Introduction to Economics: Definition as Social

Science
How do people choose which goods and services that they consume? How do producers decide what
they will produce and how they will produce it? How are these choices influenced by new discoveries
and technological change? What determines what a person earns? Why do some people become
unemployed? Why do prices change for goods and services? Why do governments intervene in the
market and how are living standards affected by such intervention? What factors influence world trade
and how does interaction with the rest of the world influence Australia’s living standards? Why does
poverty occur and why are some countries richer than others?

Economics is the scientific study of the ownership, use, and exchange of scarce
resources - often shortened to the science of scarcity. Economics is regarded as a
social science because it uses scientific methods to build theories that can help
explain the behavior of individuals, groups and organizations. Economics attempts to
explain economic behavior, which arises when scarce resources are exchanged

The study of economics involves three related investigations.

1. Why scarce resources are exchanged?

2. How consumers and producers behave as they interact with each other in
markets, in their attempt to achieve mutually beneficial exchange?
3. The role of government in compensating for the limitations of markets in
achieving mutually beneficial exchange?

Basic Economics Problem

The fundamental economic problem is the issue of scarcity – but unlimited wants.
Therefore, an underlying feature of economics is concerned with dealing how to
allocate resources in society to make the most efficient and fair use of resources.

Therefore, economics is concerned with:

a. What to produce?
b. How to produce?
c. For whom to produce?

Scarcity implies there is only a limited quantity of resources, e.g. finite fossil fuels
and a limited quantity of manufactured goods. Because of scarcity, there is a
constant opportunity cost – if you use resources to consume one good, you cannot
consume another.

Macroeconomics and Microeconomics

Microeconomics is the study of the economic behavior of individual
consumers as well as businesses.

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 Macroeconomic analysis builds on this knowledge of microeconomics and
attempts to explain economy-wide phenomena.

Macroeconomics differs from microeconomics, which focuses on smaller factors that

affect choices made by individuals and companies. Factors studied in both
microeconomics and macroeconomics typically have an influence on one another.
For example, the unemployment level in the economy as a whole has an effect on
the supply of workers from which a company can hire. Macroeconomics, in its most
basic sense, is the branch of economics that deals with the structure, performance,
behavior and decision-making of the whole, or aggregate, economy, instead of
focusing on individual markets.

Meanwhile, microeconomics looks at economic tendencies, or what can happen

when individuals make certain choices. Individuals are typically broken down into
subgroups, such as buyers, sellers and business owners. These actors interact with
the supply and demand for resources, using money and interest rates as a pricing
mechanism for coordination.

Microeconomic problems

1. Externalities
One of the most frequent problems is that economic decisions can have
external effects on other people not involved in the transaction. For example,
if you produce power from coal, the pollution affects people all over the world
(acid rain, global warming). This is a particular problem because we cannot
rely on the free market to provide the most efficient outcome. If we create
negative externalities, we don’t take them into account when deciding how
much to consume.

Externalities usually need some kind of government intervention. For

example, taxes on negative externalities (e.g. sugar tax) or subsidies on
positive externalities (e.g. free public education)

But, even the solution to market failure (e.g. taxes, creates its own potential
problems, such as how much to tax? will there be tax evasion?)

2. Monopoly
Monopoly was an economic problem that Adam Smith was concerned about
in his influential book of economics “A Wealth of Nations”. For various
reasons firms can gain monopoly power – and therefore the ability to set high
prices to consumers. Given a lack of alternatives, monopolies can make high
profits at the expense of consumers, causing inequality within society.
Monopoly power can also be seen through monopsony employers who pay
lower wages to their workers.

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 How to deal with the problem of monopoly? – A government may seek to
encourage competition, e.g. rail franchising, or price regulation to prevent
excessive prices.

3. Inequality/poverty
Inequality is considered a problem because of normative opinions such as – it
is an unfair distribution of resources. Also, you could argue there is a
diminishing marginal utility of wealth. If all wealth is owned by a small
percentage of the population, this reduces net welfare. Redistributing the
money to the very poor would enable a greater net utility to society.

Inequality is a problem. However, it is also a problem to know how much we

should seek to reduce poverty. Many will agree on the necessity of reducing
absolute poverty – but how far should we take it? Should we aim for perfect
equality (Communism) or should we aim for equality of opportunity?

