AE LESSON 1 to 3 : introduction to economics

• Economics

  • Study of social science on how individuals, business firms, governments, and societies as a whole make choices under the conditions of SCARCITY.
• Scarcity

  • the condition of resource insufficiency to satisfy all the needs and wants of a population.
  • SCARCE GOODS are for those for which demand would exceed supply if they were free.
• (2) TYPES OF SCARCITY

  • Relative Scarcity - When a good is scarce compared to its demand.
  • Absolute Scarcity - When supply is limited, ex. OIL
• Tradeoff

  • picking one thing over all the other possibilities/options.
• Opportunity Cost

  • the value of the best foregone alternative.
• (4) types of economic resources

  • land
  • labor
  • capital
  • entrepreneur
• land

  • Soil and natural resources that are found in nature and are not man-made.
• labour

  • Physical and human effort exerted in production.
• capital

  • Man-made resources used in production. 
  • Reminder: Money is not a capital but a FINANCIAL capital

  Ex. Machineries
• entrepreneur

  • Involved in combining different resources/inputs used to produce goods and services.
• (4) economic system

  • traditional system
  • command economy
  • market economy
  • mixed economy
• traditional system

  • Decisions are based on traditions or practices
• command economy

  • Authoritative system wherein decision-making is centralized in the government.
• market economy

  • The most democratic form of economic system.
• mixed economy

  • When command and market economy are the economic system of a country.
• (2) branches of economics

  • macroeconomics Concerned with the OVERALL performance of the ENTIRE economy.
  • microeconomics  Concerned with the behavior of INDIVIDUAL entities such as the consumer, the producer, and resource owner
• positive economics

  • What is ACTUALLY happening
  • Overview of WHAT IS HAPPENING in the economy
• normative economics

  • What SHOULD be
  • Focuses on policy formulation that WILL HELP attain the ideal situations
• normal good -  Income (Up) Demand (Down), or Income (Down) Demand (Up) - for better quality
• superior good - Income (Up) Demand (Up), or Income (Down) Demand (Down) - for cheap quality