MODULE 1 LESSON 1

Ag. Econ.1- Philippine and Asian Agriculture

Introduction of Economics

TIME FRAME:
Students are expected to complete this lesson for 1 week.

Learning Objectives:
In this lesson you will be able to;
1. Define Economics;
2. Differentiate microeconomics to macroeconomics;
3. Enumerate and describe 10 principles of economics.

INTRODUCTION
You are now in lesson 1 of Module 1! In this lesson, you will get to know the
Introduction in Economics. Understand the difference between microeconomic vs.
macroeconomics. Moreover, in studying Philippine and Asian Agriculture. Get ready
to take this new lesson. You will come across the principles of economics and its
underlying importance. Take your pen if you wish to record important events and
have fun learning this lesson. Good luck
 ACTIVITY

Direction: Differentiate the following; write 2 sentences that describe each item.
1. Microeconomics vs. Macroeconomics

2. Normative economics Vs. Positive economics

Content: 3
Organization of Ideas: 2
Total: 5 points /no. x 2 = 10 pts.

ANALYSIS

Direction: Please read the questions below and write 2 sentences that best describe
it’s given questions.
1. What is the connection of Agriculture in the Economics?

2. How economics plays vital role in agriculture?

3. Give at least 2 examples of microeconomics and explain briefly.

4. Give at least 2 examples of macroeconomics and explain briefly.


Content: 3
Organization of Ideas: 2
Total: 5 points /no. x 2 = 10 pts.
 ABSTRACTION

Agricultural Economics
-applies the principles of economics to crop and
animal production.
-deals with the allocation of scarce resources for
competing alternative uses
found in the production, processing, distribution,
and consumption of food, feed,
and fiber.
-in the United States: first taught at Harvard University and at the University of
Wisconsin in 1903; Bureau of Agricultural Economics was formed under the U.S
Department of Agriculture in 1921.
-in the Philippines: Bureau of Agricultural Economics was formed on June 22,
1963 under the Office of the Secretary of Agriculture and National Resources.
Macroeconomics
-is concerned with performance of the economy as a whole or with large sectors
of it, such as government, business firms, and households.
Microeconomics
-is the study of how households and firms make decisions and how they interact
in markets.
Positive economics
-Makes statements on “what is” or “what will happen”; unbiased; cause and
effect.
Normative economics
-Makes statements on “what should be”; biased; value judgements used in
formulating policies.
Ceteris paribus
-Lt, “other things being equal”
Opportunity Cost
-The value of the best forgone alternative.
10 Principles of Economics
The principles how people make decisions:

Principle #1: People Face Trade-offs

• Society faces an important tradeoff: efficiency vs. equality
• Efficiency: when society gets the most from its scarce resources
• Equality: when prosperity is distributed uniformly among society’s members
• Trade-off: To achieve greater equality, could redistribute income from wealthy to
poor. But this reduces incentive to work and produce, shrinks the size of the
economic “pie.”

Principle #2: The Cost of Something Is What You Give Up to Get It

• Making decisions requires comparing the costs and benefits of alternative choices.
• The opportunity cost of any item is whatever must be given up to obtain it.
• It is the relevant cost for decision making.
Examples: The opportunity cost of…
…going to college for a year is not just the tuition, books, and fees, but also the
foregone
wages.
…seeing a movie is not just the price of the ticket, but the value of the time you
spend
in the theater.

Principle #3: Rational People Think at the Margin

Rational people
– Systematically and purposefully do the best they can to achieve their objectives.
-make decisions by evaluating costs and benefits of marginal changes
– Incremental adjustments to an existing plan.
Example:
• When a student considers whether to go to college for an additional year, he
compares the fees & foregone wages to the extra income he could earn with the
extra year of education.
Principle #4: People Respond to Incentives
• Incentive: something that induces a person to act, i.e. the prospect of a reward or
punishment.
• Rational people respond to incentives.
Examples:
When gas prices rise, consumers buy more hybrid cars and fewer gas guzzling
SUVs.
When cigarette taxes increase, teen smoking falls.