Another issue with reducing poverty is that measures to reduce poverty may
cause unintended consequences – e.g. higher income tax on high earners
may create disincentives to work. Giving benefits to the low paid may reduce
incentives to work.

4. Volatile prices
Some agricultural markets can have volatile prices. A glut in supply can be
bad news because the fall in price can lead to lower revenue for farmers. It
could even cause some to go out of business because of a bad year. These
volatile markets can cause swings in economic fortunes.
5. Irrational moods
In some asset markets, we have seen volatile prices exacerbated by irrational
exuberance. Consumers have been caught up in market frenzy. Hoping that
rising prices will make them richer – and expecting prices to keep rising. We
can see this in issues such as tulip mania, the South Sea Bubble, railway
mania, and the recent property bubbles.

Macroeconomic problems

1. Unemployment
Unemployment has been a major economic problem in advanced economies.
One of the principal causes of unemployment is swings in the business cycle.
A fall in demand for goods during a recession, causes people to be laid off.
Because of the depressed state of the economy, there is an imbalance
between demand and supply of workers.

Unemployment can also be caused by rapid changes in labour markets, for

examples, unskilled workers unable to gain employment in a high tech

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 economy. Unemployment is a problem because it is a waste of resources, but
more importantly, it leads to very high personal costs, such as stress,
alienation, low income and feelings of failure.

2. Recession
A Recession is a period of negative economic growth – a decline in the size of
the economy. It exacerbates problems of inequality and unemployment.

3. Inflation
High inflation can be a serious problem if prices rise faster than wages and
nominal interest rates. In periods of rapidly rising prices, people with savings
will see a decline in their real wealth. If prices rise faster than wages, then
people’s spending power will decline. Also, rapidly rising prices creates
confusion and uncertainty and can cause firms to cut back on investment and
spending. Countries which have experienced hyperinflation, have seen it as a
very traumatic period because all the economic certainty is washed away,
leaving people without any certainty.

4. Balance of payments/current account deficit

A current account deficit on the balance of payments means an economy is
importing more goods and services than it is exporting. To finance this current
account deficit, they need a surplus on the financial/capital account. For many
modern economies, a small current account deficit is not a problem. However,
some developing economies have experienced a balance of payments crisis –
where the large deficit has to be financed by borrowing, and this situation
usually leads to a rapid devaluation of the currency. But, this devaluation
increases the price of imports, reduces living standards and causes inflation.

5. Exchange rate volatility

In some cases, the exchange rate can cause economic problems. For
example, countries in the Euro were not able to change the value of their
currency against other Eurozone members. Because countries like Greece
and Portugal had higher inflation rates, they became uncompetitive. Exports
fell, and they developed a large current account deficit. The overvalued
exchange rate caused a fall in economic growth.

On the other hand, a rapid devaluation can cause different problems. For
example, when the price of oil fell, oil exporting countries saw a decline in
export revenues, leading to a fall in the value of the currency. A rapid
devaluation causes the price of imports to rise and causes both higher
inflation and lower growth. A difficult problem for policymakers to deal with.

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Relative Scarcity: needs and wants

Most economics courses start from the premise of relative scarcity. Something is
seen as scarce when it is desired but access to it is limited. We start by making the
(perhaps challengeable) assumption that our needs and wants can never be fully
satisfied (they are therefore considered infinite). In contrast, the resources needed to
meet all of our needs and wants have physical limits (they are therefore finite). If
humans could attain all of their desires, there would be no scarcity and Economics
may disappear as a discipline.

Economists often distinguish between needs and wants when they discuss
relative scarcity.

A need is seen as good or service that is deemed to be necessary for one’s survival.
As societies evolve over time, what is considered a need by some individuals?

A want is therefore a good or service that is not necessary for one’s survival, but
consumption of which adds to the quality of one’s life.

Most would accept that food, water, clothing and shelter are needed for survival, but
what about telecommunications services, electricity and healthcare? Are these
needs or wants? Like many areas of Economics, there is no definitive answer and
each person will express a different opinion on how they perceive each of these
’products‘. The economic models that are discussed throughout this book are based
on an intrinsic assumption that households seek to meet their needs and wants
through their interactions in the economy and that for most people, these needs and
wants cannot be fully satisfied. In other words, as one need or want is satisfied,
another will emerge in its place.

