Revisiting Economics as a Social

Science
 Learning Outcomes
• The learners demonstrate an understanding
of economics as an applied science and its
utility in addressing the economicproblems
of the country.
• The learners shall be able to analyze and
propose solution/s to the economicproblems
using the principles of appliedeconomics.
Activity #1 Form words from the word
ECONOMICS and write all the words taken from
it and write a short description of each term.
 Revisiting Economics as a
Social Science
3 strands of the definition ofeconomics

1. Wealth (wealth-getting & wealthusing)

2. Decision-making process (making choices)
3. Allocation process (allocation of scarce
resources to meet the unlimited human
wants.
 Economics as Study of
Wealth
• ECONOMICS-define as the science on
wealth-getting & wealth-using implies that
the motivation of the process of wealth
accumulation is the utilization of wealth for
the individual’s satisfaction and society’s
welfare.
- Is all about wealth and how this wealth is
being used by individuals and society at large
for material survival, stability & development.
 Economics as Study of
Wealth
• 2 major economic problems

1. Production (disposition of these producedG&S)

2. Consumption (producing G&S)

 Economics as Study of
Making Choices
• In everything that we do, whether we produce or
consume, whether it is wealth-getting or wealth-using, we
make decisions and these decisions are based on alternative
choices.
• In making decisions, we have to consider a major conceptin
the study of economics- Opportunitycost.

(Opportunity Cost- When one makes a choice, there is always

an alternative that has to be given up.)
 Economics as Study of
Allocation
It concentrates on the allocation process, economics
can be analyzed comprehensively in terms of its five
key elements:
1. Social Science
2. Resources
3. Human wants
4. Scarcity
5. Allocation
1. ECONOMICSASSOCIAL
SCIENCE
It utilizes the scientific method of inquiry
from identifying the problem, proposing
alternative tentative answers or hypotheses,
testing the tentative answers to the question
or the problem at hand, gathering and
treating the data and answering thequestion
through the conclusion.
 ECONOMICSASSOCIAL
SCIENCE
• SOCIALSCIENCE-can be described as the study
of the various modes and aspects of human interactions in a
group as these people aspire to preserve their groups as a
social unit, to make it stable, and to promote its growth,
expansion and development.
• As a social science, ECONOMICS pertains to the study on
how society creates its material wealth, how its makes this
wealth available to its people with minimum difficulties, and
how it expands itswealth.
 2 .Resources and the Study
of Economics
• Resources or Wealth- defined as products of
nature, qualities of individuals, and man-made thingswhich
are used in producing goods or services.
• Included in the coverage of resourcesare:
1. Natural Resources (marine, forest, agricultural,
mineral)
(natural resources are used as raw materials or
intermediate inputs for the production of other
goods.)
 Resources and the Study of
Economics
2.Human Resources- are qualities of human beings
thatmay include, labor, intelligence, creativity, health,
education and talents.

3.Physical or Man made Resources- includesvarious

types of buildings, equipment, technology, bridges,
airports, factory plants and other physical
infrastructure that can be used o provide presentand
future satisfaction.
 Resources and the Study of
Economics
*one of the key characteristics of resources is that they are
limited*

2 major factors of the limitation ofresources:

1.It pertains to the length of time as well as the difficulties in
producing these resources.
2.More than the difficulties in producing these resources, the
limitation is further intensified by the competing uses for these
resources.
 3. Human wants and
Economic Analysis
• Human Wants- are based on human needsbut
differentiated or expanded by the influence of
various factors.
• Human Needs- can be portrayed as basic necessities
for material survival including food, shelter and
clothing.
 4. Scarcity as a source of
economic problem
• Scarcity- can be considered as a key economic
problem because of the limitations of resources and
the expansion of humanwants.
• Defined as the limitation of resources toanswer the
expanding human wants.
 Scarcity as a source of
economic problem
• People equate scarcity with shortage, thesetwo
concepts are related, they are not identical:
• Scarcity- is a general characteristic of resources in
the light of its competing uses that may arise from
the rapid expansion of humanwants.
• Shortage- is a condition when the supply of a good,
service, or resource is not enough to meet the
demand.
• Surplus- is a condition when the supply of a good,
service, or resource is greater than thedemand.
 5. Allocation and the Act of
Economizing
• Allocation- defined as a social mechanism to
respond to the economic problem of scarcity.

3 major mechanisms of allocation

1. Market System
2. Command System
3. Tradition System
 3 major mechanisms of
allocation
1. Market System
*Market- can be considered not only a place buta
state when transactions are made.
- is a state when buyers and sellers transact on
the purchase or sale of a good orservice.
*Price of a Commodity- is both an index of cost or
sacrifice (for producers) and benefit or satisfaction
(for buyers).
*Price- is a summary of the unit cost of producing the
good or service.
 3 major mechanisms of
allocation - Market System
*the mechanism of the marketsystem can also address the
problem of a surplus or relativeabundance.

*the market system operating on the price mechanism

provides incentives and disincentives to consumersand
producers that respond to the problem of scarcity.
 Market System
• 3 basic economic questions:

1. What to produce? (ones to be produced)

2. How to produce? (the mannerof
production/ technology)
3. For whom to produce? (for whom the
commodities will be produced byallocating
a higher proportion of output to members
of a society with high purchasingpower)
 3 major mechanisms of
allocation
2. Command System- the state or an agency of the
government may be in charge in the allocation of
resources by using its political power inanswering the
basic economic problems of production and
distribution.
- In times of natural calamities, disasters or national
emergencies, the command system may be more
orderly than the marketsystem.
 Command System
• Has been useful as a temporary alternative
mechanism in abnormal times when the
market system cannot fully operate or the
price mechanism is inadequate for allocation.

• Has been used to oblige people in the

construction of variousinfrastructures.
 3 major mechanisms of
allocation
3. Tradition System- may be useful in situations
where the operation of the market may not be
appropriate, or the power of an organized state has
no control over a certain community.
- It is the role of social structure, norms, belief, and
value system in shaping the behavior ofmembers of
society including the accumulation and utilizationof
wealth.
 3 major mechanisms of
allocation
• If the market is operating on price changes as incentive and
disincentive signals while the command system operates
under rule of power and force, tradition uses culture, social
norms to temper wants and encourages producers toexpand
production in the light of the problem of scarcity.
• Although the market system is the most prevalent
mechanism for allocation in many societies today, t the
command system as well and tradition have been utilized
with some value and effectiveness in severalinstances.