Handout-for-applied-economics-1st-quarter.docx

Economics 

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is the study of how individuals, business firms, governments, and societies as a whole make choices under conditions of scarcity

to individual consumers. In monetary terms, this is the allocation of income among households 3.

Is a broad ranging discipline that uses variety of techniques and approaches to address important social questions

Exchange – This refers to the transferring goods and services to a person or persons in return for something. At present, the medium of exchange used in the market is Money.

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It is a study on how people allocate their resources on a specific matter or situation that can result best with regards to decision making.

4. Consumption – refers to the proper utilization of economic goods. However, goods and services cannot be utilized unless you pay for it.

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5. Public Finance – This pertains to the activities of the government regarding taxation, borrowings and expenditures. It deals with the efficient use and fair distribution of public resources in order to achieve maximum social benefits. Its goal is to use funds to be properly implemented to generate maximum and optimum benefits for all members of society.

Came from the Greek word “oikanomia” meaning household management

Importance of Economics 

Understand problems facing the citizen and the family

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Help government promote growth and improve the quality of life while avoiding depression and inflation

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Analyze fascinating patterns of social behaviour

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Maximize our profits and consumer’s satisfaction

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How to allocate our money wisely

Economic Resources 1.

Land – refers to resources provided by nature such as fertile soil, forests, water and mineral deposits. It is considered economic resources because it has a price attached to it. It is usually limited resources for many economies but some are also renewables.

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Labour – Is the physical and mental effort human being used to produce goods and services. It represents human capital available to transform raw or national resources into consumer goods

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3. Capital – Has two economic definitions as a factor of production. It can represent the monetary resources companies use to purchase natural resources, land and other capital goods. Capital also represents the major physical assets individuals and companies use when producing goods and services.

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4. Entrepreneurship – refers to the ability that some people have for organizing and other resources, land, labour, capital to produce goods and services.

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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 particularly dollars in international trading and buying of raw materials from other countries

Two Branches of Economics 

Macroeconomics – deals with the economic behaviour of the whole economy or its aggregates such as government, business and households.

- stands back from individual parts of an economy and takes an overall view of the economy. Examples: GNP, GDP, Level of Employment, National Income, General level of Prices, Total Expenditures, Government Policies 

Microeconomics – deals with the economic behaviour of individual units that constitute a very small segment of the whole economy

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Examples: Consumers, firms, owners, investors

Division of Economics 1.

Production – This refers to the process of producing or creating goods needed by the households to satisfy their needs. The factors of productions Inputs and the goods and services that have been created are called Outputs of production

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Distribution – refers to the marketing of goods and services to different economic outlets for allocation

Basic Economic Problems confronting the development of the Philippines in the 21st century

FACTORS AFFECTING THE DEMAND OF A COMMODITY

A. POVERTY AND UNEQUAL DISTRIBUTION OF INCOME -

Limited or without resources and cannot earn sufficient income that can provide the minimum nutritional requirements for daily living and the basic necessities of clothing and shelter.

B. DEMOGRAPHIC CHANGES AND ITS ECONOMIC IMPLICATIONS If the economy is growing fast, this increase in labor may not be an issue. However, if the economy is not growing as fast as the growth of labor force, the problem of unemployment may ensue. C. LOW INVESTMENT IN HUMAN RESOURCE DEVELOPMENT Modern economies go beyond formation of human capital and pursue the development of knowledge capital in pushing their economies forward. Knowledge capital is formed through heavy investments in higher education, science and technology, and research and development. D. WEAK INFRASTRUCTURE -

The inadequate infrastructure of a country has debilitating effects on the households, individuals, business firms and economies.

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INCOME

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TASTE

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EXPECTATION

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MARKET

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PRICES OF OTHER COMMODITY

The prices of many commodities may have an effect on the demand of a particular good, the influence of related goods is more pronounced. PRINCIPLE OF DIMINISHING MARGINAL UTILITY As a buyer continues to consume a good his total satisfaction or utility increases; however, the additional unit or marginal satisfaction decreases as a buyer consumes an additional unit of good. SUPPLY CURVE •

Demand is an economic principle referring to a consumer's desire and willingness to pay a price for a specific good or service. Supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. DEMAND CURVE •

Is a schedule of the willingness and capacity of a consumer to buy a commodity at alternative prices at a given point in time other things held constant.

Is a schedule showing a direct or positive relationship between the price of a commodity and level of output that the seller is willing to supply at a given point in time of other things held constant.

OTHER FACTORS AFFECTING SUPPLY OF A COMMODITY •

PRICE OF PRODUCTION INPUTS

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Expectation

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Taxes

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Technology

PRINCIPLE OF DIMINISHING MARGINAL PRODUCTIVITY - This means that although the production is increasing, the additional or marginal contribution of additional labor to total production is declining.

ELASTICITY •

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= 0.0 Perfectly Inelastic

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∞ Perfectly elastic

It is a measure used in response to changes in the determinants of demand and supply.

PRICE ELASTICITY OF DEMAND •

Buyers tend to reduce their purchases as the price increases and tend to increase their purchases when the price falls.

INTERPRETATION OF PRICE ELASTICITY •

< 1.0

inelastic

Seven Dimensions of Sustainable Development

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= 1.0

unitary

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> 1.0

elastic

Under the economic development we could list more available sources of credit, associative economic arrangements, partnerships with socially-responsible agribusinesses, etc. Ecological factors of importance are: use of crops more adapted to an unpredictable climate, selection of local varieties, use of techniques of sustainable agriculture and fishing Political entry points are things like better road infrastructure for access to the markets, agrarian reform, laws protecting farm labor, promotion of fair trade criteria of production, etc.

Cultural factors include use of local technologies and knowledge, partnerships with civil society organizations, capacity building,… Under social development goes a quick response to natural disasters, addressing the social factors at the root of the high birth rate among the rural poor. Human development sees the importance of adequate nutrition, and improving resource management skills. An overall goal of spiritual development is the enhancement of meaning of agriculture as a way of life.