ECONOMICS

CHAPTER 1
INTRODUCTION TO ECONOMICS

◦ Why economics is a necessary science to be studied

The study of economics is supposed to help man make good decisions and
better judgements .

◦ One of the simplest tools that can be used in the allocation of scare
resources is the Production Possibilities Curve and Frontier (PPC/PPF).
THE HISTORY BEHIND THE WORD
◦ HOUSEHOLD MANAGEMENT – The understanding of the word economics.
◦ Scientist believe that prior 11,000 B.C. the temperature of the world was so radical it would change
several degrees below zero in a span of a few weeks to a few years . This made survival extremely
difficult for many species since the adjustment period was variably inconsistent.
◦ Paleontologist and anthropologist were able to find relies of our ancestral nomads from 9,000 B.C.
These nomads were known to roam large territories and consume whatever they can in their
immediate environments.
◦ Men were known make weapons hand for appropriate food and look for variable shelter.
◦ Women were known to take care children, appropriate food, make clothing and maintain their
shelters.
◦ The leader of tribe or clan is the wisest of the group and in the other clan the strongest male who
became a leader. These leaders turn, had the ultimate responsibility of managing the household’s
needs.
◦ For 3,000 years, our ancestral nomads roamed the earth.
◦ Nomads found out the key to survival and sustaining an entire ecosystems was fresh water bodies.
The table of early transition of man from early nomadic tribes into
modern civilization
Why study Economics?
Basic Reasons for Studying Social Science
 The Economic Method

◦ Economics uses a standard method of analysis , which one must

know to fully comprehend and appreciate its concepts and
discussions. The method is based on a blend of both the scientific
method and policy analysis.
Four Steps of Scientific Method

◦ 1)
Observation and description of phenomenon or group of
phenomena.
◦ 2) Formulation of a hypothesis to explain the phenomena.
◦ 3)Use of the hypothesis to predict the existence of other
phenomena, or to predict quantitatively the result of new
observation.
◦ 4)Performance of experimental test of the prediction by several
independent experimenters and properly performed
experiments. If the hypothesis is supported by experiments, it may
come to be regarded as a theory or law of nature.
Five steps of economic method
Approaches to Economics

◦ Normative Economics- on the other hand is that approach , which tells us what should be or
what ought to be . This is more subjective and more judgmental than positive economics .
◦ In practice , normative economic approach is more predictive than descriptive in its usage.
Six distinct aspects of the two Approaches