Applied Economics

Nominative Economics

refers to what should be - that which embodies the ideal such as the ideal rate of population growth or the most effective tax system. - focuses on policy formulation that will help to attain the ideal situation.

The Law of Demand

- As price increases, the quantity demanded for that product decreases. - The low price of the good motivates the consumer to buy more. - When price increases, the quantity demanded for the good decreases.

The Law of Supply

- As the price increases, the quantity supplied of that product also increases. - The high price of the good serves as motivation for the seller to offer more for sale. - Thus, when price increases, the quantity supplied of the good increases since the seller will take this as an opportunity to increase his/her income.

Traditional Economy

- Decisions are based on traditions and practices upheld over the years and passed on from generation to generation. - Methods are stagnant and therefore not progressive. Traditional societies exist in primitive and background civilizations.

Economics as a social science

- Economics is a different science from biology and chemistry as these are physical sciences. - it is because it studies human behavior just like psychology and sociology. -A social science is, broadly speaking, the study of society and how people behave and influence the world around them. -As a social science, economics studies how individuals make choices in allocating scarce resources to satisfy their unlimited wants

Market Equilibrium

- Equilibrium is a state of balance when demand is equal to supply. - The equality means that the quantity that the sellers are willing to sell is also the quantity that the buyers are willing to buy for price. - is attained when the quantity demanded is equal to the quantity supplied.

Price Theory

- It is also concerned with the process of setting prices of goods

Capital

- Man-made resources used in the production of goods and services, which include machineries and equipment. - The owner of capital earns an income called interest.

Labor

- Physical and human effort exerted in production. - It covers manual workers like construction workers, machine operators, and production workers, as well as professionals like nurses, lawyers, and doctors. - The term also includes jeepney drivers, farmers, and fishermen. - The income received by the labors is referred to as wage.

What to produce and how much

- Society must decide what goods and services should be produced in the economy. - Having decided on the nature of goods that will be produced, the quantity of these goods should also be decided on.

Land

- Soil and natural resources that are found in nature and are not man-made. - Owners of lands receive a payment known as rent.

How to produce

- This is a question on the production method that will be used to produce the goods and services. - This refers to the resource mix and technology that will be applied in production.

Command Economy

- This is the authoritative system wherein decision-making is centralized in the government or a planning committee. - Decisions are imposed on the people who do not have a say in what goods are to be produced. - This economy holds true in dictatorial, socialist, and communist nations.

Market Economy

- This is the most democratic form of economic system. Based on the workings of demand and supply, decisions are made on what goods and services to produce. - People's preferences are reflected in the prices they are willing to pay in the market and are therefore the basis of the producer's decisions on what goods to produce.

Economic Resources

- also known as factors of production, are the resources used to produce goods and services. - These resources are, by nature, limited and therefore, command a payment that becomes the income of the owner.

Economics

- as a study, is the social science that involves the use of scarce resources to satisfy unlimited wants.

Positive Economics

- deals with what is - things that are actually happening such as the current inflation rate, the number of employed labor, and the level of Gross National Product. - is an overview of what is happening in the economy that is possibly far from what is ideal.

Scarcity

- is a condition where there are insufficient resources to satisfy all the needs and wants of a population. - Scarcity may be relative or absolute

Macroeconomics

- is a division of economics that is concerned with the overall performance of the entire economy. - It studies the economic system as a whole rather than the individual economic units that make up the economy. - is about the nature of economic growth, the expansion of productive capacity, and the growth of national income.

Market

- is an interaction between buyers and sellers of trading or exchange. - It is where the consumer buys and the seller sells.

Applied economics

- is the application of economic theory and econometrics in specific setting with the goal of analyzing potential outcomes. - is the study of economics in relation to real world situations. - It is the application of economic principles and theories to real world situations, trying to predict what the outcomes might be.

Scarcity

- is the insufficiency of resources to meet the wants of the consumers and insufficiency of resources for producers that hamper enough production of goods and services.

Economic System

- is the means by which the society answers the basic economic problems. - is the means through which society determines the answers to the basic economic problems mentioned.

Relative Scarcity

- is when a good is scarce compared to its demand. Example: Coconuts are abundant in the Philippines since the plant easily grows in our soil and climate. However, coconuts become scarce when the supply is not sufficient to meet the needs of the people.

Absolute Scarcity

- is when supply is limited. Example: Oil is absolutely scarce in the country since we have no oil wells from which we can source our petroleum needs, so we rely heavily on imports from oil-producing countries like Iran and other Middle Eastern Countries.

Relative scarcity

- occurs not because the good is scarce per se and is difficult to obtain but because of the circumstances that surround the availability of the good.

Microeconomics

- on the other hand, is concerned with the behavior of individual entities such as the consumer, the producer, and the resource owner. - It is more concerned on how goods flow from the business firm to the consumer and how resources move from the resource owner to the business firm. - studies the decisions and choices of the individual units and how these decisions affect the prices of goods in the market. - It does not focus on aggregate levels of production, employment, and income. - Likewise, it examines alternative methods of using resources in order to alleviate scarcity.

Supply

- refers to the quantity of goods that a seller is willing to offer for sale.

opportunity cost

- refers to the value of the best foregone alternative.

dictatorial

A form of government or country which total power is held by a dictator or a small group

Socialist

A way of organizing a society in which major industries are owned and controlled by the government rather than by individual people and companies

Communist nations

A way of organizing a society in which the government owns the things that are used to make and transport products (such as land, oil, factories, ships, etc.) and there is no privately owned property.

Examples of Relative Scarcity

Bananas are abundant in the Philippines and are being grown in a lot of regions around the country. But when a typhoon destroys banana plants, the farmer has no banana to harvest, then bananas become relatively scarce.

Examples of Absolute Scarcity

Example: Cherries are absolutely scarce in our country since we do not have the right climate to grow them and we have to rely on imports for our supply of cherries. This explains why cherries are very expensive in the Philippines

Example of Opportunity Cost

Example: When land is devoted exclusively to the cultivation of rice, we give up an output of bananas or mangoes that we could have planted on that land area. Example: A producer who decides to transform all his leather into shoes, gives up the chance to produce bags with that leather. Example: A school teacher who could have worked in a bank gives up the salary that she would have earned as a bank employee. Example: A manager who quits his job in order to take up master's degree gives up his salary as a manager. That salary is the opportunity cost.

Demand

This is the desire, willingness, and ability of a consumer to buy a good or service at a given price.

Goods Market

This is the most common type of market because it is where we buy consumers goods.

For whom to produce

This question is about the market for the goods. For whom will the goods and services be produced? The young or old, the male or female market, the low-income or the high-income groups.

Labor Market

This type of market is where workers offer services and look for jobs, and where employers look for workers to hire.

Financial Market

This type of market, on the other hand, includes the stock market where securities of corporations are traded.

Macroeconomics and Microeconomics

Two branches of economics

Land Labor Capital

Types Economic Resources

Wage

an amount of money that a worker is paid based on number of hours, days, etc., that are worked.

What to produce and how much? How to produce? For whom to produce?

basic questions in the economy that have to be answered in order to cope with constraints and limitations. these are:

Salary

is a fixed compensation paid regularly for services.

Goods Market Labor Market Financial Market

types of Market