Resources and the key economic questions

An economy is a place where scarce resources are allocated among competing

uses. Economists distinguish between three main types of resources that can be
used to produce goods and services to meet the needs and wants of the people on
the planet. For this reason, they are also referred to as factors of production, where
the quantity and quality of these factors of production has a big impact on national
living standards or welfare. The three factors of production are as follows:

 Land or natural resources refers to all those resources that occur in nature.
These can be utilized in the production process to generate more elaborate
products or consumed in their raw form. Examples of such resources include
water, forests, minerals, land, animals, fruit and vegetables. It may seem
obvious, but all production depends on natural resources.
 Labour refers to the mental and physical effort by humans in the production
process. In Chapter 6 a detailed analysis of the Australian labour force will be

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 undertaken. The Australian labour force only includes those who are
employed plus those who are actively seeking employment. This means that
some labour resources may not be available for firms to use in the production
process.
 Capital refers to those resources that have been made by combining labour
and natural resources to create a more sophisticated input in the production
process. Capital goods are made with the intention of making more goods and
services in the future, and generally these will increase the efficiency with
which natural resources can be converted into end-use products for
consumption. A common example of a capital resource is machinery, such as
computers and robotics.
 Entrepreneurship or enterprise. This refers to the skills of those individuals
who combine resources to produce goods and services. They take financial
risks to establish enterprises and are extremely important to wealth creation
for every nation. They not only include high profile entrepreneurs like Rupert
Murdoch, Bill Gates or Mark Zuckerberg, but include the owners of every
small or medium-sized business in existence. This type of scarce resource
typically forms part of ‘labour resources,’ given that entrepreneurs are
providing their expertise or skills to the business sector of the economy.

“There is no such thing as a free lunch.”

If scarcity is the basic economic problem then it is evident that not every need and
want of humans can be met. The problem of scarcity has not yet been solved, even
in the richest economies. The problem of scarcity creates a fundamental problem for
all of humanity.

Test Yourself
A. Think deeply! Answers the questions that follows.

1. Explain why Economics is often referred to as a social science. How might this
affect the conclusions made by economic theorists?

2. Define the term relative scarcity. Explain why this is such an important concept
when studying Economics.

3. Discuss the concept of relative scarcity with respect to the time you have available
to undertake all of the activities you want to complete today.

4. Distinguish microeconomics from macroeconomics.

5. Define ‘factors of production’ and explain why economists often refer to resources
as ’factors of production’.

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6. Identify the three essential economic questions that each economy seeks to
answer. Using Phillipines as an example, explain how the economy attempts to
answer them.

B. Choose the letter of the correct answer.

1. Economies around the world experience relative scarcity because:

a) Natural resources are inadequate

b) Needs and wants of consumers are manipulated by marketing experts

c) Shortages develop in markets, leading to higher prices

d) Needs and wants are generally greater than the resources available to meet them

2. The Australian economy allocates scarce resources through:

a) The market mechanism only

b) Government planning

c) A combination of the market mechanism and government planning

d) Assessing the needs of each person

3. Which of the following statements would be inconsistent with Mankiw’s 10

principles of economics?

a) China specialises in the production of clothing, and trades this with Australia

b) In choosing to attend university, a young man gives up the opportunity to earn

wages working in a local super market

c) The government is better able to allocate resources because there wouldn’t need
to be any advertising

d) Australia is a rich country because we are able to utilise our resources and
increase production levels each year

4. A study of microeconomics is unlikely to include:

a) An analysis of the market for blue shirts in Australia

b) A prediction about the future of house prices in 2015-16

c) The role of governments in encouraging safe levels of alcohol consumption

d) Why the general level of prices in Australia has increased in the last 12 months

5. The opportunity cost of building a new sports pavilion at your school is:

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a) The loss of interest that the money could have earned if it were left in the bank

b) About 2 million pesos based on current market prices

c) The loss of students if the pavilion had not been constructed

d) A decrease in the number of students visiting the library

6. A country’s production possibility frontier may temporarily shift to the left if:

a) There is an increase in the number of skilled immigrants entering

b) There is a decrease in demand caused by a recession

c) The country experiences a drought for two years

d) There is an increase in the number of people joining the labour force

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Goods and Utility in Economics
An economic good is a good or service that has a benefit (utility) to society. Also,
economic goods have a degree of scarcity and therefore an opportunity cost.

