Module 1

Lesson 1

Basic Concepts of Economics

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.

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?

Definition of Economics

Using the words I have written on the board,

how would you define Economics?

?

Economics as defined

ECONOMICS

From the Greek words Oikos meaning household

and nomos meaning management

= household management

The wise production and use of wealth to

meet the demands or needs of the people

Economics as defined by

authors of Economics books Paul Samuelson (Economics)

“the study of how people and society end up choosing, with or

without use of money, to employ scarce resources that could have

alternative uses to produce various commodities among various

persons and groups in society.”

Roger Le Roy Miller (Economics, Today and Tomorrow)

“Economics concerns situations in which choices must be made

about how to use limited resources, when to use them and for what

purposes. Resources can be defined as the things people use to

make the commodities they want.”

Hall and Loeberman (Macroeconomics: Principles and Applications)

“The study of choice under the condition of scarcity”

Bernardo Villegas (Guide to Economics for Filipinos)

“A social science that studies and seeks to allocate scarce

human and non-human resources among alternatives in

order to satisfy unlimited human wants and desires.”

Gerardo Sicat (Economics)

“a scientific study which deals with how individuals and society

make choices,”

Common words among

definitions…

Scarcity- a situation where in the amount of something

available is insufficient to satisfy the desire for it.

Resources-The labor, capital, land and natural resources

and entrepreneurship that are used to produce goods

and services.

Unlimited – without limits, infinite

Wants –desires

Finally…

ECONOMICS – is a social science that deals

with how people organize themselves in

order to allocate scarce resources in order to

produce goods and services that will satisfy

the unlimited and multiplying wants and

needs of man.

Concerns of Economics

Economics is concerned with PRODUCTIONProduction is the use of inputs to produce outputs.

Inputs are commodities or services that are used to produce goods

and services.

Outputs are the different goods and services which come out of

production process.

Society have to decide what outputs will be produced and in

what quantity

Economics is concerned with DISTRIBUTION

Distribution is the allocation of the total product among

members of society. It is related to the problem of for

whom goods and services are to be produced.

Economics is concerned with CONSUMPTION

Consumption is the use of a good or service.

Consumption is the ultimate end of economic activity.

WHEN THERE IS NO CONSUMPTION, THERE WILL

BE NO NEED FOR PRODUCTION AND

DISTRIBUTION.

Economics deals with PUBLIC FINANCE

Public Finance is concerned with government

expenditures and revenues. Economics studies how the

government raises money through taxation and

borrowing.

DIVISIONS OF ECONOMICS

ECONOMICS

MICROECONOMICS

Specific

Deals with the economic

behavior of the individual

units such as consumers,

firms, the owners of factors

of productions

MACROECONOMICS

General, economy as a whole

Deals with the economic behavior of

the whole economy or its aggregate

such as government, business,

unemployment, inflation and the like.

Refers to management of income,

expenditures, wealth or resources of a

nation.

Types of Economics

1. Household Economics – most common use of economics is

for the family. At this level, anyone who knows the economic

principles will be able to improve the running of the

household.

2. Business Economics – when a person or group of persons

begins to work, they come under the system of business

economics in their workplace. In this type, you deal with the

rent, salary, profits and others.

3. National Economics – Economic factors of problems

affecting the whole nation. Deals with the management of

income, expenditures, wealth or resources of a nation.

4. International Economics – The highest stage of economic

activities involving the business of one country with other

countries like trade, tourism, exchange rates.

Is Economics a science?

Explain why if “yes” or why not if “no”

?

Economics as a Science

Is a science because it is an organized body of

truth, coordinated, arranged and systematized

with reference to certain general laws and

principles.(Observation, Formulation of theories, Gathering of

data, Experimentation, Conclusion, Generalization)

Economic analysis seeks to explain economic

events using some kind of logic based on a set

of systematic relations.

It is a social science because the subject

matter of economics is people or societies and

their behavior, unpredictable in nature.

Relations of Economics to

other Sciences

ECONOMICS

MATHEMATICS

NATURAL

SCIENCE

SOCIOLOGY

GEOGRAPHYHISTORY

ETHICS/

RELIGION

POLITICS

Essence of Studying

Economics

To understand the world betterApplying the tools of economics can help you understand global

and cataclysmic events such as wars, famines, epidemics, and

depressions. Economics has the power to help us understand these

phenomena because they result from the choices we make under

the condition of scarcity.

To gain self-confidence and become wise

decisions makersMastery of economics will help you to understand how things work in

your society thereby “feeling equipped”

To achieve social change and contribute to

National Development

Economics can help us understand the origins of serious social

problems such as: unemployment, hunger, poverty, disease, child

abuse, drug addiction, violent crime. It will also explain why previous

efforts to solve these problems have failed, and help us to design

new, more effective solutions.

To help prepare for other careersEconomics has long been a popular college major for individuals

who are intending to work in business. But it has also been popular

among those planning careers in politics, international relations, law,

medicines, engineering, etc. This is for good reason because

practitioners in each of these fields often find themselves confronting

economic issues.

Developments of Economics

Historical

INDUSTRIAL STAGE

HANDICRAFT STAGE

AGRICULTURAL STAGE

PASTORAL STAGE

HUNTING AND FISHING