At the conclusion of the session, you must

have been able to:

Compare the various definitions of economics and

identify their common ground.

Identify the basic economic problem addressed by
the concerns of economics.
Relate economics with the other social sciences. (

At the conclusion of the session, you must

have been able to:
Differentiate macroeconomics from

microeconomics as the two main divisions of

economics.
Enumerate and discuss the significance of the
following: economic systems, economic
resources, and economic goals.

a social science concerned with using

scarce resources to obtain maximum
satisfaction. (Walstad and Bingham, 1993)

the study of how societies use scarce

resources to produce valuable commodities
and distribute them among different people.
(Samuelson and Norhaus, 1992)

the study of production, distribution,

selling, and use of goods and services.
(Collin, 1997)

the study of how people use their limited

resources to try to satisfy unlimited wants.
(Parkin and Bade, 1991)

What is the common

ground of the
definitions?

Two Opposing Realities:

1. Resources are scarce.

2. Human needs and

wants are unlimited.

SCARCITY
the imbalance between our desires and the

means of satisfying those desires. (Hyman, 1992)

The condition wherein most things that people
need and want are available only in limited
supply.

WANTS
refer to a persons desires or preferences for

specific ways for satisfying a basic need.

(Bannock, 1974)

OPPORTUNITY COST
the cost of choosing to use resources for one

purpose measured by the sacrifice of the next best

alternative for using those resources. (Hyman,
1992)

From the foregoing

definitions, what do
you find to be the basic
economic problem?

SCARCITY

1.

What goods and services must be

produced and in what quantities?

Rice or weapons?
If rice, how much of what type?

How shall these goods and

services be produced?

2.

Who shall produce them?

What resources and technologies shall be used?

For whom shall these goods and

services be produced?

3.

Who shall consume them?

What benefits from the results of the economic
activities?

 The PRODUCTION, DISTRIBUTION

and CONSUMPTION of goods and

services.

PRODUCTION
The creation or addition of utility.
Utility is the economic term for usefulness. It is

the ability of a good or service to satisfy a want.

Form Utility
Place Utility
Time Utility
Possession Utility

PRODUCTION
Factors: (Economic Resources)
Land land and natural resources
Labor time and effort of human beings involved in the
production process.
Capital goods used to produce other goods
Entrepreneurship undertaking that combines the
three other factors in the production process.

DISTRIBUTION
The allocation of the total product among the

factors of production.
The distribution of money incomes among the
factors of production.

Land RENT
Labor WAGES
Capital INTEREST
Entrepreneurship PROFIT.

CONSUMPTION
The use of a good or a service.
Without it, there would be no need for production

and distribution.

GOODS AND SERVICES

Characteristics of Economic Goods:
Material
Useful
Scarce
Transferable

GOODS AND SERVICES

Economic Services non-material activities that

are useful, scarce, and transferable.

Give examples of economic services

ECONOMICS IS RELATED TO:

REASON:

Political Science

Sociology

Philosophy

History

Government has a role in

the economy.
Low standard of living
leads to social problems.
Economic acts are humans
acts (morality).
Economic development
occurs through time.

MICROECONOMICS VS. MACROECONOMICS

MICROECONOMICS

Concerned with the

behavior and activities of
specific economic units
individuals, households,
firms, industries and
resource owners.
Critical concept MARKET

MACROECONOMICS

Deals with the behavior of

the economy as a whole
with respect to output,
income, the price level,
foreign trade,
unemployment and other
aggregate economic
variables.

1.
2.
3.

4.
5.
6.

7.
8.

Economic Growth
Full Employment
Economic Efficiency
Price Level Stability
Economic Freedom
Equitable Distribution of Income
Economic Security
Balance of Trade