(B) the Nature and Importance of Economics

8/10/2019 (B) the Nature and Importance of Economics

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At the conclusion of the session, you musthave been able to:

Compare the various definitions of economics andidentify their common ground.

Identify the basic economic problem addressed by

the concerns of economics.

Relate economics with the other social sciences. (


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At the conclusion of the session, you musthave been able to:

Differentiate macroeconomics frommicroeconomics as the two main divisions ofeconomics.

Enumerate and discuss the significance of the

following: economic systems, economicresources, and economic goals.


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a social science concerned with usingscarce resources to obtain maximum

satisfaction. (Walstad and Bingham, 1993)

the study of how societies use scarceresources to produce valuable commoditiesand distribute them among different people.(Samuelson and Norhaus, 1992)


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the study of production, distribution,selling, and use of goods and services.

(Collin, 1997)

the study of how people use their limitedresources to try to satisfy unlimited wants.(Parkin and Bade, 1991)


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What is the common

ground of thedefinitions?


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Two Opposing Realities:

1.Resources arescarce

.2.Human needs and

wants are unlimited.


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SCARCITY

the imbalance between our desires and the

means of satisfying those desires. (Hyman, 1992) The condition wherein most things that people

need and want are available only in limited

supply.


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WANTS

refer to a persons desires or preferences for

specific ways for satisfying a basic need.(Bannock, 1974)


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OPPORTUNITY COST

the cost of choosing to use resources for one

purpose measured by the sacrifice of the next bestalternative for using those resources. (Hyman,1992)


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From the foregoing

definitions, what doyou find to be the basic

economic problem?


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SCARCITY


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1. What goods and services must beproduced and in what quantities? Rice or weapons?

If rice, how much of what type?


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2. How shall these goods andservices be produced?

Who shall produce them?

What resources and technologies shall be used?


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3. For whom shall these goods andservices be produced?

Who shall consume them?

What benefits from the results of the economicactivities?


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The PRODUCTION, DISTRIBUTIONand CONSUMPTIONof goods and

services.


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PRODUCTION The creation or addition of utility. Utilityis the economic term for usefulness. It is

the ability of a good or service to satisfy a want.

Form Utility Place Utility

Time Utility

Possession Utility


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PRODUCTION Factors: (Economic Resources)

Landland and natural resources

Labortime and effort of human beings involved in theproduction process.

Capitalgoods used to produce other goods

Entrepreneurship undertaking that combines thethree other factors in the production process.


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DISTRIBUTION

The allocation of the total product among thefactors of production.

The distribution of money incomes among thefactors of production.

LandRENT LaborWAGES

CapitalINTEREST

Entrepreneurship PROFIT.


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CONSUMPTION The use of a good or a service. Without it, there would be no need for production

and distribution.


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GOODS AND SERVICES Characteristics of Economic Goods:

Material

Useful

Scarce

Transferable


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GOODS AND SERVICES Economic Services non-material activities that

are useful, scarce, and transferable.

Give examples of economic services


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ECONOMICS IS RELATED TO:

Political Science

Sociology

Philosophy

History

REASON:

Government has a role inthe economy.

Low standard of livingleads to social problems.

Economic acts are humansacts (morality).

Economic developmentoccurs through time.


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MICROECONOMICS

Concerned with thebehavior and activities ofspecific economic units

individuals, households,firms, industries andresource owners.

Critical concept MARKET

MACROECONOMICS

Deals with the behavior ofthe economy as a wholewith respect to output,income, the price level,

foreign trade,unemployment and otheraggregate economicvariables.

MICROECONOMICS VS. MACROECONOMICS


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Documents

(B) the Nature and Importance of Economics