Principle #5: Trade Can Make Everyone Better Off

• Rather than being self-sufficient people can specialize in producing one good or
service and exchange it for other goods.
• Countries also benefit from trade & specialization:
– Get a better price abroad for goods they produce
– Buy other goods more cheaply from abroad than could be produced at home

Principle #6: Markets Are Usually A Good Way to Organize Economic Activity
• Market: a group of buyers and sellers (need not be in a single location)
• “Organize economic activity” means determining
– What goods to produce
– How to produce them
– How much of each to produce
– Who gets them
• A market economy allocates resources through the decentralized decisions of
manyhouseholds and firms as they interact in markets.

Principle #7: Governments Can Sometimes Improve Market Outcomes

• Important role for govt: enforce property rights (with police, courts)
• Market failure: when the market fails to allocate society’s resources efficiently
• Causes:
– Externalities, when the production or consumption of a good affect’s bystanders
(e.g. pollution)
– Market power, a single buyer or seller has substantial influence on market price
(e.g. monopoly)
• In such cases, public policy may promote efficiency.

Principle #8: A country’s standard of living depends on its ability to produce

goods
& services.
• The most important determinant of living standards: productivity the amount of
goods and services produced per unit of labor.
• Productivity depends on the equipment, skills, and technology available to workers.
• Other factors (e.g., labor unions competition from abroad) have far less impact on
living standards.

Principle #9: Prices rise when the government prints too much money.
• Inflation: increases in the general level of prices.
• In the long run, inflation is almost always caused by excessive growth in the
quantity
of money, which causes the value of money to fall.
• The faster the govt. creates money, the greater the inflation rate.

Principle #10: Society faces a short-run tradeoff between inflation and

unemployment
• In the short-run (1 – 2 years), many economic policies push inflation and
unemployment in opposite directions.
• Other factors can make this tradeoff more or less favorable, but the tradeoff is
always
Present.
 APPLICATION

Direction: Make a reaction paper about what you’ve learn on the 10 Principles of
Economics at least 1 sentence each principle.

Content: 15
Organization of Ideas: 10
Total: 25 pts.
POST ASSESSMENT
Direction: Choose the letter of the correct answer.
1. Other things being equal.

a. Quantity
b. Equality
c. Ceteris paribus
d. Equivalent

2. A value of the best forgone alternative.

a. Marginal Cost
b. Opportunity Cost
c. Fixed Cost
d. Real Cost

3. It deals with the allocation of scarce resources for competing alternative uses.

a. Economics
b. Agricultural Economics
c. Positive Economics
d. Normative Economics

4. A study of how households and firms make decisions and how they interact in
markets.

a. Microeconomics
b. Macroeconomics
c. Positive Economics
d. Normative Economics

5. It refers to the performance of the economy as a whole.

a. Microeconomics
b. Macroeconomics
c. Positive Economics
d. Normative Economics

6. A statement on “what should be”; biased; value judgements used in

formulating policies.

a. Microeconomics
b. Macroeconomics
c. Positive Economics
d. Normative Economics
 7. A principle when cigarette taxes increase, teen smoking falls.

a. People Respond to Incentives

b. The Cost of Something Is What You Give Up to Get It
c. Prices rise when the government prints too much money
d. Trade Can Make Everyone Better Off

8. When marginal changes are small, incremental change to an existing plan of

action.

a. Prices rise when the government prints too much money

b. People face trade offs
c. Rational People Think at the Margin
d. The Cost of Something Is What You Give Up to Get It

9. In this principle, there is no such word as free.

a. People face trade offs

b. Rational People Think at the Margin
c. Trade Can Make Everyone Better Off
d. Prices rise when the government prints too much money

10. A principle that Inflation and unemployment is on opposite direction.

a. Trade Can Make Everyone Better Off

b. Rational People Think at the Margin
c. Society faces a short-run tradeoff between inflation and unemployment
d. People face trade offs

Post assessment Answer key:

1 C
2 B
3 B
4 A
5 B
6 D
7 A
8 C
9 A
10 C
 CLOSURE

Congratulations! You have completed the Lesson 1. More likely you

have gained knowledge, and you are ready now to turn the page in
Lesson 2 of this module. Keep studying for wonderful future!

REFERENCES:
https://www.slideshare.net/bgsuswim79/ten-principles-of-economics-50801741
https://www.marquette.edu/econ-review/Econ2003/1.5TenPrinciples/notes.pdf