ECONOMICS - Organizing and coordinating the other 3

factors of production
I. THE ECONOMIC PROBLEM: V. BASIC ECONOMIC PROBLEMS
 SCARCITY Therefore, every society (economic
“limited productive resources (factors system) should answer the following
of production)” questions:
 MAN’S INSATIABILITY - What to produce?
“unlimited needs and wants” The system must determine the needs of
II. Definition of Economics the people.
 Economics examines and studies how What would happen if we do not consider
individuals and societies allocate their this?
limited resources to satisfy their - How to produce?
unlimited needs/wants. The system must choose the most efficient
 Science: It is a body of systematic way of producing.
knowledge built upon by conscious What would happen if we do not consider
efforts. Its laws and principles are this?
arrived at after a long series of - For whom to produce?
observations and experimentations. The system must choose where the goods
 Applied: Study of observing how will be distributed.
economic theories work in practice. What would happen if we do not consider
Application of economic principles and this?
theories to real situations, and trying to VI. PURE MARKET ECONOMY
predict what the outcomes might be - Private firms account for all the production.
III. MICRO AND MACRO - Factors of production are privately owned.
- Studies the economic behavior of: - Income from selling resources goes
 MACRO: the whole economy exclusively to the resource owners.
 MICRO: individual units - Private firms own the factors of production.
- Involves topics such as: - Government does not intervene.
 MACRO: national income, country’s - PROBLEMS ENCOUNTERED BY PURE
expenditures MARKET
 MICRO: income of workers in a firm, 1. has difficulty in enforcing property
expenditures of ADNU rights.
IV. PRODUCTIVE RESOURCES/ FACTORS OF 2. results to some people having few
PRODUCTION resources to sell.
- These are inputs that lead to outputs for 3. results to some firms trying to
consumption. monopolize markets.
- LAND OR NATURAL RESOURCES 4. results to no public goods.
“gifts of nature” 5. causes externalities or third-party
- CAPITAL OR CAPITAL GOODS harms.
“human creations” to be used to produce 6. experience economic fluctuations.
goods and services VII. PURE COMMAND ECONOMY
- LABOR - The government accounts for all the
Physical and mental effort to produce goods production.
and services - Factors of production are publicly owned.
- ENTREPRENEURSHIP ABILITY
Clyde Myca Paz
AC22
 - The government has full control of the
allocation of resources and products.
- The government own the factors of
production.
- PROBLEMS ENOUNTERED BY PURE
COMMAND ECONOMY
1. may not prioritize consumers.
2. gives little freedom of choice.
3. planning can be inefficient.
4. resources are sometimes wasted.
5. causes environmental damage.
6. gives no role for entrepreneurs.
VIII. MIXED ECONOMY
- “Balance between market and command
economies”
- Factors of production are privately and
publicly owned.
- Philippines:
Government determines the type of
industries that are allowed which private
firms operate.
IX. TRANSITIONAL ECONOMY
- Converting command economies to market
economies through “privatization”
X. TRADITIONAL ECONOMY
- “shaped by custom or religion”
- Examples: caste system in India; gender pay
gap in some countries

Clyde Myca Paz

AC22