IMPORTANCE OF ECONOMICS
• Resources • Human
are scarce. needs and
wants are
unlimited.
SCARCITY
• SCARCITY
– “the imbalance between our desires and
the means of satisfying those desires.”
(Hyman, 1992)
– The condition wherein most things that
people need and want are available only
in limited supply.”
• WANTS
–“…refer to a person’s desires or
preferences for specific ways for
satisfying a basic need.” (Bannock,
1974)
• OPPORTUNITY COST
–“…the cost of choosing to use
resources for one purpose measured
by the sacrifice of the next best
alternative for using those
resources.” (Hyman, 1992)
• PRODUCTION
– The creation or addition of utility.
– Utility is the economic term for usefulness. It
is the ability of a good or service to satisfy a
want.
• Form Utility
• Place Utility
• Time Utility
• Possession Utility
By: Angelito D. Platino THE NATURE AND IMPORTANCE OF ECONOMICS 18
Economics is Concerned with:
• PRODUCTION
– Factors: (Economic Resources)
• Land – land and natural resources
• Labor – time and effort of human beings
involved in the production process.
• Capital – goods used to produce other goods
• Entrepreneurship – undertaking that
combines the three other factors in the
production process.
By: Angelito D. Platino THE NATURE AND IMPORTANCE OF ECONOMICS 19
Economics is Concerned with:
• DISTRIBUTION
– The allocation of the total product among the
factors of production.
– The distribution of money incomes among the
factors of production.
• Land – RENT
• Labor – WAGES
• Capital – INTEREST
• Entrepreneurship – PROFIT.
• CONSUMPTION
–The use of a good or a service.
–Without it, there would be no need for
production and distribution.
MICROECONOMICS MACROECONOMICS
• Concerned with the • Deals with the behavior
“behavior and activities of the economy as a
of specific economic whole with respect to
units – individuals, output, income, the
households, firms, price level, foreign
industries and resource trade, unemployment
owners.” and other aggregate
• Critical concept – economic variables.
MARKET
1. Economic Growth
– Society desires a higher standard of
living manifested by the production of
more and better quality goods and
services.
2. Full Employment
–There must be jobs for those who
are willing and able to work.
3. Economic Efficiency
– The utilization of resources to derive the
maximum benefits for the society.
5. Economic Freedom
– High degree of freedom to choose what
economic activity to undertake afforded
to various sectors.
6. Equitable Distribution of
Income
–The condition whereby the rich get
richer and the poor get poorer is
prevented.
7. Economic Security
– Enough provision must be accorded for
those who are not able to earn minimal
income like the aged, the chronically ill,
the disabled, etc.
8. Balance of Trade
–Balance between import
expenditures and export revenues
must be maintained.