BEBANGS,
TO ALL BEBANG THAT production that takes place in the
WILL READ THIS, ILL REMIND YOU
BEFORE READING THIS REVIEW
MATERIAL MAKE SURE TO PRAY.
WE ARE ALL ENTITLED TO THAT
THREE LETTER TITLE. WE WILL
ACHIEVE IT NO MATTER WHAT.
WE CAN PASS THIS SEM WITHOUT
DOING ANYTHING AGAINST OUR
BELIEFS AND CONCSIENCE. GOOD
LUCK AND GOODBLESS.
BEBANG.
CHAPTER I: INTRODUCTORY
MACRO ECONOMICS.
ECONOMICS IS CONCERNED WITH
THE PRODUCTION, DISTRIBUTION,
AND USE OF MATERIAL GOODS
AND SERVICES.
BASIC TERMS IN ECONOMICS
GOODS is anything which yields
satisfaction to someone.
Tangible when they are in the
form of material goods or
commodities
Intangible in the form of services.
Consumer Goods which yield
satisfaction directly (soft drinks
and foods)
Capital Goods, used in the
production of other goods and
services.
Essential Goods used to satisfy the
basic needs of man.
Luxury Goods are those goods
man may do without but are used
to contribute to his comfort and
wellbeing.
Economic Good which is both
useful and scarce. It has value
attached to it and a price has to be
paid for its use.
Free Good a good which is
abundant that there is enough of
it to satisfy everyone’s needs
without paying for it. (Air)
Manufacturing It involves the
physical transformation of
commodity.
Agricultural Production,
the connection of possible
farm.
ECONOMIC RESOURCES things
which are needed to carry on the
production of goods and services.
Land (Payment: Rent) refers to all
natural resources which are given
by and found in nature and are
therefore not man-made.
Labor (Payment: Wages) any form
of human effort exerted in the
production of goods and services
Capital (Payment: Interest) refers
to man-made goods used in the
production of goods and services.
Entrepreneur (Payment: Profit)
Person who combines the other
economic resources for use in the
production of goods and services.
SCARCITY refers to the limitations
that exist in obtaining al the goods
and services that people want.
What to produce and how
much?
How much goods be
produced?
For whom shall goods be
produced?
TYPES OF ECONOMIC SYSTEM
Traditional Economy basically a
subsistence economy. A family
produces everything that it
consumes.
Command Economy the means of
production are owned by the
government
Market Economy The resources
are privately owned and decisions
are made by the people
themselves.
Mixed Economy Applies a mixture
of the three forms of decision
making.
Opportunity Cost The values of
these alternatives given up.
Consumption Possibilities Lines
combinations
SOCIETY’S TECHNOLOGICAL
POSSIBILITIES
Inputs refer to the commodities or
services used to produce the goo
or the service (LAND, LABOR AND
CAPITAL)
Output refer to the useful goods
and services resulting from the
production process.
THE TOOLS OF ECONOMICS
POSITIVE SCIENCE deals with what
it is.
NORMATIVE ECONOMICS which
deals with what should be.
Observation by simply looking
around he shall be able to obtain
information
Definition and Assumptions
describe the specific uses of the
study and peripheral conditions
Deductions these are hypotheses
or theories presented for
empirical validation
Empirical Testing deductions have
to be tested as to their validity and
correctness.
MACROECONOMICS is the
division of economics that deals
with aggregate. It studies the
economy as a whole
MICROECONOMICS its studies the
economy as parts
COMPARATIVE ADVANATAGE
that trade is beneficial even if a
country does not have an absolute
advantage in the production of
good but does not have a cost
benefit of producing the good
relative to its trading partner
ABSOLUTE ADVANTAGE benefit of
one nation over others that allows
it to manufacture more output
because it has available particular
resources or commodity in greater
quantity
CHAPTER 2: THE CIRCULAR FLOW
OF ECONOMIC ACTIVITY
Production is the use of economic
resources in the creation of goods
and services for the satisfaction of
human wants. The use of these
economic resources in production
is employment
Consumption when the goods and
services produces are ready for
use this leads to another
economic activity
Stock and Flow Variables
Flow is defined as a quantity
measured over a particular period
of time
Stock which is defined as quantity
