Learning Resource MaterialsApplied EconomicsChapter 1: Introduction to Basic EconomicsTarget OutcomesAt the end of the lesson, you are expected to:1. explain the nature and scope of economics.2. determine the fields of economics: the micro and macroeconomics.3. discuss the use of resources in the production of goods and services.4. explain the different economic systems. 5. discuss important economic concepts. 6. apply the economic concepts to everyday life. AbstractionEconomics is not the study of money or getting rich. Not the study of stock market and economics is not about men in bow-ties forecasting what will happen in a given market or the overall company. Economics is the study of people and choices.Economics 1. The science which studies human behavior as a relationship between ends and scarce means which have alternative uses" (Stiegler, 1985)2. Study of how sciences use scarce resources to produce valuable commodities and distribute them among different people (Samuelson & Nordhaus, 1995)3. Economics is the study of given ends and scarce means.(Lionel Robbins)4. The word economics comes from the Greek word oikonomia, which literally translates the household management. It is also a derivative of oikonom?, a steward, managing a household-properly, a stewardship, management (administration).5. Our economists need to forecast how the country will grow in the current year and within the next five years and where this expected growth will come from.6. Will agriculture lead the way? What if other calamities hit the country? Does the government need to borrow from the international community or will its revenue be enough?7. How does the general price level move? Do we see stable prices or erratic swings to our commodities?What is Economics?Economics seeks to understand how individuals interact within the social structure to address key questions about the production and exchange of goods and services. ? It probes deeply on the individual needs and desires in order to forecast the availability or lack of goods and services. ? it seeks to assess if there are incentives for these individuals to participate in the production these goods.? It also questions how production is organized such that maximum-possible quantities are made available given existing resources and production technology. ? Social science that attempts to explain economic behavior using different methods and theoriesFactors of Production1. Land (acreage and raw materials)2. Labor (unskilled, semiskilled, professional) 3. Capital (machines, factories, transportation equipment, and infrastructure) and 4. Entrepreneurship (organizing the other factors of production and risk-taking)Final Goods and services - those products that are directly consumed by individuals to satisfy their needs and wants.Intermediate or Capital Goods - are those goods used to produce other goods. Two most important Assumptions in Economics1. People have unlimited wants but limited resources; and2. Everything has a cost ScarcityScarcity refers to a physical condition where the quantity desired of a particular resource exceeds the quantity available in the absence of a rationing system. Scarcity can be caused by many things including: ? Lack of natural resources: Some countries do not have many resources (land, water, oil etc.)? Climate problems: Weather can cause scarcity. Crops can be flooded, or affected by drought.? War: In war, crops are often destroyed, people displaced, transport and trade disrupted, etc.? Bad economic management: corrupt/inefficient governments often create scarcity (e.g. Burma). ? Bad transport infrastructure: Inadequate road, rail and air networks can cause scarcity. ? Government policy: some governments make laws that create scarcity (e.g. new cars in Burma).Absolute scarcity - it is when supply is limitedExample: Oil is absolutely scarce in the Philippines since we have no oil wells from which we can source our petroleum needs so we rely heavily on imports from oil-producing countries like Iran and other Middle Eastern countries. Opportunity cost Opportunity cost refers to the value of the best foregone alternative.Example: When land is devoted exclusively to the cultivation of rice, we give up an output of bananas and mangoes that we could have planted on that land area.The concept of opportunity cost holds true for individuals, businesses and even a society. In making choice, trade-offs are involved. Main Branches of EconomicsMicroeconomics deals with the behavior of individual components as an economic agent such as household, consumer, worker, firm, and individual owner of production (producer). It also refers to the study of choices by individuals, like how someone decides on the budget.Macroeconomics deals with the behavior of the economy as a whole with the view to understand the interaction between economic aggregates such as employment, inflation, and national income/country's gross national product (GNP). It also deals with the study of governments, industries, central banking, and the boom and bust of the business cycle.Gross National ProductComponents of GNP is Y = C + I + G + X + Z. That stands for GNP = Consumption + Investment + Government +X (net exports, or imports minus exports) + Z (net income earned by domestic residents from overseas investments - net income earned by foreign residents from domestic investments.)Normative Economics has something to do with "what ought to be." Hence it involves ethics and value judgment.Positive Economics, on the other hand has something to do with "what is' It describes facts and data in the economy.Economic SystemEconomic System -refers to a set of economic institutions that dominate a given economy with the main objective of solving economic problems.Four Economic System1. Traditional Economy - Economic decisions are made with great influence from the past because it is copying/duplicating the decisions made by previous generations. It is a system whose past