Chapt 1-3 Applied Econ S2 Q1

• Commodity

  Economic goods used as inputs in the production of other goods or services
• Economic Resources


  Factors used in producing goods or providing services: Land, labor, assets, capital
• Human Needs


  Something essential for living
• Scarcity


  Limitedness of resources coupled with unlimited human wants and needs
• Human Wants


  Something desired for comfort
• Macroeconomics

  • Focus on overall performance of the economy
  • Expansion of productive capacity
  • Growth of national income
• Shortage


  Products and services not available in required quantity
• Economic Resources


  • Land
  • Labor
  • Capital
• Traditional Economy


  • Decisions based on traditions and practices passed down through generations
  • Practice of barter system
• Command Economy


  • Decision-making centralized in government or planning committee
  • Socialist, Dictatorial, and Communist nations
• Economic Systems

  • Traditional Economy
  • Command Economy
  • Market Economy
• Basic economic problems of society

  • What to produce and how much
  • How to produce
  • For whom to produce
• Microeconomics


  • Concerned with behavior of individual entities like consumers, producers, and resource owners
  • Studies decisions and choices of individuals
  • Focus on production, employment, and income levels
• Economic theory and concepts are applicable in real-world situations
• Economics


  Effective management of scarce resources to satisfy unlimited human wants and needs
• Economics differs from Biology and Chemistry


  Economics studies human want behaviors similar to Psychology and Sociology, while Biology and Chemistry focus on physical and chemical principles of living organisms and matter
• Market Economy

  • Democratic economic system based on demand and supply
  • Decisions made based on people's preferences reflected in market prices
• Positive Economics


  Deals with "what is" - current economic situations like inflation rate, employment numbers, and GNP level
• Philippines' Basic Economic Problems

  Unemployment

  Poverty

  Booming population
• Measuring the Economy


  • Shaping the economy's future based on past and present perspectives extended to the future
  • GDP measures total value of finished products within a country's borders
  • GNP estimates total value of products and services produced by a country's residents
• Scientific Approach in Empirical Testing of Economic Theory


  1. State propositions or conditions taken as given

  2. Observe facts and apply rules of logic

  3. Establish principles for testing hypotheses

  4. Use statistics and econometrics for empirical proof
• Normative Economics


  Deals with "what should be" - focuses on ideal situations and policy formulation
• Demand


  Willingness of a consumer to buy a commodity at a given price
• Law of Supply and Demand

  interaction between the sellers of a product and the buyers. It

  shows the relationship between the availability of a particular product and the demand for that product has on its

  price.
• How Supply and Demand Create an Equilibrium Price

  Market is in equilibrium when quantity demanded equals quantity supplied
• Supply


  Quantity of goods a seller is willing to offer for sale