PRINTABLE LEARNING MATERIAL Module 1- Topic1: Revisiting Economics as a Social Science LEARNING OUTCOME: Define basic terms in applied economics. (DLSL_AERE-la-1) What is Economics? Economics comes from the ancient Greek word “oikonomikos” or “oikonomia.” Oikonomikos literally translates to “the task of managing a household.” Adam Smith defined economics as “an inquiry into the nature and causes of the wealth of nations while Alfred Marshal definition of economics is study of man in the ordinary business of life. Marshall argued that the subject was both the study of wealth and the study of mankind. He believed it was not a natural science such as physics or chemistry, but rather a social science. (Lifted from: https://corporatefinanceinstitute.com/resources/knowledge/economics/what-iseconomics/) Also, Economics is essentially a study of the usage of resources under specific constraints, all bound with an audacious hope that the subject under scrutiny is a rational entity which seeks to improve its overall well-being. There are two branches within the subject have evolved thus: microeconomics (individual choices) which deals with entities and the interaction between those entities, while macroeconomics (aggregate outcomes) deals with the entire economy as a whole. The aim of studying economics is to understand the decision process behind allocating the currently available resources, the needs always unlimited but resources being limited. (Lifted from: https://www.mbacrystalball.com/blog/economics/) According to the book entitled Applied Economics of Phoenix Publishing house by Tereso Tullao, there are 3 Strands of the Definition of Economics: first is Wealth (wealth-getting & wealth using), second is Decision-making process (making choices) and the last one is Allocation process (allocation of scarce resources to meet the unlimited human wants. Furthermore, there are 2 major Economic Problems, the first one is Production which is the disposition of produced Goods and Services and Consumption which is the consuming the Goods and Services. From this we can see the key elements of Economics as Study of Allocation: 1. Economics as Social Science (identifying the problem, hypotheses, gathering and treating the data and conclusion. 2. Resources and the Study of Economics: First is Natural Resources- marine, forest, agricultural and mineral, second is Human Resources are the qualities of human beings that may include, labor, intelligence, creativity, health, education and talents and the last one is Physical or Manmade Resources that includes various types of buildings, equipment, technology, bridges, airports, factory plants and other physical infrastructure that can be used to provide present and future satisfaction. 3. Human wants and Economic Analysis (Human Wants and Needs) 4. Scarcity as a source of economic problem Scarcity- is a general characteristic of resources in the light of its competing uses that may arise from the rapid expansion of human wants and make choices. Shortage- is a condition when the supply of a good, service, or resource is not enough to meet the demand. Surplus- is a condition when the supply of a good, service, or resource is greater than the demand. 5. Allocation and the Act of Economizing (Market System, Command System and Tradition System) In addition, according to Will Kenton, in his online article in Investopedia.com, Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. The four factors of production are: 1.Land-includes all natural resources used in the production process. 2. Labor-physical actions and mental activities that people contribute to the production of goods and services 3.Capital-all manufactured aids used in producing consumer goods and services. 4. Entrepreneurial ability-special human resource, distinct from labor supplied by entrepreneurs-combines all resources, makes strategic decisions, bears risk. (Lifted from: https://quizlet.com/67807514/ch1-opportunity-cost-flash-cards/) The following are the three basic economic questions and this idea can be seen from the book entitled Applied Economics of Phoenix Publishing house by Tereso Tullao. 1. What to produce? (ones to be produced) 2. How to produce? (the manner of production/ technology) 3. For whom to produce? (for whom the commodities will be produced by allocating a higher proportion of output to members of a society with high purchasing power) Licensing & Attributions / References Introduction to Economics https://www.mbacrystalball.com/blog/economics/ Kenton, Wil, (2019) Opportunity Cost https://www.investopedia.com/terms/o/opportunitycost.asp What is Economics https://corporatefinanceinstitute.com/resources/knowledge/economics/what-is-economics/ Image of economics https://www.vectorstock.com/royalty-free-vector/business-economics-vector-589367 Tullao, Tereso S. Jr. (2016). Applied Economics: For a Progressive Philippines. Phoenix Publishing House
