econ

• Economics


  The study of how people choose to use scarce resources or limited productive resources to produce various commodities and distribute them to various members of society for their consumption
• Origin of economics


  oikonomia = management of the household
• Reasons economics is studied

  • Provides valuable knowledge concerning our social environment and behavior
  • Equips a democratic citizenry to render fundamental decisions intelligently
  • Provides valuable information to business executives
• Macroeconomics


  Deals with the whole or aggregate economy
• Microeconomics


  Deals with the individuals – households, firms, markets, consumers, producers
• Positive economics


  Makes statements on "what is" or what will happen, is objective and fact-based, relates and describes facts without saying whether they are good or bad, devoid of value or ethical judgment
• Normative economics


  Makes statements on "what should be", is subjective and value-based, makes a value judgment, opinion based so they cannot be proved or disproved
• Agricultural economics


  An applied social science that deals with how producers, consumers, and societies use scarce and natural resources in the production, processing, marketing, and consumption of food and fiber products
• In the Philippines, the Bureau of Agricultural Economics was formed on June 22, 1963 under the office of the Secretary of Agriculture and Natural Resources
• Production Possibilities Frontier


  A useful tool for illustrating the choices available to society and its constraints, all the possible combinations of the maximum amounts of two goods and services that can be produced with a given amount of resources
• Ceteris paribus


  "Other things being equal"
• Diminishing Return


  Indicates that as you increase the amount of something, ceteris paribus, the additional impact of that "something" will eventually increase at a decreasing rate
• Marginality


  An additional or incremental unit of something
• Economic resource


  Scarce and commands a non-zero price, i.e. it costs something
• Goods


  Concrete objects or things that satisfy needs, e.g. rice, fish, meat, and other food items
• Services


  The intangible equivalent of an economic good
• Types of goods/commodity

  • Free good (available to everyone at no charge, e.g. air)
  • Economic good (commodity in limited supply and has many different types of wants and needs)
• Needs


  Things you cannot live without, including basic needs (food, shelter, clothing) and essential to decent and comfortable living, as well as luxury goods
• Wants


  Something you would like to have, can be created
• Basic economic problems


  • What to produce? (what society desires)
  • How much to produce? (how much goods or service society desires)
  • When to produce? (making goods available at the time that they are needed or wanted)
  • How to produce? (who will produce and with what resources and production techniques)
  • For whom? (who gets to eat the fruit of economic activity)
• Economic goals


  • Full employment (no voluntary unemployment)
  • Economic growth (general increase in real output)
  • Price stability (absence of inflation and wide fluctuations in prices)
  • Economic freedom (freedom to do economic activities within the legal framework)
  • Economic security (assurance of the fulfillment of the economic needs of every member of society, including the handicapped)
  • Equity (equitable distribution of wealth and income)
  • Economic efficiency (achieving the maximum fulfillment of wants using the available productive resources)
  • Balance of trade (balance between imports and exports)
• Five Foundations of Economics

  • Incentives
  • Trade-offs
  • Opportunity Cost
  • Marginal Thinking
  • Principles of Trade
• Incentives


  Factors that motivate you to act or to exert effort
• Types of Incentives


  • Positive Incentives
  • Negative Incentives
• Positive Incentives


  Incentives that encourage action
• Negative Incentives


  Incentives that also encourage action
• Types of Incentives


  • Direct Incentives
  • Indirect Incentives
• Direct Incentives


  Incentives that are easy to recognize
• Indirect Incentives


  Incentives that are much harder to recognize
• Trade-offs


  The choice between alternative uses for a given quantity of resources
• Opportunity Cost


  The value of what you lose when choosing between two or more options
• Marginal Thinking


  The process of systematically evaluating a course of action, requiring decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost
• Trade


  The voluntary exchange of goods and services between two or more parties
• Markets


  • Bring buyers and sellers together to exchange goods and services
• Capitalism


  A system of production whereby business owners (capitalists) produce goods for sale in order to make a profit and not for personal consumption
• Capitalism


  • Absence of a central economic planning
  • Private ownership of property
  • Operation of the pricing process/price system
  • Competitive conditions
  • Profit motive
  • Presence of essential freedom
• Communism


  A system of production where private property ceases to exist and the people of a society collectively own the tools of production
• Communism


  • Essential freedoms enjoyed in a capitalist system are eliminated, and property ceases to be source of private or individual income
  • Government determines the aims of the economy
  • Government determines the type, quality, and quantity of commodities to be produced
  • Government regulates the prices of goods and services
• Socialism


  A system of production whereby workers collectively own the business, the tools of production, and the finished product, and share the profits - instead of having business owners who retain private ownership of all of the business and simply hire workers in return for wages
• Socialism


  • Operation of the pricing process/price system
  • Freedom of choice in consumption
  • A private sector of small producing units
  • A public sector which oversees the fulfillment of collective objectives