Revisiting Economics as a Social Science

Lesson 1

Applied Economics

Specific Objectives

1. Define economics

2. Determine the importance of economics

3. Describe the nature of economics

Economics

Study of what constitutes rational human

behavior in the endeavor to fulfill needs

and wants

Understanding how society allocates its

scarce resources

Almost always, human activities involve

economics

DEFINITIONS OF

ECONOMICSFROM

DIFFERENT PERSPECTIVES

1. Fajardo

2. Nordhaus

Economics – is the proper allocation and

efficient use of available resources for the

maximum satisfaction of human wants

Economics – is the science of choice. It

studies how people choose to use scarce

resources to produce various commodities

3. Sicat

2. Webster

Economics – is a scientific study which

deals with how individuals and society

may general choices

Economics – branch of knowledge that

deals with production, distribution and

consumption of goods and services

ECONOMICS IN A

PROCESS

Unlimited wants

ScarcityMake

Choices

Economic activities

Earning money

Buying goods and services

Depositing and withdrawing

money in bank

Economics from

“Oikanomia”

Household

Management

Science

Social Science

Economics

Economics is classified as a social

science because it deals with the

study of human’s life and how he

lives with other men.

ECONOMICS

Macroeconomics

Microeconomics

Macroeconomics Deals with the economic behavior of the

whole economy or its aggregates

(composed of individual units)

AGGREGATES

Business Government

Households

Macroeconomics

Discusses the following:

- Gross national product

- Level of employment

- National income

- General level of prices

“EMPLOYMENT AND INCOME ANALYSIS”

Microeconomics

Deals with the economic

behavior of individual units

such as:

Consumers

Firms

Landowners

Microeconomics

Discusses the following:

- Price of rice

- Number of workers in a certain firm

- Income of Mr. Fu

- Expenditures of PLDT

“PRICE THEORY”

Divisions of

Economics

Production

Distribution

ExchangeConsumption

Public Finance

Divisions of Economics

1. Production – refers to the process of producing or

creating goods needed by the households to satisfy

their needs

Factors of production – inputs

Goods and services – outputs

Factors of Production

Goods

Services

Divisions of Economics

1. Production – refers to the process of producing or creating goods needed by the households to satisfy their needs

Factors of production – inputs

Goods and services – outputs

2. Distribution – refers to the marketing of goods and services to different economic outlets

3. Exchange – refers to the process of transferring goods and services to a person in return for something

present medium of exchange - money

Divisions of Economics

4. Consumption – refers to the proper utilization of

economic goods. However, goods and services could

not be utilized unless you pay for it. Hence, consumption

could also be spending money for goods and services

5. Public Finance – pertains to the activities of the

government regarding taxation, borrowings and

expenditures. It deals with the efficient use and fair

distribution of public resources.

ECONOMIC

RESOURCESFactors of production or inputs

Land

Entrepreneurs

Labor

Capital

Foreign

exchange

1. Land

These resources consist of free gifts of nature

which includes:

- soil

- rivers

- lakes, oceans

- forests

- mountains

- mineral resources

1. Land

Land is considered an economic resource because it

has a price attached to it.

* we usually pay for it through rent or lease

Land is a limited resource. Physical

land is a fixed resource.

2. Labor

Also called “human resources”

Labor- refers to all human efforts, be it mental or

physical, that help to produce satisfying goods

and services

In return, he earns an income in forms of wages

and salaries

2. Labor

Labor is a flexible factor of production

- workers can be allocated to different areas of

the economy for producing goods and services

3. Capital

Two economic definitions of capital:

a. Capital – can represent the monetary

resources use to purchase natural resources

Ex: Companies use capital to buy land and

other goods

3. Capital

Two economic definitions of capital:

b. Capital – represents the major physical assets individuals and companies use when producing goods and services

Ex: buildings, vehicles, equipments

Income derived from capital is interest

4. Entrepreneurs

French word which means “enterpriser”

Entrepreneur – organizer and coordinator of

other factors of production: land, labor and

capital.

He uses his initiative, talent and

resourcefulness to create economic goods.

5. Foreign Exchange

Refers to the dollar and dollar reserves that the

economy has.

Foreign exchange is part of economic resources

because we need foreign currency for international

trading and buying materials from other countries

International medium - dollar

QUIZ

LET’S TEST

OURSELVES!

1. Economics is derived from the Greek word

“oikanomia” meaning:

a. Economic management

b. Household management

c. Social management

1 point

LET’S TEST

OURSELVES!

2. Economics is a social science because it

deals with:

a. Human nature

b. Natural resources

c. Experimentation

1 point

LET’S TEST

OURSELVES!3. Scarcity of resources means:

a. minimum resources

b. excess resources

c. shortage of resources

d. no resources

1 point

LET’S TEST

OURSELVES!4. These are examples of human wants except:

a. smartphone

b. perfume

c. watch

d. clothing

1 point

LET’S TEST

OURSELVES!

5. Give your definition of

economics

2 points

Identify what type of

economics (Macro or Micro)

discusses the ff:

1. Gross National Product

2. Price of bananas

3. Profits of Bread and Butter

4. Employment

1 point per item