Prepared by: Ms. Erika Mae R.

Lorete, LPT
Subject Teacher
• differentiate between economics as a social science and as an
applied science
• apply the concept of opportunity cost when evaluation options and
making economic decisions;
• differentiate macroeconomics and microeconomics
• describe and state the importance of economics resources
Economics examines how individuals,
businesses, and societies manage limited
resources to meet their needs and desires.
This balance influences economies and
impacts daily life. Key concepts in
economics help us understand its
fundamentals.
SCARCITY
insufficiency of resources to meet
the wants of consumers and
insufficiency of resources for
producers that hamper enough
production of goods and services.
Economics, as a study is the social science that involves
the use of scarce resources to satisfy unlimited wants.
Part of human behavior is the tendency of man to want
to have as many goods and services as he can.
However, his ability to buy goods and services is limited
by his income and purchasing power.
Alfred Marshall described
economics as a study of mankind in
the ordinary business of life. It
examines part of the individual and
social action that is most closely
connected with the attainment and
use of material requisites of well-
being.
Relative scarcity is when a good is
scarce compared to its demand. For
example, coconuts are abundant in the
Philippines since the plant easily grows
in our soil and climate. However,
coconuts become scarce when the
supply is not sufficient to meet the
needs of the people.
Absolute scarcity is when supply is
limited. Oil is absolutely scarce in the
country since we have no oil wells from
which we can source our petroleum
needs, so we rely heavily on imports
from oil-producing countries like Iran
and other Middle Eastern countries.
Because of the presence of scarcity, there is a need for man to
make decisions in choosing how to maximize the use of the
scarce resources to satisfy as many wants a possible.
Opportunity cost is the value of the best
alternative sacrificed when making a
choice. For example, purchasing a new
phone instead of saving for a vacation
means the vacation is the opportunity
cost. Understanding opportunity costs
aids individuals and businesses in
making informed decisions by weighing
potential losses against gains.
The concept of opportunity cost holds true for individuals, businesses, and
even a society. In making a choice, trade-offs are involved. The opportunity
cost of watching a movie in a cinema is the value of other things that you
could have bought with that money such as a pint of ice cream, a combo
meal in a fast food, or a simple t-shirt to be used in a PE class. Another
example would be a business proprietor that withdraws P10,000 from his
savings account so he can buy materials to be used in his business. He gives
up the interest the savings would have earned but his goal is to earn more
money that would be generated by the business.
Economic resources, also known as factors
of production, are the resources used to
produce goods and services. These
resources are, by nature, limited and
therefore, command a payment that
becomes the income of the resource
owner.
1. Land - soil and natural resources that
are found in nature and are not man-
made. Owners of lands receive a payment
known as rent.
2. Labor - physical and human effort exerted in production. It covers
manual workers like construction workers, machine operators, and
production workers, as well as professionals like nurses, lawyers, and
doctors. The term also includes jeepney drivers, farmers, and fishermen.
The income received by labors is referred to as wage.
3. Capital - man-made resources used in the production of
goods and services which include machineries and equipment.
The owner of capital earns an income called interest.
Economics is a different science from biology and chemistry as these
are physical sciences. Economics is a social science because it studies
human behavior just like psychology and sociology. A social science is,
the study of society and how people behave and influence the world
around them. As a social science, economics studies how individuals
make choices in allocating scarce resources to satisfy their unlimited
wants.
Macroeconomics is a division of economics that is
concerned with the overall performance of the
entire economy. It studies the economic system as
a whole rather than the individual economic units
that make up the economy. It focuses on the overall
flow of goods and resources and studies the causes
of change in the aggregate flow of money, the
aggregate movement of goods and services, and
the general employment of resources.
Macroeconomics is about the nature of economic
growth, the expansion of productive capacity, and
the growth of national income.
Microeconomics, is concerned with the behavior of
individual entities such as the consumer, the producer, and
the resource owner. It is more concerned on how goods flow
from the business firm to the consumer and how resources
move from the resource owner to the business firm. It is also
concerned with the process of setting prices of goods that is
also known as Price Theory.
Microeconomics studies the decisions and choices of the
individual units and how these decisions affect the prices of
goods in the market. Likewise, it examines alternative
methods of using resources in order to alleviate scarcity. It
does not focus on aggregate levels of production,
employment, and income.
Every economy faces the challenge of allocating limited
resources, leading to three key questions:
1. What to produce and how much? (food, housing,
technology)
• Society must decide what goods and services should
be produced in the economy. Having decided on the
nature of goods that will be produced, the quantity of
these goods should also be decided on.
Every economy faces the challenge of allocating
limited resources, leading to three key questions:
2. How to produce? (machines vs. human labor,
sustainability)
• is a question on the production method that will be
used to produce the goods and services. This refers
to the resource mix and technology that will be
applied in production.
Every economy faces the challenge of allocating limited
resources, leading to three key questions:
3. For whom to produce? (equal distribution vs.
income-based)
• is about the market for the goods. For whom will the
goods and services be produced? The young or old,
the male or female market, the low-income or the
high-income groups?
Countries use different economic systems to produce and
distribute goods, including:
• Traditional Economy: Based on customs, common in rural areas.
• Command Economy: The government controls all economic
decisions.
• Market Economy: Decisions made by individuals and businesses
based on supply and demand.
• Mixed Economy: Combines elements of command and market
systems with some government regulation.
Each system has unique pros and cons, and many countries use a
blend to suit their needs.
The economic system impacts daily life in several ways:
• Market Economy: Offers consumers many choices
and encourages business competition, leading to
innovation.
• Command Economy: Limits choices as the
government controls production, focusing on
essential goods like healthcare and education.
• Mixed Economy: Balances personal choice with
government services, influencing availability and
costs.
Economics will help the students understand
why there is a need for everybody, including
the government, to budget and properly
allocate the use of whatever resources are
available. It will help one understand how to
make more rational decisions in spending
money, saving part of it, and even investing
some of it.
On the national level, economics will
enable the students to take a look on how
the economy operates and to decide for
themselves if the government officials
and leaders are effective in trying to
shape up the economy and formulate
policies for the good of the nation.