experiences which were handed down from generation to generation are used as bases for economic decisions2. Command Economy - Economic system that society uses in allocating the scarce resources wherein the factors of production and distribution are owned and managed by the state because the decisions in answering the basic economic problems are planned, done, and dictated by the government. The decisions are made from the top authority and whatever decisions made are relayed to the majority of the people. Hence, it is a system in which people do not have political and economic freedom.3. Free Market Economy - It refers to an individual consumer and businesses interacting to solve the economic problems. The price of a commodity dictates what goods and services will be produced for whom and how it will be produced. This system is also consulting with the majority, which means that interaction takes place between buyers and sellers in determining the price of a particular good! commodity.4. Mixed Market Economy - In reality, there is no economy using the purest form of economic system. Thus, a mixed economy, with elements of the first three systems mentioned, are present in varied degrees of the so-called mixed market economy. That is both private and public institutions exercise economic control.Basic Assumption- resources are finite. Resources are materials used in the production of goods and services. Classification of Resources1. Natural Resources2. Human Resources3. Man-made ResourcesThe Philippine Economic Problem The Philippine economy is no exemption from continuing structural economic vulnerabilities. There are varied observations about the continuing problems that we have as a nation. The Standard & Poor's Ratings Services, following in the footsteps of Fitch Ratings, has just awarded the Philippines with its second credit ratings upgrade ? raising hopes of sustained economic boom in the years to come.What are the Basic Economic Problems?All societies face the economic problem, which is the problem of how to make the best use of limited, or scarce, resources. The economic problem exists because, although the needs and wants of people are endless, the resources available to satisfy needs and wants are limited. Limited Resources - Resources are limited in two essential ways: 1. Limited in physical quantity, as in the case of land, which has a finite quantity. 2. Limited in use, as in the case of labor and machinery, which can only be used for one purpose at any one time. Choice and Opportunity Cost Choice and opportunity cost are two fundamental concepts in economics. Given that resources are limited, producers and consumers have to make choices between competing alternatives. All economic decisions involve making choices. Individuals must choose how best to use their skill and effort, firms must choose how best to use their workers and machinery, and governments must choose how best to use taxpayers' money.Three very Dominant Basic Economic Problems1. What to produce? Each and every economy must determine what products and services, and what volume of each, to produce. In some way, these kinds which can of decisions should be coordinated in every society. 2. How to produce? Societies decide on the mix of resources to use to create the desired output of goods and services. For example, we precisely decide on how much land, labor, and capital should be used to produce consumer goods3. For whom to produce? All societies need to decide who will get the output from the country's economic activity, and how much they will get. For example, who will get the computers and cars that have been produced? This would have is often called the problem of distribution.Questions to Ponder1. Does the implementation of laws protect the country, its resources and people? 2. Is judicial independence strong? 3. Is the rule of law effective? 4. Are corruption and cronyism still pervasive? 5. Is there a proportionate share of land, corporate wealth, and political power? 6. Do we build a culture of industriousness or a culture of impunityAccording to Asian Development outlook 2017, buoyant domestic demand drove economic growth up to 6.8% in 2016 and a forecast of moderate growth in 2017 with 6.7% GDP. Despite the positive forecast, there are economic issues that remain unresolved. In a recent survey by Pulse Asia, released on March 24, 2017, the pollster noted that the leading urgent concerns among Filipinos ? inflation control (46%)? the increase of workers' pay (44%), ? the fight against government corruption (40%).? poverty reduction (37%), ? job creation (34%), and ? the fight against crime (22%). ? What can be gleaned from this survey?Philippine Socioeconomic Development in the 21st Century Dealing with the problem of scarcity ? We live in a finite world where individuals and communities always face the problem of scarcity. ? There is scarcity because simply, it is a condition in which human wants are often greater than the available supply.? Your desire is impossible to satisfy because there will always be infinite wants. Fact remains, you can't always have it all! ? This is true for everybody. Scarcity is a fact of life, whether we are talking about the Philippines, the developing or the advanced countries because no society has it all! Filling the Gap: Resources and Production? Resources are the basic categories of inputs used to produce good and services (Layton, Robinson, & Tucker, 2005).? These are also called factors of production, which are divided into three categories: land, labor, capital, and entrepreneurship. EntrepreneursEntrepreneurship is a special type of labor. It refers to the creative ability of individuals to seek solution to problems by combining resources that can result to existing or new products. They help all! bring progress to a nation. In the Philippines, there are many entrepreneurs who venture into producing innovative products, like the famous fast food