Economics: A Basic Studies of A Basic Study Guide and Comprehensive Study Guide and Comprehensive Study Guide

Overview and Definition of Economics

• Definition of Economics: Economics is a Social Science that studies the efforts of humans to intelligently utilize limited resources to satisfy unlimited needs and wants, while aiming to live with dignity.

• Economics as a Social Science:

  • It is categorized as a Social Science because it studies events in our environment.

  • General science focuses on natural phenomena, whereas Social Science focuses on human behavior within a societal context.

• Scientific Nature: Economics is considered a science because it employs the scientific method to explain and answer environmental and societal occurrences.

Fundamental Concepts in Economics

• Limited Resources (Limitadong Pinagkukunang-yaman): This refers to natural resources. It is an objective reality that these resources are finite and limited, making them insufficient to meet every possible human desire.

• Unlimited Needs (Walang Katapusang Pangangailangan): This refers to the desires people wish to achieve to gain happiness and personal satisfaction. Unlike resources, human wants are endless.

• Economic System: This is the methodology or process through which individuals, groups, businesses, or the government choose a system to solve economic problems.

• Economic Questions: There are three fundamental questions addressed in economics:

  1. What should be done/produced (Ano ang dapat gawin)?

  2. How should it be done/produced (Paano gagawin)?

  3. For whom should it be done/produced (Para kanino gagawin)?

Prominent Economists and Their Contributions

• Adam Smith:

  • Birth/Death: Born June 16, 1723, in Kirkcaldy, Fife, Scotland; died July 17, 1790.

  • Title: Known as the "Father of Modern Economics."

  • Major Work: Authored "An Inquiry Into the Nature and Causes of the Wealth of Nations" (1776).

  • Philosophy: Popularized the concept of "Laissez-Faire" (let alone policy).

• David Ricardo:

  • Birth/Death: Born April 19, 1772, in London; died September 11, 1823.

  • Key Theory: The Law of "Comparative Advantage," which focuses on specialization.

  • Major Work: Authored "Principle of Economy and Taxation."

  • Other Concepts: Explained the "Law of Diminishing Returns" (Batas ng Bumababang Halaga).

• Thomas Robert Malthus:

  • Birth: Born February 13, 1766, in Surrey, England.

  • Major Work: Authored "An Essay on the Principle of Population."

  • Population Theory: He posited that population grows geometrically $(2, 4, 6, 8, ...)$ while resources grow arithmetically $(1, 2, 3, 4, ...)$.

  • Proposed Solutions to Overpopulation:

    • Positive Check: Factors that increase death rates, such as hunger/famine, disease, and war.

    • Preventive Check: Factors that decrease birth rates, such as delayed marriage, abortion, prostitution, and celibacy.

• Karl Heinrich Marx:

  • Birth: Born May 5, 1818, in Trier, Germany.

  • Role: Influential philosopher, political economist, and revolutionary socialist.

  • Title: Known as the "Father of Communism."

  • Major Works: "Communist Manifesto" and "Das Kapital" (the latter viewed as the "bible" of communists and a critique of Capitalism).

• John Maynard Keynes:

  • Birth: Born June 5, 1883, in Cambridge, England.

  • Title: Known as the "Father of Modern Macroeconomics."

  • School of Thought: Keynesian Economics.

Scope of Economics (Branches)

• Microeconomics (Maykroekonomiks):

  • Definition: Studies the small units of the economy.

  • Focus: Explains the movements and decisions of individual business firms (bahay-kalakal) and households (sambahayan).

  • Examples: Behavior of consumers and producers, Demand, Supply, Markets, Prices, and Business organizations.

• Macroeconomics (Makroekonomiks):

  • Definition: Studies large units or the totality of the economy.

  • Focus: Discusses the national economy as a whole.

  • Examples: National income, Gross National Product (GNP), Gross Domestic Product (GDP), Aggregate supply and demand, External debt, Exchange rates (e.g., Peso to Dollar), Unemployment, and Internal/External trade.

