INTRODUCTION TO

ECONOMICS
 Objectives
At the end of the class, the students are
expected to learn the following:
1. Meaning of Ecomomics
2. Concept of Scarcity
3. Four Factors of Production
4. Human Needs and Wants
 Economics
Defined as the “Efficient
allocation of the scarce
means of production toward
the satisfaction of human
needs and wants”.
 Efficient Allocation

 Efficient - achieving maximum productivity with

minimum wasted effort or expense
 Allocation - the action or process of allocating or
distributing something.
 Economic efficiency implies an economic state in
which every resource is optimally allocated to serve
each individual or entity in the best way while
minimizing waste and inefficiency.
 SCARCITY

 commodity or service being short in

supply, relative to its demand.

 limited availability of economic

resources relative to man's or society's
unlimited demand for goods and
services.
 SCARCITY

 Since human needs and wants are

unlimited and the available resources
are limited, scarcity naturally results
leaving the society with the problem
of resource allocation.
 Origin of Economics

From the Greek words...

1.) Oikos- household
2.) Nomus- system or management
Oikonomia or Oikonomus means “management
of household”
All those people living under one roof are
considered a household.
 HOUSEHOLDS

Households do two fundamental things vital to

the economy.
1. Demand goods and services from product
markets
2. Supply labor, capital, land, and
entrepreneurial ability to resource markets.
Economists think of each household acting as a
single decision-maker.
 Factors of Production

Land
Labor
Capital
Entrepreneurship
 Factors of Production (Land)

- All natural resources found in nature

- Comprises all the materials and things,
which are available beneath the soil or
above it.
-Main source of raw materials which are
utilized for the production of goods and
services.
 Factors of Production (Land)
Ex. forests, mountains, rivers, oceans, minerals,
air, sunshine.
Fossil fuels (petroleum, natural gas, coal)
Minerals (diamonds, gold, copper, silver)
Natural vegetation, forests, timber.
Animals (salmon, whales, deer, etc.)
Air, wind. Water, water power, lakes,
Sunlight, Soil...
 Factors of Production (Labor)
- Any form of human effort exerted in
the production of goods and services.
- Covers a wide range of skills, abilities and
characteristics.
Ex. Factory/Construction workers, Skilled
workers (baker, electrician,etc.), nurse, doctor,
lawyer, tacher...
Factors of Production (Capital)
- Manmade goods used in the production
of other goods and services.
Ex.
Buildings, Factories, equipment/machineries,
and other physical facilities used in the
production process.
 Factors of Production
(Entrepreneurship)
- An Entrepreneur is a person who
organizes, manages, and assumes the
risks of a firm.
- An Entrepreneur possess managerial skills
needed in building, operating and expanding
the business.
- The one who decides what combinations of
land, labor and capital are to be used in the
production process.
 Needs and Wants
Human Needs - the elements required for
survival and normal mental and physical health,
such as food, water, shelter, protection from
environmental threas, and love.

Human Wants - are those things that people

desire to have above what they truly need in
order to live such as jewelries, cars, cellular
phone, expensive house, among others.
 Illustrative Example (Bakery)
Raw materials (Land)

Manager
Baker (Labor) (Entrepreneurship)
Building/Equipment (Capital)
 Activity

Give specific example that involves the four factors of

production. Write on a 1/2 yellow pad (30 mins).

Explain what you have written on class (10 mins max).

 Assignment

 Advance Reading:
- Concept of Circular Flow Model
- Opportunity Cost
- Basic Decision Problems
- Four Basic Economic Questions
THANK YOU!!!