This is in contrast to a free good (like air, sea water) where there is no opportunity
cost – but abundance. Free goods cannot be traded because nobody living by the
sea would buy seawater – there is no point. However, with economic goods where
there is some scarcity and value, people will be willing to pay for them (in some
form).

In the field of behavioral economics we often come across the term utility. In this
context, utility refers to the perceived value (i.e. usefulness) an individual receives
when they purchase a good or service. There are four different types of utility: form
utility, place utility, time utility, and possession utility.

1. Form
Form utility is created by the design of the product or service itself. The more
specifically a good or service is targeted towards customer needs and
desires, the higher its perceived added value (i.e. form utility) will be. In other
words, form utility is obtained by transforming customer needs into products
or services.
2. Place
Place utility can be obtained through the process of making a good or service
more easily available to potential customers. The easier it is to purchase a
product, the more attractive it becomes.
3. Time
Time utility is created by providing easy availability of a good or service at the
time when customers need or want it. The more easily and quickly a product
can be purchased (and used) at that time, the higher its perceived time utility
is. In addition to that, time utility is always high in times of scarcity.
4. Possession
Possession utility describes the benefits that can be derived from owning and
using a specific product. Generally speaking, the more “useful” a product is to
an individual, the higher its possession utility will be.

Factors of Production
Factors of production are the resources people use to produce goods and services;
they are the building blocks of the economy. Economists divide the factors of
production into four categories: land, labor, capital, and entrepreneurship.

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  The first factor of production is land, but this includes any natural resource
used to produce goods and services. This includes not just land, but anything
that comes from the land. Some common land or natural resources are water,
oil, copper, natural gas, coal, and forests. Land resources are the raw
materials in the production process. These resources can be renewable, such
as forests, or nonrenewable such as oil or natural gas. The income that
resource owners earn in return for land resources is called rent.
 The second factor of production is labor. Labor is the effort that people
contribute to the production of goods and services. Labor resources include
the work done by the waiter who brings your food at a local restaurant as well
as the engineer who designed the bus that transports you to school. It
includes an artist's creation of a painting as well as the work of the pilot flying
the airplane overhead. If you have ever been paid for a job, you have
contributed labor resources to the production of goods or services. The
income earned by labor resources is called wages and is the largest source of
income for most people.
 The third factor of production is capital. Think of capital as the machinery,
tools and buildings humans use to produce goods and services. Some
common examples of capital include hammers, forklifts, conveyer belts,
computers, and delivery vans. Capital differs based on the worker and the
type of work being done. For example, a doctor may use a stethoscope and
an examination room to provide medical services. Your teacher may use

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 textbooks, desks, and a whiteboard to produce education services. The
income earned by owners of capital resources is interest.
 The fourth factor of production is entrepreneurship. An entrepreneur is a
person who combines the other factors of production - land, labor, and capital
- to earn a profit. The most successful entrepreneurs are innovators who find
new ways produce goods and services or who develop new goods and
services to bring to market. Without the entrepreneur combining land, labor,
and capital in new ways, many of the innovations we see around us would not
exist. Think of the entrepreneurship of Henry Ford or Bill Gates.
Entrepreneurs are a vital engine of economic growth helping to build some of
the largest firms in the world as well as some of the small businesses in your
neighborhood. Entrepreneurs thrive in economies where they have the
freedom to start businesses and buy resources freely. The payment to
entrepreneurship is profit.

Fundamental institutions of present Economic

system
A classification of economic institutions

Functions Examples Typical formal Informal

regulating agency regulating
agency
Property rights Land tenure Land registries Oral history,
Establish rights; chiefs &
decide Inheritance law Probate registry other local
between competing Intellectual property Patent offices political
claims; rights: patents, authorities
inform non-owners & copyright Custom
police
Reciprocracy: Weights, measures, Standards bureau Elders, religious
facilitating transactions standards Courts
Establish rules of Contract law; Civil courts;
exchange, dispute arbitration councils Customary
respect for contracts arbitration Market information points
Provide information Public information agencies for exchange
Reduce or re-allocate
on Local authorities; (Crossroads,
risk
markets stock exchanges/ etc.)
Physical provision bourses Market
& organization hierarchies
of markets (e.g. Bank regulatory (Market
auction rings, stock Agencies mammies/
exchanges, futures Queens/etc.)
markets) Professional Haveli systems
Banking associations
conventions, Professional
instruments (letters associations