Divisions of Economics

1. Production (Produksyon): The process of using natural resources in a useful way to create products and services that meet human needs.

   • Factors of Production (Mga Salik ng Produksyon): Land (Lupa), Labor (Paggawa), Capital (Kapital), and Entrepreneurship.

2. Consumption (Pagkonsumo): The act of buying, using, or consuming products and services to satisfy needs and gain personal satisfaction. Consumption gives meaning/purpose to production.

3. Exchange (Palitan/Pagpapalitan): The transfer of goods or services from one person to another. This occurs in the Market (Pamilihan) where producers and consumers meet. This is vital for guiding a country's exports and imports.

4. Distribution (Distribusyon / Pamamahagi):

   • Spatial Distribution: Shows how things are located globally and explains population density in different areas.

   • Economic Distribution: Refers to the payment made to the factors of production used for consumption.

   • Payment Mapping:

     • Land (Lupa): Rent (Upa/Renta)

     • Labor (Paggawa): Wages (Sahod/Sweldo)

     • Capital: Interest

     • Entrepreneur: Profit (Tubo)

     • Government: Tax (Buwis)

5. Public Finance (Pampublikong Pananalapi): Refers to the funds collected by the government (such as taxes) to provide public services, including subsidies, public schools, and hospitals.

The Scientific Method in Economics

1. Identifying the Problem (Pag-alam sa Suliranin): Defining the specific issue that needs a solution or explanation. Example: How does the population grow?

2. Formulating a Hypothesis (Pagbibigay ng Hypothesis): Proposing an educated guess or tentative explanation.

3. Data Collection (Pangangalap ng datos): Gathering information to verify the hypothesis via:

   • Reading maps.

   • Interviews (Pakikipanayam).

   • Studying statistics.

   • Reading books, newspapers, and magazines.

   • Using the internet.

4. Formulating a Conclusion (Pagbuo ng konklusyon): Analyzing the data to see if the hypothesis is correct.

5. Application and Recommendation (Paglalapat ng konklusyon at Pagbibigay ng Rekomendasyon): Applying the findings to the society and humans who are the center of the study.

Relationship of Economics to Other Sciences

• Mathematics: Economics and math are inseparable; it uses graphs, charts, tables, and mathematical equations to explain economic phenomena.

• History: Records important events in human life and civilizations that lead to development.

• Psychology: Studies human behavior — how people think, learn, and interact. Combined with ethics/morality, it explains why individuals or groups act the way they do.

• Political Science: Government and laws directly influence economic changes like trade, consumer protection, prices, supply, demand, and infrastructure.

• Sociology: Studies the development, structure, and behavior of groups within society, analyzing behavior based on culture.

• Geography: Studies topography, including land and water forms, which determine the livelihoods (hanapbuhay) of people in specific locations.

Importance of Studying Economics

Studying economics helps an individual become:

1. An Analytical Citizen: Capable of critique regarding trends, policies, and government programs.

2. A Smart Consumer: One who is not easily swayed by advertisements and chooses products based on actual needs.

3. An Effective Problem Solver: Capable of finding solutions to economic issues.

4. An Entrepreneur: Gaining a complete understanding of the existing market system.

Key Economic Terms and Market Dynamics

• Supply: The quantity of a product or service that businessmen are ready to sell at various prices.

• Demand: The quantity of a product or service that consumers want and are able to buy.

• Market Laws:

  • High Demand + Low Supply: Price increases ($\text{Price} \uparrow$) due to competition among buyers.

  • High Supply + Low Demand: Price decreases ($\text{Price} \downarrow$) to clear inventory.

• Conservation (Pangangalaga): The concept of being careful in using natural resources for the benefit of future generations.

• Monopoly: A type of market where a single company or producer sells a unique product or service.

• Industrialization: The shift of a country's nature from agriculture toward industry and services.

• Human Capital: The total knowledge, skills, experience, and health of workers or citizens.