Applied economics 1

  • Economics:

Efficient allocation of limited resources to satisfy the unlimited needs and wants of humans

Greek: oikonomia - household management

- devoted to understanding how society allocates its scarce resources

- Basic understanding of economics is vital for a sound decision making

because resources scarcity exists we need to study how society chooses from the available resources , how these are produced and priced and who are the consumers.

IMPORTANCE:

  • Guides us how to make a living, use money wisely, run our business, distribute available scarce resources.

  • helps government promote growth and improve the quality of life while avoiding depression and inflation and analyze patterns of social behavior

  • basic understanding of economics is vital for a sound decision-making

Castillo - Study of how man best allocate and utilize the scarce resources of society to satiisfy unlimited want.

Fajardo - Proper allocation and efficient use

SCARCITY VS. MAN’S INSATIABILITY

  • Recession: 2 consecutive quarters’ GDP is negative

  • Depression: Prolonged recession

NATURE OF ECONOMICS

As Science

- Body of systematic knowledge using scientific method

- Use scientific methods to build theories that can help explain the behavior of individuals, graph, organization

As social science

- Studies human behavior

- deals with the study of man’s life and how he lives with other men

- Study of relations between people during production, distribution, exchange, consumption, and public finance (divisions of economics)\

Applied science

- Observe how theories work in practice

- When theories are applied

BRANCHES

  • Macroeconomics

- Broad issues: inflation, unemployment level

- Deals w/ economic behavior of the whole economy or aggregate

  • Microenomics

- Deals w/ individual units’ behavior: consumers, firms, owners

- Constitute small segment of the whole economy

- Actions of individual agents

DIVISIONS OF ECONOMICS

  • Production: producing/creating goods needed by household to satisfy needs

  • Distribution: Marketing of goods and services to different economic outlets for allocation to consumers

  • Exchange: Transferring goods and services to a person for something in return

  • Consumption: Proper utilization of economic good

  • Public finance: Government activities (taxation, borrowings, expenditures) Efficient use and fair distribution of public resources in order to achieve maximum social benefits

Applied economics 2

  • Economics - 2 centuries old

  • Adam Smith - Father of economics

“ An inquiry into the nature and causes of the wealth of nations” on march 9, 1776 same year for america’s decleration of independence

FACTORS OF PRODUCTION

  • Land

- gift of nature

- Natural resources

  • Capital

- manmade resources

- human creation to be used to produce

  • Labor

- Physical & mental effort to produce

  • Entrepreneurship

- The act of organizing and coordinating the other 3 factors