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 of credit, etc.)
Auditing &
accounting
conventions
Insurance
companies
Co-operation & Laws on limited Register of
Organisation: liability & bankruptcy companies
Allow Competition policy
• Interactions within Commissions on
organisations Regulations on monopolies & Social norms of
• Collective action & cooperatives, mergers cooperation
cooperation charities, Co-operatives
(in labour, price civil associations ministries, bureau
negotiation)
Auditing &
• Realising economies
of scale and managing accounting Professional Custom
diseconomies of scale conventions associations
Employment Min labour,
employment
tribunals

How do institutions affect economic growth and poverty reduction?

The functioning of institutions potentially affects three factors that help determine
economic growth, thus:

• Investment: when property rights are secure, owners of capital are more likely to
invest, all other things being equal. If it is easy to trade, obtain credit, retain a
reasonable share of the profits (that is, without excessive taxation) and to insure
against risks, investment is again encouraged. Investment may also be stimulated
when establishing companies or more informal economic groups, (and the
organization of their functioning) is relatively straightforward.

• Technical innovation: again, secure intellectual property rights are likely to

promote private investment in research and development of innovations.

• Economic organization: is likely to be more effective and efficient, delivering the

benefits of specialization and economies of scale where they apply, when institutions
facilitate transactions and co-operation between individuals, whether in formal
companies or less formal co-operatives.

Institutions are also likely to have a profound influence on the pattern of economic
growth and the distribution of rewards within economies and societies – and thereby
affect levels of poverty.

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5 MAJOR DIVISIONS OF ECONOMICS
1. Consumption

Since the existence of human wants is the starting point of economic activity, we
study consumption first. In this, we study about the consumption of wealth for the
satisfaction of human wants. In this division, we study about the characteristics of
human wants, the behavior of the consumer, diminishing utility and consumer’s
surplus, etc.

2. Production

This division covers the factors of production viz., Land, Labor, Capital and
Organization. The laws governing production, mobility of factors and the role of
factors are studied in this division.

3. Exchange

In this division, we study about trade and commerce, money and banking.
Consumption will be possible only if the produced commodity is placed in the hands
of the consumer. For this, trade and commerce are essential for the movement of
goods and services from one place to another.

4. Distribution

Production is the result of the cooperation of factors of production. Since a

commodity is produced with the efforts of land, labor, capital and organization, the
produced wealth has to be distributed among the cooperating factors. The reward for
factors of production is studied in this division under rent, wages, interest and profit.
Distribution studies about the pricing of factors of production.

5. Public Finance

This division studies about the income, expenditure and financial administration of
the State. This tells about taxation and expenditure, budgeting and financial
administration. Public Finance has been separated from Economics and is treated as
an independent branch.

Demand and Supply

Supply and demand is perhaps one of the most fundamental concepts of economics
and it is the backbone of a market economy.

Demand refers to how much (quantity) of a product or service is desired by buyers.

The quantity demanded is the amount of a product people are willing to buy at a
certain price; the relationship between price and quantity demanded is known as the
demand relationship.

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A, B and C are points on the demand curve. Each point on the curve reflects a direct
correlation between quantity demanded (Q) and price (P). So, at point A, the quantity
demanded will be Q1 and the price will be P1, and so on. The demand relationship
curve illustrates the negative relationship between price and quantity demanded. The
higher the price of a good the lower the quantity demanded (A), and the lower the
price, the more the good will be in demand (C).

Supply represents how much the market can offer. The quantity supplied refers to
the amount of a certain good producers are willing to supply when receiving a certain
price. The correlation between price and how much of a good or service is supplied
to the market is known as the supply relationship. Price, therefore, is a reflection of
supply and demand.

A, B and C are points on the supply curve. Each point on the curve reflects a direct
correlation between quantities supplied (Q) and price (P). At point B, the quantity
supplied will be Q2 and the price will be P2, and so on.

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Price the amount of money that has to be paid to acquire a given product. Insofar as
the amount people are prepared to pay for a product represents its value, price is
also a measure of value.

