ECONOMICS

Is a study of social behavior and

relation of human wants, production
and distribution and allocation.

People have needs and wants.

BASIC NEEDS

We need to eat in order to survive

We need clothing to warm ourselves
We need houses to live in
we need education to improve our knowledge and skills

Humans have unlimited number

of material wants.
ex:
clothes in fashion
cellular phone
modern appliances
expensive cars
vacation to other countries.

SUPPLY OF RESOURCES

It

is not enough to be able to

satisfy all the unlimited wants
of people.
It created a mismatch of
unlimited human wants and
availability of goods.

SCARCITY

Situation

in which the
amount of something
available is insufficient to
satisfy the desire for it.

SCARCITY AND INDIVIDUAL CHOICE

Unlimited

variety of scarcities,
based on two basic limitations:
1.Scarce time
Limited number of hours in each
day to satisfy our desires
2.Scarce spending power
Cannot afford to buy more of the
things we want

SCARCITY AND INDIVIDUAL CHOICE

Limitations

force each of us to
make choices
Economists study
Choices
Consequences of those choices
Indirect effects of individual
choice on our society

SCARCITY AND SOCIAL CHOICE

Society

faces a scarcity of resources

Categories of resources:
Labor
Capital
Human capital
Capital stock
Land/natural resources
Entrepreneurship

SCARCITY AND ECONOMICS

Problems

studied in economics: the

scarcity of resourcesand the choices it
forces us to make
Households have limited income to
allocate among goods and services
Firms production is limited by costs
of production
Government agencies the budget
is limited, so goals must be carefully
chosen

SCARCITY AND ECONOMICS

Economists

study the decisions made by

households, firms, and governments to
Explain

how our economic system

operates
Forecast the future of our economy,
Suggest ways to make that future even
better
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How

do we distribute and allocate

our existing resources in order to
address peoples needs as much
as possible?
What are the mechanisms by
which these resources can be
distributed to everyone in order
to serve as many needs as
possible.

ALLOCATION MECHANISMS- WAYS OF

DISTRIBUTING OUR RESOURCES

1. MARKET MECHANISM It

is use as a way of distributing and allocating available resources.

MARKET- is a place where buyers and sellers discuss, decide and

transact as to when, where, how, what and who will produce and
buy the goods and services.
PRICE- is an indicator of the cost of production of commodities, as
well as an index of scarcity and abundance.
Supply of goods is abundant- price is lower
Supply of goods is scarce- price is higher
>Supermarkets, wet markets, malls, school canteen, sarisari store,
etc--- places where we usually experience this type of mechanism.

COMMAND SYSTEM
Type of allocation mechanism is based on
the priciple that all productive reources,
except human labor, are owned by the state.

2.

CENTRAL

PLANNING BOARD- they

determine what the whole society will need.
Based on this need, the board will know
what to produce and where to allocate
available resources.

RUSSIA

AND CHINA- two countries that

practiced this kind of system

TWO MAIN BRANCHES OF

ECONOMICS

MICROECONOMICS
Micro

comes from the Greek word

mikros, meaning small
Studies the behavior of consumers,
producers and market structure
Choices they make
Interaction in specific markets
Focuses on individual parts of an
economy
15

PROFITS-

the difference between

the revenue and the cost.

REVENUE-

it is the amount of
money the producer gets out of
selling in the market what he
produced.

COST-

is the value of all the

resource he utilized during the
production.

DEMAND- reflects the behavior of a typical

consumer in relation to the price of good; and can
reflect the purchasing power of the consumers
income.
SUPPLY- reflects the behavior of a typical producer
with respect to the price he will be able to charge for
his products, among other things, the limits of his
production capacity.
BARGAINING- process in which you haggle with the
price of the producer.
TRADE- exchange of money and goods takes place.

MACROECONOMICS
Macro

comes from the Greek word makros,

meaning large
Studies the behavior of the overall economy
Focuses on big picture and ignores fine
details
Looks at the relationships of government to
the business and private consumers in
general and vice versa.
It also deals with the local market and its
relationship with foreign market.
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ECONOMIC ANALYSIS

this section discusses a simple framework

used in economic to analysis to analyze various
economics transactions taking place in the
economy.

CIRCULAR
Circular

FLOW ANALYSIS

flow- is our map. Like any map it is

not as detailed and as complete as to show you
all the houses and market.
It helps us understand economic activity and
where the people come into the picture.

