READING MATERIALS #1-ECONOMICS

What is Economics?

"Economics is the study of the use of scarce resources that have alternative uses." That's the classic definition of
economics. Basically, there are people, and people need resources to fulfil their desires. These resources cannot
be infinite, but the desires can be, so people need to make choices about how to use their scarce resources.
Economists study these choices.

All economic questions fall into one of two categories: positive and normative. Positive economics describes
"what is" and normative economics argues for what ought to be, so a question like, "why do people use
money?" is a positive question and "should people use money?" is a normative question.

A general rule of thumb is that if your economic model has no value judgements, it's positive economics, and if
it does have value judgements it's normative economics, since to tell someone what he ought to do, you first
have to judge what is best for him.

Economics is also divided into microeconomics and macroeconomics. Microeconomics studies the behaviour of
individual agents and markets, while macroeconomics studies the behaviour of the entire economy.

Economists also have their own branch of statistics called "econometrics" that's specialized to analyzing
economic data. Since economic data usually comes from the real world, and not from controlled experiments,
econometrics faces mathematical challenges that other fields might not.

The tools economists have developed to study human behaviour have broad uses outside of what we would
traditionally consider economics. Economists study not only markets, but things like crime, war, the family,
religion, culture, politics, law, and even genetics. That's why it's not unusual to see papers by psychologists,
sociologists, criminologists, political scientists, anthropologists, biologists, neuroscientists, or legal scholars
being co-authored by economists..

Economics as defined by authors of Economics

Paul Samuelson (Economics)

the study of how people and society end up choosing, with or without use of money, to employ scarce
resources that could have alternative uses to produce various commodities among various persons and groups in
society.

Roger Le Roy Miller (Economics, Today and Tomorrow)

Economics concerns situations in which choices must be made about how to use limited resources, when to
use them and for what purposes. Resources can be defined as the things people use to make the commodities
they want.

Hall and Loeberman (Macroeconomics: Principles and Applications)

The study of choice under the condition of scarcity

Bernardo Villegas (Guide to Economics for Filipinos)

Page | 1
 A social science that studies and seeks to allocate scarce human and non-human resources among alternatives
in order to satisfy unlimited human wants and desires.

Gerardo Sicat (Economics)

a scientific study which deals with how individuals and society make choices,

ECONOMICS is a social science that deals with how people organize themselves in order to allocate
scarce resources in order to produce goods and services that will satisfy the unlimited and multiplying wants
and needs of man.

Concerns of Economics

Economics is concerned with PRODUCTION

Production is the use of inputs to produce outputs.

Inputs are commodities or services that are used to produce goods and services.
Outputs are the different goods and services which come out of production process.
Society have to decide what outputs will be produced and in what quantity

Economics is concerned with DISTRIBUTION

-Distribution is the allocation of the total product among members of society. It is related to the problem of for
whom goods and services are to be produced.

Economics is concerned with CONSUMPTION

-Consumption is the use of a good or service. Consumption is the ultimate end of economic activity.
WHEN THERE IS NO CONSUMPTION, THERE WILL BE NO NEED FOR PRODUCTION AND
DISTRIBUTION.

Economics deals with PUBLIC FINANCE

-Public Finance is concerned with government expenditures and revenues. Economics studies how the
government raises money through taxation and borrowing.

DIVISIONS OF ECONOMICS

1. MICROECONOMICS
Specific
Deals with the economic behavior of the individual units such as consumers, firms, the owners of factors of
productions
2. MACROECONOMICS
General, economy as a whole
Deals with the economic behavior of the whole economy or its aggregate such as government, business,
unemployment, inflation and the like.
Refers to management of income, expenditures, wealth or resources of a nation.

Types of Economics

Page | 2
 1. Household Economics most common use of economics is for the family. At this level, anyone who
knows the economic principles will be able to improve the running of the household.
2. Business Economics when a person or group of persons begins to work, they come under the system
of business economics in their workplace. In this type, you deal with the rent, salary, profits and others.
3. National Economics Economic factors of problems affecting the whole nation. Deals with the
management of income, expenditures, wealth or resources of a nation.
4. International Economics The highest stage of economic activities involving the business of one
country with other countries like trade, tourism, exchange rates.

Economics as a Science

Is a science because it is an organized body of truth, coordinated, arranged and systematized with
reference to certain general laws and principles.(Observation, Formulation of theories, Gathering of
data, Experimentation, Conclusion, Generalization)
Economic analysis seeks to explain economic events using some kind of logic based on a set of
systematic relations.
It is a social science because the subject matter of economics is people or societies and their behavior,
unpredictable in nature.

Essence of Studying Economics

To understand the world better

-Applying the tools of economics can help you understand global and cataclysmic events such as wars,
famines, epidemics, and depressions. Economics has the power to help us understand these phenomena
because they result from the choices we make under the condition of scarcity.

To gain self-confidence and become wise decisions makers

-Mastery of economics will help you to understand how things work in your society thereby feeling
equipped

To achieve social change and contribute to National Development

-Economics can help us understand the origins of serious social problems such as: unemployment,
hunger, poverty, disease, child abuse, drug addiction, violent crime. It will also explain why previous
efforts to solve these problems have failed, and help us to design new, more effective solutions.

To help prepare for other careers

-Economics has long been a popular college major for individuals who are intending to work in
business. But it has also been popular among those planning careers in politics, international relations,
law, medicines, engineering, etc. This is for good reason because practitioners in each of these fields
often find themselves confronting economic issues.

Page | 3