It follows from the definition just stated that prices perform an economic function of
major significance. So long as they are not artificially controlled, prices provide an
economic mechanism by which goods and services are distributed among the large
number of people desiring them. They also act as indicators of the strength of
demand for different products and enable producers to respond accordingly. This
system is known as the price mechanism and is based on the principle that only by
allowing prices to move freely will the supply of any given commodity match demand.
If supply is excessive, prices will be low and production will be reduced; this will
cause prices to rise until there is a balance of demand and supply. In the same way,
if supply is inadequate, prices will be high, leading to an increase in production that
in turn will lead to a reduction in prices until both supply and demand are in
equilibrium.

Market a means by which the exchange of goods and services takes place as a
result of buyers and sellers being in contact with one another, either directly or
through mediating agents or institutions.

Markets in the most literal and immediate sense are places in which things are
bought and sold. In the modern industrial system, however, the market is not a
place; it has expanded to include the whole geographical area in which sellers
compete with each other for customers.

Marketing in Economics

Marketing economics is the science of markets including product, pricing, promotion

and place. Marketing is often viewed as an art that includes social elements such as
influencing and creative elements such as design. These elements are built on top of
economic fundamentals such as the forces of competition and customer demand.
The following are key economic principles and theories related to marketing.

5 Types of Marketing Economics

Marketing economics is the science of markets including product, pricing, promotion

and place. Marketing is often viewed as an art that includes social elements such as
influencing and creative elements such as design. These elements are built on top of
economic fundamentals such as the forces of competition and customer demand.
The following are key economic principles and theories related to marketing.

Product

Developing products that are competitive in the market. The economics of products
begin with business models that explain how you capture value. Product economics

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also includes the basic economics of production such as economies of scale that
predict your cost competitiveness.

Pricing

Pricing is subject to the basic laws of supply and demand. For example, a luxury firm
that strictly maintains premium prices will enjoy far less demand for its products. This
represents a temptation to discount as any price reductions may dramatically
increase sales but potentially damage the status of the brand. Beyond luxury, many
firms must set their price below a price umbrella of a strong competitor or accept a
market price that they have no influence over.

Promotion

Generating demand for products and services with communications and

relationships. Much of this is based on attention economics, the idea that human
attention is a precious resource. This is the economic foundation of advertising and
other types of promotion such as direct marketing.

Distributions

Making a product or service available to customers through physical locations and

digital presence. This is based on the economics of trade and open markets.

Experience

The idea that customer experience is the primary form of competitive advantage in
an advanced economy. The global economy is undergoing a long term shift whereby
value is increasingly based on intangible things such as brand image and services.

Money
We all know what money is. We may have different terms for it—smackers, c-notes,
dead presidents, Benjamins, bucks, bones, clams, dough, moolah—but money
usually finds a way to overcome these barriers of dialect and speak to us all.

Economists, however, have a language all their own when it comes to money. They
define it as something that serves as a medium of exchange, a unit of accounting,
and a store of value.

Money is a medium of exchange in the sense that we all agree to accept it in making
transactions. Merchants agree to accept money in exchange for their goods;
employees agree to accept money in exchange for their labor

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Evolution of money in the Philippines

Like all nations, the Philippines first main form of trade was through direct barter
exchange. Basically, if a tribesman wanted fish from a neighboring village, he would
present his pig or chickens, and receive a certain amount of fish in exchange.

However, we would soon realize that this form of trade was inefficient, as the
outcome of the trade relied heavily upon the discretion of the two parties. Since gold
in the Philippines during pre-colonial times were plentiful, people began using this
resource, shaping them into rings or beads, and using them as forms of payment,
effectively functioning as coins.

When the Spanish colonized the Philippine islands during the 1520s, they introduced
their silver coin “teston” which became the main form of currency in the Philippines at
the time. However, since the Philippines was fast becoming a melting pot of cultures,
with different ethnicities bringing in their own forms of currency, the ruling Spanish
regime introduced the “peso fuerte” or strong peso, printed on paper, functioning as
the first instance of paper money in the Philippines, and being of higher value than
other currencies in the country at that time.

When the Philippines was liberated from the Spanish, we replaced the peso fuerte
with our own Philippine Peso, adding centavos as well as renaming them to our own
native language.

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During the American occupation, they introduced a monetary system which based
the value of currency on the amount of gold reserves the country possesses. At that
time, the Philippine Peso was valued at 2 pesos to 1 dollar.

Nowadays, all Philippine currency has been named to its Tagalog roots, and
primarily feature national heroes, landmarks, and natural resources.

