ECONOMICS -From a word oikos means household and nomos means management.

-A social science that studies and seeks to allocate scarce human and non-human resources among alternatives in order to satisfy unlimited wants and desires- BERNARDO VILLEGAS -The father of economics was Adam Smith. The author of the famous book An inquiry into the nature and causes of the wealth of nations(1776). (Wealth Definition) CLASSIFICATION OF ECONOMICS MICROECONOMICS- deals with the economic behavior of the individual units such as consumers, firms, the owners of factors of production. MACROECONOMICS- deals with the economic behavior of the whole economy or its aggregate such as government business, unemployment, inflation and the like. FACTORS OF PRODUCTION (limited resources) Land Natural resources (trees, oil) Payment: rent Labor Human resources (workers) Payment: labor wages Capital Manmade resources (machines, cash, buildings) Payment: interest Entrepreneurship Business sense and making choices Payment: profit The goal of entrepreneurship is to create a good or service of value by developing a new combination of the other factors of production. ABRAHAM MASLOW (HIERARCHY OF NEEDS) 1. Biological and Physiological needs - air, food, drink, shelter, warmth, sex, sleep, etc. 2. Safety needs - protection from elements, security, order, law, limits, stability, etc. 3. Social Needs - Belongingness and Love, - work group, family, affection, relationships, etc.

4. Esteem needs - self-esteem, achievement, mastery, independence, status, dominance, prestige, managerial responsibility, etc. 5. Cognitive needs - knowledge, meaning, etc. 6. Aesthetic needs - appreciation and search for beauty, balance, form, etc. 7. Self-Actualization needs - realizing personal potential, self-fulfillment, seeking personal growth and peak experiences. 8. Transcendence needs - helping others to achieve self - actualization.
BASIC NEEDS - refers to those fundamental requirements that serve as the foundation for survival. Access to the basic needs of life, including shelter, food, and clothing is necessary to the development of a strong community and a necessary precursor to individual self-sufficiency.

ECONOMIC SYSTEM
1. TRADITIONAL SYSTEM

-An economic system in which production and distribution questions are answered by looking to the past. -People will make what they always made will do the same work their parents did. -Economic decisions are made by customs and beliefs. EXAMPLE: Inuit, some parts of Africa and South America.
2. COMMAND SYSTEM

- An economic system in which production and distribution questions are answered by central planners (government). -Economic decisions are made by the government. EXAMPLE: North Korea, former Soviet Union, Cuba, *most communist countries.

-Planners estimate what goods will be needed in the future and work backward to decide what materials and workers are needed now. -Planners can be wrong about future needs, and they do not provide people with many choices. EXAMPLE: Farming (the government decided who would be farmers, what they would grow and how much would be turned over to the government).
3. MARKET SYSTEM

-An economic system in which production and distribution questions are answered by prices and profits. -Economic decisions are based on FREE ENTERPRISE. -The price of a good depends on how much of the good is available and how many people want it. -Economic decisions are made by customs and beliefs.
4. MIXED SYSTEM

-Individuals own most resources and determine what and how to produce. -Government regulates certain industries. EXAMPLE: China; most nations
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MARKET + COMMAND = MIXED

5 FUNDAMENTAL ECONOMIC QUESTIONS What goods and services will be produced? How will the goods and services be produced? Who will get the goods and services? How will the system accommodate change? How will the system promote progress?

LAW OF SUPPLY -