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Economics is the study of how people allocate scarce resources for production,
distribution, and consumption, both individually and collectively.
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Economics is considered a social science because it tries to understand how people behave and
interact within a society.
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Law of Scarcity - An economic system cannot produce all goods and services that consumers want,
and most consumers do not have the resources to purchase everything they want.
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TRADE-OFF – the exchange or choosing between two alternatives. It is a reality of life that getting one
thing would mean giving up another thing.
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OPPORTUNITY COST – is the value or cost of the next best-forgone choice/alternative. In other words,
opportunity costs represent that could have a different decision.
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Fajardo - economics is the proper allocation and efficient use of available resources for the maximum
satisfaction of human wants.
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Nordhaus - economics is the science of choice
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Sicat - economics is a scientific study which deals with how individual and society may general choices
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Webster - economics is a branch of knowledge that deals with production, distribution, and
consumption of goods and services
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Economic activities - earning money, buying goods and services, depositing and withdrawing money in
the bank
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Oikonomia - household management
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Economics is classified as social science because it deals with the study of human’s life and how he
lives
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Macroeconomics - deals with the economic behavior of the whole economy or its aggregates
(individual units)
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Macroeconomics - gross national product, level of employment, national income and generate level of
prices. “employment and income analysis”
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Microeconomics - deals with the economic behavior of individual units such as: consumer, firms and
landowners
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Microeconomics - price of rice, no. Of workers in a certain firm, income of mr. Fu, expenditures of pldt.
“ price theory”
Division of economics
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Production - process of producing goods, factors of production (inputs), goods and services (output)
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Distribution - marketing of goods and services to different economic outlets
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Exchange - process of transforming goods and services in return for something (present medium of
exchange - money)
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Consumption - proper utilization of economic goods
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Public finance - activities of the government regarding taxation, borrowings, and expenditures.
Factors of production (input)
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Land - free gift of nature, has price attached to it, land is limited resource, physical land is a fix
resource.
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Labor - human resources, efforts, mental, physical. Flexible factor of production
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Capital - present monetary resources, major physical asset
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Entrepreneurs - organizer and coordinator of other factors of production; land, labor and capital
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Foreign exchange - dollar reserve that a company has, buying and trading from other countries
(international medium - dollar)
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What to produce, how to produce, for whom
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Positive economics - analysis of facts
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Normative economics - can’t find information