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Different Currencies

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Currencies for the Middle East, Asia and Russia are shown with the exchange rate of
45 different countries. The strongest currency is the Kuwaiti dinar. The exchange
rate of the Kuwaiti dinar is 0.30 for 1 USD. The weakest currency is the Iranian rial, 1
USD is equivalent to 30,165 Iranian rial. In the map, 4 locations have stronger
currencies than the U.S. dollar: Kuwait, Oman, British Indian Ocean Territory, and
Jordan.

Strongest Currencies

 Kuwait: 1 USD = 0.30 Kuwaiti dinar

 Bahrain: 1 USD = 0.37 Bahraini dinar
 Oman: 1 USD = 0.38 Omani rial
 British Indian Ocean Territory: 1 USD = 0.69 Pound sterling
 Jordan: 1 USD = 0.71 Jordanian dinar

Weakest Currencies

 Iran: 1 USD = 30,165 Iranian rial

 Vietnam: 1 USD = 22,281 Vietnamese đồng
 Indonesia: 1 USD = 13,236 Indonesian rupiah
 Laos: 1 USD = 8,220 Lao kip
 Cambodia: 1 USD = 4,005 Cambodian riel

Grouping of Nations

 The Group of Eight (G8) Industrialized Nations

The Group of Eight (G8) refers to the group of eight highly industrialized
nations—France, Germany, Italy, the United Kingdom, Japan, the United
States, Canada, and Russia—that hold an annual meeting to foster
consensus on global issues like economic growth and crisis management,
global security, energy, and terrorism. The forum enables presidents and
prime ministers, as well as their finance and foreign ministers, to candidly
discuss pressing international issues. Its small and static membership,
however, excludes emerging powers from important talks concerning the
global economy and international security, and as an informal grouping, states
have little leverage over other members with which to secure compliance on
agreements beyond imposing reputational costs.

Economic Growth and Development

What is the difference between Economic Growth and Development? We will start by
defining Economic growth and development. Having economic growth without
economic development is possible.

A country’s economic development is usually indicated by an increase in citizens’

quality of life. ‘Quality of life’ is often measured using the Human Development Index,

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which is an economic model that considers intrinsic personal factors not considered
in economic growth, such as literacy rates, life expectancy and poverty rates.

Growth occurs when…

 There is a discovery of new mineral/metal deposits.

 There is an increase in the number of people in the workforce or the quality of
the workforce improves. Example: training and education.
 There is an increase in capital and machinery.
 There is an improvement in technology

Development occurs when…

 An increase in real income per head – GDP per capita.

 The increase in levels of literacy and education standards.
 Improvement in the quality and availability of housing.
 Improvement in levels of environmental standards.
 Increased life expectancy.

A. Economic Growth

Growth is an increase in the country’s output.

B. Development

Development is an improvement in factors such as health, education, literacy rates

and a decline in poverty levels.

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Food Security
Food security is defined as the availability of food and one's access to it. A
household is considered food secure when its occupants do not live in hunger or fear
of starvation. Stages of food insecurity range from food secure situations to full-scale
famine. The World Food Summit of 1996 defined food security as existing "when all
people at all times have access to sufficient, safe, nutritious food to maintain a
healthy and active life".

The World Food Summit of 1996 defined food security as existing "when all people
at all times have access to sufficient, safe, nutritious food to maintain a healthy and
active life". Commonly, the concept of food security is defined as including both
physical and economic access to food that meets people's dietary needs as well as
their food preferences. Household food security exists when all members, at all
times, have access to enough food for an active, healthy life. Food security
incorporates a measure of resilience to future disruption or unavailability of critical
food supply due to various risk factors including droughts, shipping disruptions, fuel
shortages, economic instability, and wars.

 Food stability: Refers to the ability to obtain food over time.

 Food access: Refers to the affordability and allocation of food, as well as the
preferences of individuals and households.
 Food availability: Relates to the supply of food through production,
distribution, and exchange.

What is Food Security?

