Module 1

Lesson 1
Basic Concepts of Economics
 Pre-test
I. True or False: Carefully read each sentence
and determine if the sentence is true or if the
sentence is false.
1. Economics comes from the Greek word oikonomia
which means household chores.
2. Economics is considered a field of social science.
3. Economics is relevant because it is part of
everybody’s life.
4. There are three (3) divisions of Economics, the
microeconomics, the macroeconomics and the home
economics.
5. As a science, Economics is related to other sciences.
Economics as defined
From the Greek words Oikos meaning household
and nomos meaning management
= household management

ECONOMICS

The wise production and use of wealth to

meet the demands or needs of the people
Economics as defined by authors of
Economics books
 Paul Samuelson (Economics)
“the study of how people and society end up choosing, with or without
use of money, to employ scarce resources that could have alternative
uses to produce various commodities among various persons and
groups in society.”

 Roger Le Roy Miller (Economics, Today and Tomorrow)

“Economics concerns situations in which choices must be made
about how to use limited resources, when to use them and for what
purposes. Resources can be defined as the things people use to
make the commodities they want.”

 Hall and Loeberman (Macroeconomics: Principles and Applications)

“The study of choice under the condition of scarcity”
 Bernardo Villegas (Guide to Economics for
Filipinos)
“A social science that studies and seeks to
allocate scarce human and non-human
resources among alternatives in order to satisfy
unlimited human wants and desires.”

 Gerardo Sicat (Economics)

“a scientific study which deals with how
individuals and society make choices,”
Common words among definitions…
 Scarcity- a situation wherein the amount of something available is
insufficient to satisfy the desire for it.
 Resources-The labor, capital, land and natural resources and
entrepreneurship that are used to produce goods and services.
 Unlimited – without limits, infinite
 Wants –desires
Finally…
 ECONOMICS – is a social science that deals with how people
organize themselves to allocate scarce resources to produce
goods and services that will satisfy the unlimited and
multiplying wants and needs of man.
 A need is generally referred to, in economics, as
something that is extremely necessary for a person to
survive. If a need is not met, it would lead to the onset
of disease, the inability to function effectively and
efficiently in society, and even death. Needs are
categorized into two groups.
 There are the objective or physical needs, and the
subjective needs. Objective needs are those that are met
through tangible things, or things that could be
measured. Examples of these include food, water,
shelter and even air. On the other hand, subjective
needs are those that are often seen to ensure our mental
health. Examples of these are self-esteem, a sense of
security and approval.
 SUBJECTIVE NEEDS

OBJECTIVE NEEDS
 On the other hand, a want is something that a
person desires, either immediately or in the future.
Unlike needs, wants are those that differ from one
person to another. Each person has his or her own list of
wants, each with a varying level of importance.
Furthermore, wants can change over a period. This
contrasts with needs, which remain constant throughout
the lifetime of the person.
Concerns of Economics
 Economics is concerned with PRODUCTION
Production is the use of inputs to produce outputs.
Inputs are commodities or services that are used to produce
goods and services.
Outputs are the different goods and services which come out of
production process.
Society have to decide what outputs will be produced and in
what quantity.
 Economics is concerned with DISTRIBUTION
Distribution is the allocation of the total product among
members of society. It is related to the problem of for
whom goods and services are to be produced.
 Economics is concerned with CONSUMPTION
Consumption is the use of a good or service.
Consumption is the ultimate end of economic activity.
WHEN THERE IS NO CONSUMPTION, THERE WILL
BE NO NEED FOR PRODUCTION AND
DISTRIBUTION.
 Economics deals with PUBLIC FINANCE
Public Finance is concerned with government
expenditures and revenues. Economics studies how the
government raises money through taxation and
borrowing.
DIVISIONS OF ECONOMICS
ECONOMICS

MACROECONOMICS
MICROECONOMICS
General, economy as a whole
Specific
Deals with the economic behavior of
Deals with the economic the whole economy or its aggregate
behavior of the individual such as government, business,
units such as consumers, unemployment, inflation and the like.
firms, the owners of factors
Refers to management of income,
of productions
expenditures, wealth or resources of a
nation.
Types of Economics
1. Household Economics – most common use of economics
is for the family. At this level, anyone who knows the
economic principles will be able to improve the running of the
household.
2. Business Economics – when a person or group of persons
begins to work, they come under the system of business
economics in their workplace. In this type, you deal with the
rent, salary, profits and others.
3. National Economics – Economic factors of problems
affecting the whole nation. Deals with the management of
income, expenditures, wealth or resources of a nation.
4. International Economics – The highest stage of economic
activities involving the business of one country with other
countries like trade, tourism, exchange rates.
 Is Economics a science?
Explain why if “yes” or why not if “no”

?
Economics as a Science
 Economics is a science because it is an
organized body of truth, coordinated, arranged
and systematized with reference to certain
general laws and principles.(Observation, Formulation of
theories, Gathering of data, Experimentation, Conclusion,
Generalization)
Economics as a Social Science
 Social science is the study of society and
how people behave and influence the world
around them.
 Economics is a social science because it
studies human behavior just like psychology
and sociology.
 As a social science, economics studies how
individuals make choices in allocating scarce
resources to satisfy their unlimited wants.
Economics as an Applied Science:
1. Helps students to learn about the relationship of business
and basic economic theories.
2. Offers opportunities to measure their academic and personal
growth and improve their educational career planning.
3. It focuses on urban problems, the health-care crisis,
agricultural problems, poverty, economic growth and the
environment.
Essence of Studying Economics
 To understand the world better
Applying the tools of economics can help you understand global and cataclysmic events
such as wars, famines, epidemics, and depressions. Economics has the power to help us
understand these phenomena because they result from the choices we make under the
condition of scarcity.
 To gain self-confidence and become wise decisions makers
Mastery of economics will help you to understand how things work in your society thereby
“feeling equipped”
 To achieve social change and contirbute to
National Development
Economics can help us understand the origins of serious social
problems such as: unemployment, hunger, poverty, disease, child
abuse, drug addiction, violent crime. It will also explain why previous
efforts to solve these problems have failed, and help us to design
new, more effective solutions.

 To help prepare for other careers

Economics has long been a popular college major for individuals
who are intending to work in business. But it has also been popular
among those planning careers in politics, international relations, law,
medicines, engineering, etc. This is for good reason because
practitioners in each of these fields often find themselves
confronting economic issues.