ECONOMICS: The Basics

Sir Theo

ECONOMICS- Is a body of knowledge that analyzes, explains, and even predicts the economic behavior of people, groups, and nations; and involves such concepts as the distribution of goods and services, level of employment and income of the people, prices, and basic economic issues such as scarcity, wants, needs, and allocation.

ECONOMICS- It comes from the Greek word that

means “household management”.

Most people have needs that are not fully satisfied. Aside from the basic needs. People may also aspire for physical security comfort, convenience, and various other wants, which can only be answered by providing them with resources.

Choices in Economics

• Unlimited wants and needs- not capable of having something

or doesn’t have capacity to spent.• Limited Resources

- available to satisfy every human want and need.

•  Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs.

• Allocation is the manner of choosing which needs should be satisfied, and how much resources should be used to satisfy them.

DIVISIONS OF ECONOMICS

• Macroeconomics is the division of economics that pertains to the study of whole economies or systems. It includes among others, following concerns:

• Inflation and unemployment• Government income and expenses• Total money supply, investments

• International finance and economies

• Balance of payments, fiscal policy

• Microeconomics is the division of economics that is concerned with individual decisions within an economy: a single consumer, a group, a firm, a country. It pertains to the workings of individual markets. It includes the following concerns:

• Prices of goods• Value of land, labor, and capital • Specific markets: food, electronics,

energy, etc.• Businesses, monopolies, and

commercial empires• Employees and employers

The Scientific Approach in Economics

• A Science as systematic field of study which objective is to produce reliable explanations and solutions using experiment, observation, and deduction.

• Economics, however, is not an exact science like mathematics and physics.

• It is a Social Science• It explains how and why people

behave the way they do, as individuals and in groups.

• It has general principles such as the Law of Supply and Demand but these do not apply in every situation to everyone.

The Tools of Economics

• Observation • This involves seeing and observing

economic phenomena that are happening presently and that had happened in the past.

• Through this economist could determine the causes and effects of events to individuals, groups, and nations.

• Economic Analysis • Facts and historical events are

available to any person or economists, but they have to see those phenomena in the light of certain assumptions and then come up with some projections using logic.

• Statistical Analyses • Economists use statistics to perform

their economic analysis.• It includes various data and

information that are organized in a systematic manner.

• Experiments• Use subjects in limited geographical

areas to establish control in their experiments.

Economic Sectors and Economics

• Individuals• Individuals struggle daily with such

economic situations such as employment, wages, and wise spending.

• Households• It consists of two or more members,

families who cooperate for the purpose of living.

• Businesses• The main objective of the business

firms is to satisfy the wants and needs of individuals and households, through the production of goods and services. This are usually categorized as single proprietorship, partnerships, and corporations.

• Government• This is a sector composed of the

leaders and prime movers of the country, which sets political and economic policies.

• International Sector• It refers to trade and business

activities that happen between and among various nations.