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Two common definitions of food security come from the United States Department of
Agriculture (USDA), and the UN's Food and Agriculture Organization (FAO):

 Food security exists when all people, at all times, have physical and economic
access to sufficient, safe and nutritious food to meet their dietary needs and
food preferences for an active and healthy life. (FAO)
 Food security for a household means access by all members at all times to
enough food for an active, healthy life. Food security includes at a minimum,
(USDA):

(1) The ready availability of nutritionally adequate and safe foods

(2) An assured ability to acquire acceptable foods in socially acceptable ways (that
is, without resorting to emergency food supplies, scavenging, stealing, or other
coping strategies).

Things affecting food security today include:

Global Water Crisis - Water table reserves are falling in many countries (including
Northern China, the US, and India) due to widespread over-pumping and irrigation.

Climate Change - Rising global temperatures are beginning to have a ripple effect
on crop yields, forest resources, water supplies and altering the balance of nature.

Land Degradation - Intensive farming leads to a vicious cycle of exhaustion of soil

fertility and decline of agricultural yields.

Greedy Land Deals - Corporations and Governments buying rights to millions of

acres of agricultural land in developing countries to secure their own long-term food
supplies.

Food security is not just a poverty issue; it is a much larger issue that involves the
whole food system and affects every one of us in some way. Issues such as whether
households get enough food, how it is distributed within the household and whether
that food fulfills the nutrition needs of all members of the household show that food
security is clearly linked to health.

Global Food Security must exist to meet the challenge of providing the world's
growing population with a sustainable, secure supply of good quality food.

 Food insecurity is measured in the United States by questions in the Census

Bureau's Current Population Survey.
 Diseases affecting livestock or crops can have devastating effects on food
availability especially if there are no contingency plans in place.
 The approach known as food sovereignty views the business practices of
multinational corporations as a form of neocolonialism.

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  FAO reported that almost 870 million people were chronically undernourished
in the years 2010-2012.
 The United States Department of Agriculture defines food insecurity as
"limited or uncertain availability of nutritionally adequate and safe foods or
limited or uncertain ability to acquire acceptable foods in socially acceptable
ways."
 The 1996 World Summit on Food Security declared that "food should not be
used as an instrument for political and economic pressure".
 842 million people in the world do not have enough to eat. This number has
fallen by 17 percent since 1990.
Source: State of Food Insecurity in the World,FAO, 2013
(www.fao.org/publications/sofi/en/)
 One out of six children - roughly 100 million - in developing countries is
underweight.
Source: Global health Observatory, WHO, 2012
(www.who.int/gho/mdg/poverty_hunger/underweight/en/)
 Poor nutrition causes nearly half (45%) of deaths in children under five - 3.1
million children each year.
Source: Series on Maternal and Child Nutrition, The Lancet, 2013
(www.thelancet.com/series/maternal-and-child-nutrition)
 The vast majority of hungry people (827 million) live in developing countries,
where 14.3 percent of the population is undernourished.
Source: State of Food Insecurity in the World, FAO, 2013
(www.fao.org/publications/sofi/en/)
 If women farmers had the same access to resources as men, the number of
hungry in the world could be reduced by up to 150 million.
Source: Women in Agriculture: Closing the Gender Gap for Development,
FAO, 2011 (www.fao.org/docrep/013/i2050e/i2050e00.htm)
 Asia has the largest number of hungry people (over 500 million) but Sub-
Saharan Africa has the highest prevalence (24.8 percent of population).
Source: State of Food Insecurity in the World, FAO, 2013
(www.fao.org/publications/sofi/en/)
 66 million primary school-age children attend classes hungry across the
developing world, with 23 million in Africa alone.
Source: Two Minutes to Learn About School Meals, WFP, 2012
(documents.wfp.org/stellent/groups/public/documents/communications/wfp22
0221.pdf)
 WFP calculates that US$3.2 billion is needed per year to reach all 66 million
hungry school-age children.
Source: Two Minutes to Learn About School Meals, WFP, 2012
(documents.wfp.org/stellent/groups/public/documents/communications/wfp22
0221.pdf)

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  One in four of the world's children are stunted. In developing countries the
proportion can rise to one in three.
Source: Prevalence and Trends of Stunting among Children, Public Health
Nutrition, 2012
(www.who.int/nutgrowthdb/publications/stunting1990_2020/en/)
 80 percent of the world's stunted children live in just 20 countries.
Source: Maternal and Child Under-nutrition: Effective Action at National
Level,The Lancet, 2008 (www.thelancet.com/journals/lancet/article/PIIS0140-
6736%2807%2961694-8/abstract)

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