Lesson 1 what is economics
- 1. Lesson 1 Basic Concepts of Economics
- 2. Learning Outcomes In this lesson, the students are able to: 1. Define economics 2. Explain the concepts of economics 3. Explain how applied economics can be used to solve economic problems
- 3. Pre-test I. True or False: Carefully read each sentence and determine if the sentence is true or if the sentence is false. • 1. Economics comes from the Greek word oikonomia • which means household chores. • 2. Economics is considered a field of social science. • 3. Economics is relevant because it is part of • everybody’s life. • 4. There are three (3) divisions of Economics, the • microeconomics, the macroeconomics and the home • economics. • 5. As a science, Economics is related to other sciences.
- 4. II. Essay. Answer the following using five (5) sentences and above. a. As an individual, what do you think is the essence of studying economics? b. How do you apply economics in your household?
- 5. What is Economics? Economics is formally defined as follows: “The science which studies human behavior as relationship between ends and scare means which have alternative uses” (Stiegler, 1985) “Study of how societies use scare resources to produce valuable commodities and distribute them among different people” (Samuelson and Nordhuas, 1995) “Economics is the study of given ends and scarce means (Lionel Rob-bins).
- 6. Economics is…. • The word “economics” comes the Greek word “oikonomia”, which literally translate to household management. It is also a derivative of oikonoméō, “a steward, managing a household”)- properly, a stewardship, management (administration). • Economics is a discipline and can actually be defined as the study of scarcity, the study of how people use resources, the study of the proper allocation and efficient use of scarce resources to produce commodities for the satisfaction of unlimited needs and wants of man.
- 7. • Economics involves wealth, finance, recessions, and banking, leading to the misconception that economics is all about money and the stock market. • Economics seeks to understand how individuals interact within social structures to address key questions about the production and exchange of goods and services. • Economics is regarded as a social because it uses scientific methods to build theories that can help explain the behavior of individuals, groups and organizations.
- 8. • Hence, economist have to employ different methods, based primarily on observation and deduction and the construction of abstract models. Production is about conversion of scarce resources into desired goods and services. These resources are often to as the factors of production. Land (acreage, and raw materials) Labor (unskilled, semiskilled, professional) Capital (machines, factories, transportation equipment, and infrastructure) and Entrepreneurship (organizing the other factors of production and risk-taking) Scarcity refers to a physical condition where the quantity desired of a particular resources exceeds the quantity available in the absence of a rationing system.
- 9. Potential candidates for rationing systems include: • Traditional and Culture, addressed • Planning and Central Government Command • Voting and Political Procedures • Markets – using a system of prices to act as means of communication about the availability of resources and the desire for those resources.
- 10. Goods and services refer to: • Final Goods and services --- those products that are directly consumed by individuals to satisfy their needs and wants • Intermediate or Capital Goods --- are those goods used to produce other goods. Needs represent those goods and services required for human survival. Needs are determined by nature, climate and region, and are often finite. Wants or Desires refer to everything else. Human wants are determined by society and culture in which individual lives.
- 11. • Equally important is developing an understanding about how wants and needs are communicated to the economic system, how to involve individuals in the production process and provide incentives for these individuals to specialize in areas of production where their talents are best used and them exchange goods with others.
- 12. Main Branches of Economics 1. Microeconomics deals with the behavior of individual components as an economic agent such as household, consumer, worker, firm and individual owner of production (producer). refers to the study of choices by individuals, like how someone decides on the budget.
- 13. Main Branches of Economics 2. Macroeconomics deals with behavior of economy as a whole with the view to understand the interaction between economic aggregates such as employment, and national income/country’s gross national product (GNP) the study of government, industries, central banking, and the boom and bust of the business cycle.
- 14. Milton Friedman, a well know statistician and economist differentiate the two. • Normative Economics – has something to do with “what ought to be.” It involves ethics and value of judgment. • Positive Economics, on the other hand has something to do with “what is”. It describe facts and data in the economy. It gives policy recommendation to positive economics.
- 15. Group Activity Give examples of how economics affects your life as a student and as a member of the house hold. Explain to class your answer and realization.
- 16. Assignment • Clip an economic news article from the newspaper or magazine. Explain why and how the issue being discussed is economics in nature. • Write an essay on the relevance of economics in one’s daily life.
Editor's Notes
- #15: Ex. If we want to know the percentage of 2016 graduates of Phil Colleges and Univ. or rate of unemployment. Positive economics available factual data. (RVAT) Reformed Value Added Tax to 12% we are talking of a normative economics. This case needs a moral judgment or decision and not merely through economic science.