ECONOMICS

Substitution effect

is felt when a change in the price of a good changes demand due to alternative consumption of substitute goods. For example, lower price encourages consumption away from higher-priced substitutes on top of buying more with the budget (income effect)

Gross National Product

is the market value of final products, both sold and unsold, produced by the resources of the economy of the given period.

Demand

is the willingness of a consumer to buy a commodity at a given price. A demand schedule shows the various quantities the consumer is willing to buy at various prices.

Relative scarcity

is when a good is scarce compared to its demand. Relative scarcity occurs not because the good is scarce and is difficult to obtain but because of the circumstances that surround the availability of the good.

labor market

is where workers offer services and look for jobs, and where employers look for workers to hire.

Scarcity

insufficiency of resources for producers that hamper enough production of goods and services.

Scarcity

is a condition where there are insufficient resources to satisfy all the needs and wants of a population

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.

How to produce

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

Normative economics

on the other hand, refers to what should be-that which embodies the ideal such as the ideal rate of population growth or the most effective tax system

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 labors is referred to as wage.

Scarcity may be

relative or absolute

Demand

shows how the quantity demanded of a good depends on its determinants

Land

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

land, labor, capital

some Economic Resources

social science

study of society and how people behave and influence the world around them.

economic system

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

goods market

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

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.

Law of Demand

After observing the behavior of price and quantity demanded in the above schedule, we can now state the

Choice and Decision-Making

Because of the presence of scarcity, there is a need for man to make decisions in choosing how to maximize the use of the scarce resources to satisfy as many wants as possible.

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 backward civilizations.

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.

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.

Alfred Marshall

Well-known economist that described economics as a study of mankind in the ordinary business of life. It examines part of the individual and social action that is most closely connected with the attainment and use of material requisites of well-being.

assumption "ceteris paribus,"

all other related variables except those that are being studied at the moment

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 resource owner.

What to produce and how much How to produce for whom to produce

basic questions in the economy

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 the Gross National Product.

Traditional economy Command economy Market economy

three economic systems:

absolute scarcity

when supply is limited

financial market

which includes the stock market where securities of corporations are traded.

Economics

It is the social science that involves the use of scarce resources to satisfy unlimited wants.

Opportunity Cost

Refers to the value of the best forgone alternative.

For whom to produce

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?

Macroeconomics

is about the nature of economic growth, the expansion of productive capacity, and the growth of national income.

The Market

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

Microeconomics

is concerned with the behavior of individual entities such as the consumer, the producer, and the resource owner. Microeconomics studies the decisions and choices of the individual units and how these decisions affect the prices of goods in the market.

Gross Domestic Product

is defined as the market value of final products produced within the country.

Income effect

is felt when a change in the price of a good changes consumer's real income or purchasing power, which is the capacity to buy with a given income.

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.