measured as of given point in time
Wealth is anything of valued
owned. It may consist of money,
jewelry , buildings and other
property
Income It is the rate at which we
earn money.
Raw Materials are unprocessed
goods.
Intermediate Goods/ Goods In
process partially processed and
are not yet ready for final use in
consumption
Final Goods consist of goods that
are ready for consumption.
Pure Competition
-large number of buyer and sellers
-no one individual or group can
influence the price of what being
bought or sold
-the goods are identical or
homogenous
-sellers have no preference for
one over another commodity
Pure Monopoly
-only one seller of particular
product
-seller controls the total supply
-monopoly firm or seller
determine its own policy
-does not have anything to fear so
far in competition is concerned
Monopsony
-there is only one buyer of the
product
Imperfect Type
Monopolistic Competition
-competition + monopoly
-there is large number of seller
and buyer
-each seller or firm can determine
its own policies with regards of
the policies of competitors
Oligopoly
-competing sellers or firms is
sufficiently small
-competition among the few
Pure/Perfect oligopoly
-homogenous or identical so that
where one firm lowers its price by
a certain amount, the other firms
follows
Imperfect/Differentiated
Oligopoly
-products are differentiated
-a price cut by one firms does not
necessary quote a price cut by the
other competitor
CIRCULAR FLOW OF ECONOMIC
ACTIVITY
-production, consumption,
employment and income
generation
Economic Units
Household consuming unit
Firm producing unit
CHAPTER 3: DEMAND AND
SUPPLY
Market is a means of interactions
between buyers and sellers for
trading or exchange.
Labor Market where workers offer
their services and employers looks
for workers to hire.
Demand is the quantity of good
that buyers are willing to buy.
Demand Function SHOWS the
quantity demanded of a good is
dependent on its determinants
Law of demand ALL OTHER things
remains constant (ceteris paribus),
the quantity demanded of a good
is inversely related to the price of
that good. (Qd=f(p))
Non-Price Determinants
(parameter) taste and preference,
consumers income, expectations
of future price and income, family
size, population growth and prices
of related goods are assumed
constant.
SUPPLY is the quantity of goods
that sellers are willing to sell
Law of supply All other things
remaining constant, the quantity
supplied of a good is directly
related to the price of the good.
(Qs= f(p))
Nonprice factors motives,
technology, cost of production,
and the number of firms in the
market.
MARKET EQUILIBRIUM
Alfred Marshall a British
economist was responsible for
introducing the very important
Law of demand and supply.
Equilibrium means a state of
balance
ELASTICITIES OF DEMAND AND
SUPPLY
Price Elasticity it is the
responsiveness of demand to
changes in the price of the good.
𝑄2−𝑄1 𝑃2−𝑃1
Ep=𝑄2+𝑄1 ÷ 𝑃2+𝑃1
Q= QUANTITY DEMAND
P=PRICE
Ep= Equilibrium point
ELASTIC determinants leads to a
proportionately greater change of
demand or supply (E>1)
INELASTIC determinants results in
a proportionately lesser change in
the quantity of demand and
supply (E <1)
UNITARY ELASTIC determinants
leads to a proportionately equal
change in the quantity demand
and supply (E=1)
BEBANGS,
IN THIS POINT HOPING
THAT YOU ABSORD SOME SORT
OF INFORMATIONS THAT WILL
HELP YOU IN THIS COMING
PRELIMINARY EXAMINATIONS. LET
THIS MATERIAL BE YOUR GUIDE IN
ANSWERING THE EXAM IN GOOD
FAITH. IN CASE OF DOUBT ASK
BEBANG FOR MOTIVATION.
BEBANG.

INCOME ELASTICITY OF DEMAND

It study of the responsiveness of
demand to a change in consumer
income

𝑄2−𝑄1 𝑌2−𝑌1
Ep= ÷
𝑄2+𝑄1 𝑌2+𝑌1

Q= QUANTITY DEMAND
Y=income
Ep= Equilibrium point

CROSS ELASTICTY OF DEMAND

Relates to a percentage in the
demand for a good with
percentage change in the price of
another good.

𝑄𝑥2−𝑄𝑥1 𝑃𝑌2−𝑃𝑌1
𝑄𝑥2+𝑄𝑥1 𝑃𝑌2+𝑃𝑌1
Ep= ( 2
)÷( 2
)

QX= QUANTITY DEMAND FOR

GOOD X
PY=income price of good Y
Ep= Equilibrium point

PRICE ELASTICITY OF SUPPLY

Relates to a percentage in the
QUANTITY SUPPLIED for a good
with percentage change in the
price of another good.

𝑄𝑆2−𝑄𝑆1 𝑃2−𝑃1

Ep= ( 𝑄𝑆2+𝑄𝑆1
2
) ÷ ( 𝑃2+𝑃1
2
)

QX= QUANTITY supplied

PY= price
Ep= Equilibrium point