Introduction to Economics: Scarcity, Resources, and Economic Systems, Lecture notes of Economics

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REVISITING ECONOMICS

AS A SOCIAL SCIENCE

Rubric for group discussion

Contributing Ideas to Discussion 15 pts

Listening to Others 10 pts

Staying on Task and Topic 10 pts

Working with a Group 15 pts

Total 50 pts

Apply our knowledge of economics to one significant issue

we daily. How can we relate traffic to what we have

learned about Economics?

Economics

refers to the effective management of scarce resources to satisfy

unlimited human wants and needs.

It is a social science that studies the means by which individuals,

groups, and societies produce , distribute , and consume products and

services.

Adam Smith (Developed a theory of absolute advantage)

Scottish philosopher popularly the father of economics and authored of

The Wealth of Nations in 1776. Society is based on interdependence

among people. The underlying interconnection, according to Smith, is the

movement of goods and services in relation to the needs and wants of people. Creating the concept of GDP and theory of compensating wage differential. Alfred Marshall (Study of mankind in the ordinary business of life) It examines partly the individual and social action that is closely connected

UNLIMITED HUMAN WANTS AND NEEDS NEEDS- in economics defines as a thing that are desired which are essential for human survival. WANTS- desired but are not essential for survival ECONOMIC RESOURCES AND FACTORS OF PRODUCTION Land- refers to all natural resources that exist without man’s intervention. It encompasses all things derived from the forces of nature such as air, water, forest, vegetation, and minerals (payment for land is called rent). Labor- refers to human inputs such as manpower skills that are used in transforming resources into different products that meet our needs (payment for labor is called wages and salaries). Capital- is a man-made factors of production used to create another product. Examples are machinery and equipment used in manufacturing companies (payment for capital is interest). Entrepreneurship- is the factor of production that integrates land, labor, and

Capital to create new products. Entrepreneur- is an individual who makes the decisions with regard to production and utilizing the other factors of production. A successful entrepreneur creates new products and innovates by improving on old ones. TWO BRANCHES OF ECONOMICS

Economic system- characterized by the type of institution responsible for the management and allocation of resources used in the production of goods and services. THREE KNOWN ECONOMIC SYSTEM

1. Market economic system- economic resources are owned by private entities. This system proposes the following answer to the three economic questions. - produced goods that yield high profits? - produced at maximum efficiency with minimum costs? - distribute the goods to those who can afford to buy the products? 2. Command economic system- all resources are owned by the government. The question what to produced? is answered by producing more public goods (roads, public schools, and public hospitals). This economy holds dictatorial, socialist, and communist nations.

3. Mixed economic system- three questions are answered by both

government and private entities in consideration of their mutual benefit.

• economic resources owned by both
• some countries employ an economic system which is more

command-oriented than market-oriented vice versa

DECISION-MAKING AND RATIONALITY

Decision making - is an important aspect of economics to determine how

individuals or groups of individuals will behave given certain changes in

the economy.

Rationality - defined as the assumption that individuals are consistent

and logical in their decision-making, and that they seek an outcome that

is most beneficial to them.