THE NATURE AND IMPORTANCE OF ECONOMICSDISCUSSANT: ARNEL DE MESA MEDINA

WHAT IS ECONOMICS?

“A social science concerned with using scarce resources to obtain the maximum satisfaction of the unlimited material wants of society” – Walstad and Bingham

“The study of how societies use scarce resources to produce valuable commodities and distribute them among people.” – Samuelson and Nordhaus

“The study of production, distribution, selling, and use of goods and services.” – Collin

“The study of how people use their limited resources to try to satisfy unlimited wants.” – Parkin and Bade

OTHER IMPORTANT TERMS TO REMEMBER

SCARCITY – refers to the condition wherein most things that people are available only in limited supply.

ECONOMIC GOOD/S – anything, either physical commodity or a service, which yields utility and which could command a price if bought or sold in the market.

UNLIMITED WANTS – refers to a person’s desires or preferences for specific ways of satisfying a basic need.

OPPORTUNITY COST

Defined as “the cost of choosing to use resources for one purpose measured by the sacrifice of the next best alternative for using those resources.”

FUNDAMENTAL ECONOMIC PROBLEMS

1. What goods and services must be produced and in what quantities?

2. How shall these goods and services be produced?3. For whom shall these goods and services be

produced?

TYPES OF ECONOMIC SYSTEMS

1. Capitalism2. Communism3. Socialism4. Mixed Economies

CAPITALISM

- Is an economic system mainly characterized by private individuals owning and operating the majority of businesses that produce goods and services.

FORMS OF CAPITALISM

1. Pure Capitalism2. Modified Capitalism

PURE CAPITALISM

1. All economic decisions are made without government intervention

2. Competition serves to determine the goods and services needed by the society

3. Competition will determine who will survive in the marketplace. Under the modified capitalism, the government intervenes and regulates business to a certain extent.

RIGHTS OF CAPITALISM

1. Private property2. Profits3. Business decisions4. Choice

COMMUNISM

- Is a society in which the government owns all the nation’s resources.

SOCIALISM

- Under socialism, the government owns and operate the basic industries like communication, water service, postal service, transport, banking and selected manufacturing businesses.

MIXED ECONOMIES

- It contains both private and state enterprises.

ECONOMIC RESOURCES

1. Land2. Labor3. Capital4. Entrepreneurial ability

ECONOMIC GOALS

1. Economic growth2. Full employment3. Economic efficiency4. Price level stability5. Economic freedom6. Equitable distribution of income7. Economic security8. Balance of trade

DIVISIONS OF ECONOMY

1. Microeconomics2. Macroeconomics