Principles of Economics by: Roberto Medina Prepared by : Bernard Cua

INTRODUCTION TO MICROECONOMIC !IT" #RT Etymolo$y of Economics %rom t&e 'ree( )ord *oi(onomia+ or * oi(onomos+ )&ic& means mana$ement od &ouse&old : Oi(os , &ouse- . nomos , mana$infEconomics is a science t&at dals )it& t&e allocation of scarce resources to satisfy t&E unlimited needs and )ants of t&e society/ Economics is a study of &o) societies use scarce resources to produce 0ariable commodities and t&en distribute t&em amon$ different people/ Economics is a social science t&at deals )it& t&e efficient allocation of scarce resources to satisfy man+s unlimited )ants and needs/ DI1I ION O% ECONOMIC 2/ Microeconomics 3 deals )it& t&e interaction of t&e economic a$ents suc& as firms4 industries4 indi0iduals4 $o0ernment a$encies and t&e li(e/ 5 Prices of $oods 5 1alue of land4 labor and capital 5 pecific mar(ets: food4 electronics4 ener$y 5 Businesses4 monopolies4 and commercail empires 5 Employees and employers 6/ Macroeconomics 3 deals )it& t&e economy as a )&ole/ It furt&er e7amines t&e factors t&at determine national product/ 5 Inflation and unemployment 5 'o0ernment income and e7penses 5 Total money supply4 in0estments 5 International %inance and economies 5 Balance of payments4 fiscal policy

Principles of Economics by: Roberto Medina Prepared by : Bernard Cua

Microeconomics and Macroeconomics contrasted MICROECONOMIC M8CROECONOMIC Concerns )it& &ouse&old income Deals )it& national income %ocuses on indi0idual product #oo(s o0er o0erall prices le0el prices and relati0e prices and &o) 9uic(ly it rises and fall/ Concerns )it& &o) many people Deals )it& a$$ra$ate are &ired )it&in a year employment for a $i0en year MET"OD OR U E O% ECONOMIC 2/ Positi0e economics 3 attempts to understand t&e be&a0ior and t&e operation of t&e economic system )it&out ma(in$ :ud$ements )&et&er t&e outcomes are $ood or bad/ It deals )it& facts and e7istin$ situations )it&in t&e economy/ 5 "o) muc& pay )ill be $i0en to s(illed or uns(illed )or(ers ; 5 "o) )ill ne) ta7es affect t&e spendin$ po)er of consumers; 5 In )&at )ays is in$apore a&ead of t&e P&ilippines in terms of forei$n in0estments; 6/ Normati0e economics 3 loo(s at t&e outcomes of t&e economic be$a0ior and as(s )&et&er t&ey are $ood or bad and )&et&er t&ey can be made better/ In ot&er )ords4 normati0e economics in0ol0es :ud$ement and prescription of courses of action/ It is about norms4 0alues4 :ud$ements4 and et&ical concerns re$ardin$ t&e economy and 0arious economic situations/ 5 &ould $o0ernment pro0ide subsidy or re$ulate t&e &i$& cost of education; 5 &ould consumers patroni<e products )&ic& are c&eaper but are of lo) 9uality or products )&ic& are more e7pensi0e but are of &i$&er 9uality; 5 !&at percenta$e of t&e bud$et s&ould families spend for t&eir food;

ECONOMIC ECTOR 8ND ECONOMIC

Principles of Economics by: Roberto Medina Prepared by : Bernard Cua

2/ INDI1IDU8# 3 refers to people )&o stru$$le daily )it& economic situations suc& as employment4 )a$es and )ise spendin$/ Economics affect eac& indiciduals dependin$ on t&eir 0alues4 culture4 or status in life/ 6/ "OU E"O#D 3 consists of t)o or more members4 families or $roups of families )&o cooperate for t&e purpose of li0in$/ "ouse&old can be classified by t&e le0el of income/ 5"ouse&old are income receivers meanin$ t&at t&ey $enerate income from combined )a$es4 salaries4 earnin$s of t&eir members/ 5"ouse&old can become spenders too because t&ey buy needs and necessities/ 5"ouse&old are sources of ta7es and sa0in$s 5"ouse&old can also pro0ide labor or entrepreneurial abilities =/ BU INE E 3 T&ey are t&e sector t&at pro0ides products or ser0ices to satisfy &uman needs and )ants/ It can be cate$ori<ed as sin$le proprietor4 partners&ips and corporation/ >/ 'O1ERNMENT 3 consists of leaders and prime mo0ers of a country4 )&ic& sets its political and economic policies 5promotes t&e effecti0e performance of mar(ets t&rou$& le$al frame)or(s and $round rules for t&e mar(et to follo): a/ rules of contract b/ penalties for 0iolators c/ incenti0es for business players 5 recei0er of funds and income t&rou$& ta7es and spends for $i0ernment pro:ects/ ?/ INTERN8TION8# ECTOR 5 refers to trade and business acti0ities t&at &appen bet)een and amon$ nations/ Production and consumption 0ary amon$ t&e different countries of t&e )orld/ 5 T&is sector &as no) become a (ey sector because of t&e increasiun$ trade relations and $lobali<ation/