A SIMPLE ECONOMY

Two groups of people

CONSUMER- ex. Own family

PRODUCER

CONSUMABLE- items that are produced and available

in various outlets and markets.

CONSUMPTION
NEEDS
2a

1a

PAYMENTS
4a

3a

PRODUCERS

CONSUMERS
8a

5a

7a
WAGES/INCOME
LABOR SERVICES

Basic Philippine Economy System

6a

MORE ELABORATE ECONOMY

3 MAJOR SECTORS:
1. Government- build and provide the following:

Highways

bridges
Ports
Public schools buildings
Pay for public school teachers
Pay for policeman for peace and security

PUBLIC GOODS- extremely necessary for economic stability

TAXATION- one of the major source of government funds.
Government collects taxes from both consumer and producers.

 Government

transaction

Example:
2001

---spent 711 billion pesos on various

activities for the country, on the other hand, it
generated income of 568 billion out of various
taxes such as income and sales taxes.

DEFICIT-

if spending is greater than the income.

DEBT- occurs when government borrows either
from the private and public sector or from abroad
to finance the deficit.

GOVERNMENT

1b

TAXES

2b
PRODUCERS

CONSUMER
3b

PUBLIC
GOODS

4b

External ( or the rest of the world) sectors

Imports and Exports of goods and services
Remittances of Filipino working abroad
Foreign investments
Foreign Borrowings

2.

Banking Sectors- the one of the channels

through which savings, or extra money from the
consumer group, is put back into the system in
the form of local investments.

3.

BANKING SECTORS

1d

SAVINGS

2d
PRODUCERS

CONSUMER
3d

LOANS
GRANTED

4d

TYPES OF BANKS
1. COMMERCIAL BANKS
2. SAVINGS BANKS
3. PRIVATE DEVELOPMENT BANKS
4. RURAL BANKS

They pay interest to depositors and charge

interest to borrowers.
Interest- money paid regularly at a particular
rate for the use of money lent, or for delaying the
repayment of a debt

OBJECTIVES IN THE STUDY OF

ECONOMY
Primary objective is how to improve the well being
of people.
GOALS:
1. STABLE PRICES- rising prices people will be
able to buy less.

2. FULL EMPLOYMENT- if people do not have

jobs, it creates a whole lot of social problems such
as crimes, mendicancy, homelessness and etc.
3. Proper Allocation- limited resources have to
be put in places where they are most needed and
where they can earn the most returns.

 4.

Equality in Income Distribution and Poverty

Elimination

5.

Economic Growth and Development

- ideally , there should be sustained growth in the
countrys income and improvement in the economic
well beingof its people. This can be attained by the
following:
Peoples capability through improvement in human
capital e.g education and skills development
Modern technology and production facilities.

SECTION 1
Philippine

challenges

Resources: Problems and

RESOURCES-

this are needed in the

production of goods and services.

GROUPS OF RESOURCES
NATURAL RESOURCES
HUMAN RESOURCES
PHYSICAL CAPITAL

1. NATURAL RESOURCES

A.

Forest Resources
Great source of products like
Logs Lumber
Plywood
Veneer

Mismanagement=
Solution:

deadly calamities

1 TREE= 3 TREES
PERMIT TO LOG

 B.

MARINE RESOURCES
FISHERIES- major food for Filipino people.
Production of fishes has increased but the supply
has declined, some reasons are Overfishing and
illegal fishing methods.
C.

MINERAL RESOURCES
1. METALLIC- Gold, silver, chromite, copper, iron,
lead
2. NON METALLIC- sand, gravel, salt, silica
sand
3. MINERAL FUEL

2. HUMAN RESOURCES
These

are the people behind the production

process
Teachers , doctors, welders, drivers, pilots,
engineers, carpenters, factory workers, etc....

High

population growth would not be problem

if the economy can accommodate it.

The

education in the Philippines is free in

public government elementary and high school.

3. PHYSICAL CAPITAL

These includes machinery, equipment, structures like

buildings, road, bridges, airport and other infrastructure.
If there are enough good quality infrastructures, they can
greatly facilitate and increase the efficiency of the
production process.
Infrastructures:

Land

classification
Area reforested
Forest Reforested
Production of forest products
Length of roads
National bridges
Registered airports
Telephone lines