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Chapter 1 Revisiting Economics As A Social Science

This document defines economics and describes its key concepts. It begins by defining economics as the study of rational human behavior to fulfill needs and wants through allocating scarce resources. It then discusses perspectives on economics and provides examples of economic activities. The document outlines that economics is classified as a social science because it deals with how humans live and interact. It also summarizes the main areas of economics, including macroeconomics, microeconomics, production, distribution, exchange, consumption, and public finance. Finally, it identifies the main factors of production - land, labor, capital, entrepreneurs, and foreign exchange.

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86 views4 pages

Chapter 1 Revisiting Economics As A Social Science

This document defines economics and describes its key concepts. It begins by defining economics as the study of rational human behavior to fulfill needs and wants through allocating scarce resources. It then discusses perspectives on economics and provides examples of economic activities. The document outlines that economics is classified as a social science because it deals with how humans live and interact. It also summarizes the main areas of economics, including macroeconomics, microeconomics, production, distribution, exchange, consumption, and public finance. Finally, it identifies the main factors of production - land, labor, capital, entrepreneurs, and foreign exchange.

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Lesson 1: Revisiting Economics as a Social Science

Specific Objective
a. Define Economics
b. Determine the importance of economics
c. Describe the nature of Economics

Economics
- Study of what constitutes rational human behavior in the endeavor to fulfill needs and wants.
- Understanding how society allocates its scarce resources.
- Almost always, human activities involve economics.

Economics from Different Perspectives


1. Feliciano Fajardo
Economics is the proper allocation and efficient use of available resources for the maximum
satisfaction of human wants.

2. William Nordhaus
Economics is the science of choice. It studies how people choose to use scarce resources to
produce various commodities.

3. Gerardo P. Sicat
Economics is a scientific study which deals with how individuals and society may general choices.

4. Webster
Economics - branch of knowledge that deals with production, distribution, and consumption of goods
and services.

Economics in a process

Economic activities
- Earning money
- Buying goods and services
- Depositing and withdrawing money in bank

Economics from "Oikanomia" means Household Management


Economics is classified as a social science because it deals with the study of human's life and how he
lives with other men.

1. Macroeconomics
Deals with the economic behavior of the whole economy or its aggregates (composed of individual
units).

Aggregates
a. Business
b. Government
c. Households

Discusses the following:


- Gross national product
- Level of employment
- National income
- General level of prices
"Employment and Income Analysis"

2. Microeconomics
Deals with the economic behavior of individual units such as:
- Consumers
- Firms
- Landowners

Discusses the following:


- Price of rice
- Number of workers in a certain firm
- Income of Mr. Fu
- Expenditures of PLDT
"Price Theory"
Division of Economics
1. Production refers to the process of producing or creating goods needed by the households to
satisfy their needs.

Factors od production - Inputs


Goods and services - Outputs

Factors of Production
- Capital
- Labor
- Entrepreneurship
- Land

Goods
- A good is something you can see and feel. It is something you can use!
- Something you can be used or consumed

Services
- A service is something done for someone else. Sometimes people are paid for their service,
sometimes they are not.
- An action that someone does to help others.

Service are the non-physical, intangible parts of our economy, as opposed to goods, which we can
touch or handle. (Ex. education, medical treatment, and transportation make up the majority of the
economies of the rich nations.)

A Producer is a person or business that makes goods or provides services.


A Consumer is a person or business that buys or uses goods or services.

2. Distribution refers to the marketing of goods and services to different economic outlets.

3. Exchange refers to the process of transferring goods and services to a person in return for
something present medium of exchange - money.

4. Consumption refers to the proper utilization of economic goods. However, goods and services
could not be utilized unless you pay for it. Hence, consumption could also be spending money for
goods and services.

5. Public Finance pertains to the activities of the government regarding taxation, borrowings and
expenditures. It deals with the efficient use and fair distribution of public resources.
Economic Resources
Factors of Production or Inputs
1. Land
These resources consist of free gifts of nature which includes:
- Soil
- Rivers
- Lakes, oceans
- Forests
- Mountains
- Mineral resources

• Land is considered an economic resource because it has a price attached to it.


• We usually pay for it through rent or lease.
• Land is a limited resource. Physical land is a fixed resource.

2. Labor
• Also called "human resources".
• Labor refers to all human efforts, be it mental or physical, that help to produce satisfying goods
and services.
• In return, he earns an income in forms of wages and salaries.
• Labor is a flexible factor of production.
• Workers can be allocated to different areas of the economy for producing goods and services.

3. Capital
Two economic definition of capital:
a. Capital can represent the monetary resource use to purchase natural resources. Ex.
Companies use capital to buy land and other goods.
b. Capital represent major physical assets individuals and companies use when producing
goods and services. Ex. Buildings, vehicles, and equipment.
• Income derived from capital is interest.

4. Entrepreneurs
• French word which means "enterpriser"
• Entrepreneur - organizer and coordinator of other factors of production: land, labor, and capital.
• He uses his initiative, talent, and resourcefulness to create economic goods.

5. Foreign Exchange
• Refers to the dollar and dollar reserves that the economy has.
• Foreign exchange is part of economic resources because we need foreign currency for
international trading and buying materials from other countries.
• International medium - dollar

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