Principles of Economics by: Roberto Medina Prepared by : Bernard Cua

5 T&e $ro)t& of international sector is spurred by t&e follo)in$ factors: a/ Tec&nolo$y 3 better met&ods of trasportin$ $oods4 people and ser0ices b/ Trade #iberali<ation 3 Openin$ of mar(ets to ot&er countries to$et&er )it& an accompanyin$ decrrease on tariffs or import ta7es/ c/ Trade a$reements amon$ countries and re$ions of t&e )orld c/2/ 8sia5Pacific Economic Conference ,8PECc/6/ European Union , European Community c/=/ Nort&ern 8merican %ree Trade 8$reement , N8%T8DI1I ION O% ECONOMIC 8CTI1ITIE 2/ PRODUCTION 5 refers to t&e creation of more utilities/ Production is an acti0ity t&at creates or ma(es t&in$s aimed to satisfy man+s satisfaction/ T&e basic resources needed for production are: a/ #and 3 includes eart&+s surface capable of culti0ation/ In t&is resource includes also e0ertyt&in$ t&at is pro0ided by nature suc& as air4 bodies of )ater/ b/ #abor5 refers to t&e e7ertion of effort to $et income/ It refers to t&e producti0e ser0ices embodied in &uman p&ysical effort 4 s(ill or intellectual po)ers/ It consists &uman time spent in production/ c/ Capital5 refers to durable $oods used to produce ot&er $oods/ It also includes buildin$s4 plants mac&ineries4 roads 4 computers4 s&ips and ot&ers/ d/ Entrepreneur or Enterpriser 3 t&e one t&at mana$es and efficiently utili<es #and4 #abor and Capital to produce $oods to satisfy &uman )ants/ 6/ E@C"8N'E 3 refers to t&e consideration of 0alue and price/ %or e0ery e7ca&n$e to ta(e place4 t&ere s&ould al)ays be $oods and ser0ices for )&ic& t&e amount )ill be $i0en/ =/ CON UMPTION 3 refers to t&e final utili<ation of $oods and ser0ices/

Principles of Economics by: Roberto Medina Prepared by : Bernard Cua

>/ DI TRIBUTION 3 refers to t&e apportionment of t&e national income amon$ t&e factors of production/ T&e different s&ares of distribution are: a/ Rent 3payment deri0ed and $i0en from t&e use of land b/ alary , or )a$es - 3 refers to t&e compensation recei0ed by an indi0idual in t&e e7ercise of function or ser0ices rendered/ c/ Interest5 refers to t&e income deri0ed from t&e capital in0estments d/ Profit 3 refers to t&e amount or income deri0ed from t&e entrepreneurs&ip en$a$ed in by an indi0idual and s&ared to t&e enterpriser for &is effort in mana$in$ t&e business/ T"E %UND8MENT8# ECONOMIC PROB#EM 2/ 6/ =/ >/ !"8T TO PRODUCE ; "O! MUC" TO PRODUCE; "O! TO PRODUCE; AAA %OR !"OM TO PRODUCE;

AAA #8! TO BE CON IDERED IN PRODUCTION a/ #a) of Diminis&in$ Returns 3 It concerns )it& t&e relations&ip of t&e 0ariable and fi7ed imputs/ It states t&at4 )it& t&e successi0e addition of 0ariable inputs to a fi7ed factor4 a time )ill come )&en t&e 0ariable input )ill fall to yield increasin$ returns/ %I@ED %8CTOR 2 &ectare of lo) land C rice UNIT O% %ERTI#IBER D 2 6 = ? G E OUTPUT , Ca0ansED FD 22? 2=D 2>D 2>? 2>E 6D. 6?. 2?. 2D5 ?5 65 PERCENT8'E O% R8TE INCRE8 E

Principles of Economics by: Roberto Medina Prepared by : Bernard Cua

b/ #a) of comparati0e ad0anta$e 3 T&is ma(es a comparison as to t&e benefits offered/ It $uides and $i0es insi$&t4 on t&e part of t&e producers4 to compare and decide )&ic& is more ad0anta$eous to do4 to buy or to produce/