Introduction

Based on Dr. Tereso Tullao’s textbook entitled,

“Elements of Economics”.

Definition

a social science that deals with the efficient allocation of scarce resources among its alternative uses to satisfy unlimited human wants and needs

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Definition

“As an allocation of wealth (arising from the scarcity of resources)”

“As creation and consumption of wealth (expansion of wealth)”

“As a science of choice”

Scientific Method

1. Formulation of the problem2. Establishing possible answer or

hypothesis3. Gathering data and information4. Treatment and analysis of data5. Interpretation of results together

with the conclusion

Scientific Method

Formulation of the Problem

Arises from “existing issues or limitations of previous studies” Examples include causes

of poverty, implications of the minimum wage on the unemployment rate, etc.

Scientific Method

Establishing a HypothesisPreliminary answer to the problem

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Scientific Method

Gathering Data and Information Approach “depends on the objectives of

the study” Historical approach – “trace the roots of

contemporary issue or problem” Experimental method – “compare effects of

outside intervention, for example of food assistance, on consumption patterns”

Methods include survey, FGDs, using key informants

Scientific Method

Treatment of Data Refers to “the method of arranging,

manipulating, and testing data so that it may be suitable for analysis” General description of the data set

(i.e., central tendency) Manipulated to make inferences or

conclusions about the characteristics of the data set

Scientific Method

Interpretation ofResults & Conclusions

Answering the problem

Conclusion may accept or reject the hypothesis

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Positive vs. Normative Economics

Positive Economics is “descriptive in approach”. It “illustrates what is happening to various actors, sectors and institutions within and outside the economy”.

Normative Economics is “prescriptive in approach”. It “directs us on what ought to be done”.

Other Tools

Use of Mathematics – effective in describing relationships between economic variables

Using Models – aids in illustrating hypotheses, theories, and estimates

Using Graphs – representations of economic models

Other Tools

Using Statistical Analysis – verifies the validity of economic relationships as applied to reality (i.e., econometrics)

Ceteris Paribus – “everything else remaining the same” or “all else constant”

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