a more efficient and economically competitive manner than its peers (kung san ka mas magaling dun ka)

·       Law of Diminishing Marginal Returns - predicts that after some optimal level of capacity is reached adding an additional factor of production will result in smaller increases in output (wag kang OA)

Alfred Marshall

·       Law of Diminishing Marginal Utility - states that the marginal utility from consuming additional units of a good eventually declines (kapag sobra na, nakakaumay din)

BASIC ECONOMIC ACTIVITIES

Production - production is the process of combining various inputs to a create output

Productive Resources

·       Land (Natural)

·       Capital (Man Made)

·       Labor (Blue Collar – skills; White Collar – intellectual)

·       Entrepreneur

Allocation - resources are distributed to the people who desire their resources

·       Traditional (Culture, History)

·       Command (Government ang may ari ng resources)

·       Market (Private individuals ang may-ari ng resources)

·       Mixed

Consumption - use of goods and services by households

MICROECONOMICS

Demand - willingness of the consumer to buy a good or service at a given price

Supply - willingness of the producer to make a good or services available at a given price

Schedule – Tabular representation of connections of demand and supply

Curve – graphical representation of connections of demand and supply

LAW OF SUPPLY & DEMAND

Substitute Good – can replace other goods

Price of good 

Demand of Substitute

Complementary Good – go together

Price of good 

Demand of Substitute

MACROECONOMICS

Metrics of Economic Growth and Development

Growth – Income

Development - Welfare

Metrics of Economic Growth

GNP = GDP + Net factor income from abroad

Metrics of Economic Development

Human Development Index (HDI) - compiled by the United Nations to measure various countries levels of social and economic development

Inflation – continuing increase in price of commodities

Unemployment – willing and able to work but does not have paid job

Fiscal Policy - government spending and taxation that influences our economy

·       Expansionary FP – more spending, lower tax

·       Contractionary FP - less spending, more tax

Monetary Policy – role of central banks in managing the money and interest rates

·       Expansionary MP – more money in circulation

·       Contractionary MP - less money in circulation

New Growth Theory - pressures the desire and wants of the populace will drive ongoing productivity and economic growth