Economics – Lesson 1 & 2 6) The Circular Flow of Output and

income
Adam Smith – “Father of Economics” 7) Inflows and Outflows
 “No Society can surely be 8) Demand
flourishing and happy. Which 9) The Market
the far greater part of the 10) Supply
members is poor and 11) Demand and Supply
miserable.” 12) Accounting Profit and
Economic Profit
Stuart R. Lynn – Students taking a 13) Consumption and Savings
course 14) Labor
in ECONOMIC DEVELOPMENT must have basic 15) Employment
knowledge of Economics. 16) Inflation
17) Monetary Policy
Economic Development 18) Fiscal Policy
 Focuses largely on: 19) Trade Policy
- Production
- Exchange of Goods/Services Economic Development
 Process by which:
 Considers How the Economy a) Emerging economies
offers its citizens opportunities become advanced economies
to: b) Countries with LOW Living
- live longer, Standards become Nations
- be educated, and with HIGH Living Standards
- have a good job c) The Overall Health, well-
being, and Academic Level
Basic Knowledge in Economics the General Population of a
1) Economics Resources Nation Improves
2) They need to choose d) Improving the Quality of
3) Types of Economic System Life of a Nation, Region, or
4) The tools of Economic Community.
5) Economic Model of Income and e) Focuses on both qualitative
Consumption and quantitative growth of
the economy
 f) “An Economy grows or
changes and becomes
more advanced, especially
when both economic and Economic Development: (INFOS)
social conditions are 1) Average Life Expectancy
improved” 2) Education Standards
 Means – Improved Production 3) Environmental Standards
Volume due to the 4) Literacy Rates
Advancements of Technology 5) Availability of Housing, Plus Quality
 Qualitative improvement in of Housing
the life of citizens of a country is 6) Access to Health
most appropriately determined 7) Income per Capita
by the Human Development
Index (HDI) Walt W. Rostow – Classic “Stages of
 It looks at how the citizens of Economic Growth” – 1960, presented
a country are affected. with 5 Steps through which all
 Apart from their living countries must pass to become
standards, it also looks at the developed:
freedom they have to enjoy
those living standards. STAGES OF ECONOMIC GROWTH
1) Traditional Society
 OBJECTIVES Involved such 2) Preconditions to Take-Off
as: 3) Take-Off
1) Social Well-Being 4) Drive to Maturity
2) Economic Growth 5) Age to High Mass Consumption
3) Sustainability
Characteristics of Each Stages of
 Measures all aspects includes a EGrowth
Country becoming: 1) Traditional Society ~ (4)
1) Wealthier a) Per Capita – within limitation
2) Healthier range available technology
3) Better Educated there is a low ceiling per capita
4) Have a greater Access to output
Good Quality Housing
 b) Employment in Agriculture – a) Development of One Leading
high proportion of Workforce Sector – development of a
(75%/more) or resources are specific industry for the growth
devoted to the production of of a country’s growth and
agricultural goods. development (ex: steel & iron)
c) Political Power – center of b) The Rate of Investments –
gravity of political power was “Industrial Revolution” – Rate of
Localistic, Region-Bound and Investment was from 5% or less
Primarily based on Land to over 10% of the National
Ownership. Income, (Ex: Agricultural land
d) Social Mobility – a was acquired for
hierarchical, hereditary, status- Industrialization)
oriented social structure held
down the mobility of society at 4) Drive To Maturity ~ (2)
that time. a) Shift in Occupational
2) Pre-Take-Off ~ (4) Distribution – From Agricultural
a) New Enterprise – New Types of to Manufacturing
Enterprising People emerged on b) Shift in Consumption Pattern
the Society – Preferences were shifted to
b) Infrastructure – As different Luxury Goods due to High
industries were established in Income – as a result, the
other parts of the country, Consumption Patterns of Non-
automatically transportation, Agricultural Goods Increased
and ports were required
c) Credit Institutions – 5) Age Of High Mass Consumption
Developed in order to mobilize ~
savings for investment a) Urbanization and Shift to
d) Political Power – Centralized Wants; not just Necessities –
political power based on; Durable Consumer Goods; shift
Nationalism replaced the land- in emphasis from problems of
based localistic or colonial production to that of
power. consumption; through its
political process – expresses its
3) Take Off ~ (2)
 willingness to allocate increased 3) HOW MUCH to Produce?
social welfare and security. 4) FOR WHOM to Produce?

Entrepreneurship – A business Method to Production (HOW MUCH)

Undertaking 1) Labor Intensive
2) Capital Intensive
Entrepreneur – one who undertakes
business; Economic Systems – means by which
Combines: Societies and Gov’t organize and
1) Capital, distribute available resources, goods and
2) Land, services within or across a society .
3) Labor (or Man-made Types of Economic Systems
Resources), 1) Traditional Economy – based on
4) Natural Resources, customs/traditions
5) and Human Resources 2) Command Economy – Planned
Economy; Common to Communist
Economic Concepts States; Owned by the State/ Gov’t
1) Scarcity 3) Market Economy – Capitalism;
2) Choice Free Enterprise
3) Opportunity Cost  Pure Capitalists (No Gov’t
 Trade Interference)
 Trade Off  Modified Capitalists (Gov’t
may or may not interfere)
Overall Economic Concept 4) Mixed Economy – “Socialism”
“There is a need to choose due to  Big Corporations –
SCARCITY. Decisions and CHOICES are Government
to be made. There is a TRADE OFF, as a  Small Corporations – Private
result. That which is foregone, Given Up
or Sacrificed is the OPPORTUNITY
COST.” ECONOMIC ACTIVITIES
1) Production – Use of Economic
Basic Economic Questions / Problems Resources in the Creation of Goods
1) WHAT to Produce? and Services
2) HOW to Produce? 2) Distribution
  Purely Technical – Economic Growth
distribution of G&S from  Can be measured as a
Producers to Consumers; the percentage increases in Real
Middleman bridges the gap Gross Domestic Product;
between producers and  Where GDP is adjusted by
consumers. INFLATION
 An Economic Questions with  Increase in the country’s Real
Social Dimension Level of National Output
3) Consumption – utilization of  Increase in Output can also
goods and services; the end of all be caused by:
economic activities 1) Increase in the Quality of
 Kinds of Consumptions Resources (by Education etc.)
a) Direct or Final 2) Increase in the Quantity of
Consumption Resources
b) Productive Consumption 3) Improvements in Technology
c) Wasteful Consumption 4) Increase in the Value of
Goods and Services produced
by every sector of the
Exchange – involves Value and economy.
Price; something is given up to
get another

Commercial Rent – money

paid for concrete goods

Economic Rent – any INCOME

derived from the USE OF LAND

Michael Todaro – defines E-

Development as an increase in living
standards, improvement in self-esteem
needs, and freedom from oppression as
well as greater choice.
 Owners/
Shares of
Economic Providers of
National or Social
Resources Economic
Income
Resources
Capital Capitalists Interest

Entrepreneurship Entrepreneur Profit

Land Land Owner Rent

Labor Laborer Wage