Resource Utilization & Economics – Quick Review

Economics & Scarcity

  • Economics: efficient allocation of scarce resources to satisfy human wants.

  • Scarcity: limited resources vs. unlimited wants ➔ necessitates choice & allocation.

Factors of Production

  • Land: all natural resources; return = rent.

  • Labor: human effort (physical & mental); return = wages/salaries.

  • Capital: man-made goods used to produce other goods; return = interest; money ≠ capital.

  • Entrepreneurship: organizes factors, assumes risk; return = profit.

Circular Flow (Households ⇄ Firms)

  • Households sell resources, earn incomes.

  • Firms buy resources, sell goods/services.

  • Two markets: resource (inputs) & product (outputs); real flow opposite to money flow.

Opportunity Cost

  • Value of next-best alternative foregone.

  • Expressed via relative prices, e.g. OC<em>Coke=2 cupcakes\text{OC}<em>\text{Coke}=2\text{ cupcakes} when P</em>Coke=P20P</em>\text{Coke}=\text{P}20 and Pcupcake=P10P_\text{cupcake}=\text{P}10.

Basic Decision Problems & Four Questions

  • Decision areas: consumption, production, distribution, growth over time.

  • Core questions: What to produce? How to produce? How much? For whom?

Three Es in Economics

  • Efficiency: optimal input–output use (technical & economic).

  • Effectiveness: achievement of desired goals.

  • Equity: fairness/justice in distribution.

Positive vs. Normative Economics

  • Positive: describes "what is" (objective).

  • Normative: prescribes "what should be" (value-laden).

Ceteris Paribus

  • "All else equal" assumption to isolate two-variable relationships.

Branches of Economics

  • Microeconomics: individual households & firms; price mechanism.

  • Macroeconomics: aggregate variables (GDP, inflation, employment, etc.).

Economic Systems

  • Traditional: subsistence, custom-based.

  • Command: state planning & ownership.

  • Market: private ownership; prices guide decisions.

  • Socialism: state controls key enterprises; aims at equitable distribution.

  • Mixed: blend of market & command elements (e.g., Philippines).

Key Historical Schools & Economists

  • Classical: Adam Smith, David Ricardo, Karl Marx.

  • Neoclassical (≈1870s): Leon Walras (general equilibrium), Alfred Marshall (marginalism).

  • Keynesian (1936): J.M. Keynes – General Theory.

  • Non-Walrasian: John Hicks – IS-LM model.

  • Post-Keynesian / Monetarist: Samuelson, Arrow, Tobin, Friedman.

Additional Core Terms

  • Wealth: stock of assets with monetary value.

  • Consumption: direct use of goods/services for satisfaction.

  • Production: creation of outputs using land, labor, capital.

  • Exchange: trading goods/services for money or barter.

  • Distribution: allocation of scarce resources/products among users.