chains, which always want to get ahead with their competitors by offering combos, new toys and others.Example:Socorro Ramos and the National Book Store? Started as a salesgirl when she was 18 yrs. old in Goodwill Bookstore in Escolta. ? She was a quick learner and thus, became in charge of the store. She got married to Jose Ramos, the son of the scion who owns the bookstore. ? Despite their parents' disapproval of the union, they decided to get married and run one of the stores. ? Unfazed by two unexpected failures (war destroyed the store and storm destroyed the roof in Avenida branch), they rebuilt it.? National Book Store picked up in business and expanded to more than 70 National Book Store outlets.Scarcity and Choice There are two responses to scarcity: 1.) Economy-wide or 2) individual choices. ? Layton, Robinson , & Tucker (2005) states that Economics is the study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants.? It is the limitation of the available goods that forces us to make choices. But, the choice involves giving up another opportunity to do or use something else (Carvaugh, 2003). ? Before you think of tradeoffs, it may well be necessary to consider models that may express the economic approach to this problem.The Methodology of Economics? Using the scientific method is the best way to approach the problem of scarcity; ? Mostly, an economic way of thinking leads you to assume that to solve the problem of scarcity, it has to employ the principles of scarcity and rational self-interest to search out answers to the problems of real world. This model may serve as a starting point:1. Know the problem2. Simplify assumptions3. Data collection and testing the modelThe model presents the step-by-step approach to seek answers to the problem of scarcity. 1. Know the problem. Why is there an increasing number of drop-outs in public schools than in private educational institutions. 2. Simplify Assumptions. To find out the reasons, and build a model, one has to look into the factors that can explain the increase in dropouts. An economist must take sight of relevant variables that are relate d to causes of drop-outs and possible opportunities. 3. Data collection and testing the model. Gather data including numerical data, graphs or mathematical equations. Further, economic way of thinking certainly seeks to avoid mistakes. Hence, a model serves an important function in predicting the impact of change in economic variables.There are two pitfalls to clear thinking and making simplified assumptions: 1. Ceterus paribus means that while certain variables change, 'all other things remain unchanged 2. Association versus causation?this refers to a genuine cause-and-effect relationship. Students may be dropping out of school for personal reasons, regardless of the static cost of education both in public and private schools. Unless the two are intently examined, there can be economic decisions that can further hurt the individual or communities economically. Utilization of LearningActivity 1Direction: Listed below are the resources for production of goods and services. Please list down the economic issues to each resource of production that may harm the economy. Choose your answer from the box below. Activity 2Please categorize the characteristics of microeconomics and macroeconomics using the diagram below.? Studies the behavior of individual economic units;? Focuses of the behavior of individual in the market? Focuses on parts of the economy: individuals, firms, and industries;? *Studies the economy as a whole? Focuses on goals like productions standard of living, unemployment, and inflation. * Policies are focused on monetary policy and fiscal policy.? *Studies of markets of good and service Activity 3.Filipino EntrepreneursLook for at least 10 Filipino entrepreneurs and fill the following table: Name of Entrepreneur Business or Company Fast Facts about the Entrepreneur Supplementary MaterialSirin aki S (2019) 10 Basic Office Equipment Every Business Needs. Retrieved on June 01 2020 from https://www.market-inspector.co.uk/blog/2017/01/10-basic-office-equipment-for-starting-a-businessEnriquez, H C (2020). Basic Economic Problems of the Country. Retrieved on June 01 2020 fromhttps://www.slideshare.net/HannahCullen/lesson-3-basic-economic-problemsLamarco, N. (2018) The Socioeconomic Factors Affecting Small Businesses Retrieved on June 01 2020 from https://smallbusiness.chron.com/socioeconomic-factors-affecting-small-businesses-73234. html https://www.slideshare.net/HannahCullen/lesson-3-basic-economic-problemsMolina, J. A. & Nadal, G. J I (2020) Concept and Scope of Economics. Retrieved on June 01 2020 from http://personal.unizar.es/jamolina/Unit1.pdfNowaczyk, J. (2020 ).Four Factors of Production: Land, Labor, Capital & Entrepreneurship Retrieved on June o1 2020 from https://study.com/academy/lesson/four-factors-of- production-land-labor-capital-entrepreneurship.htmlPretty, N (2020). Basic terms in Economics. Retrieved on June o1 2020 from https://www.slideshare.netikspretty/basic-terms-in-economicPortillo, E.F (2017). Basic terms in Economics retrieved on June 01 2020 from https://www.slideshare.net/enaportillo13/basic-terms-in-economicsWebsites:https://global.oup.com/us/companion.websites/9780199811786/student/chapt1/multiplechoice https://www.thebalance.com/factors-of-production-the-4-types-and-who-owns-them-4045262 https://quizizz.com/admin/quiz/5b7564f0dfd12e00194449b9/factors-of-productionhttps://study.com/academy/practice/quiz-worksheet-four-factors-of-production.html https://int.search.myway.com/search/AJimage.jhtml?https://int.search.tb.ask.com/search/AJimage.jht

Activity 1 Direction: Listed below are the resources for production of goods and services. Please list down the economic issues to each resource of production that may harm the economy. Land Labor Resources of Capital Production Entrepreneurship Factors of Production Economic Issues Land Labor Capital Entrepreneurship