Economics is the study of how
societies efficiently use scarce resources to produce valuable commodities and
distribute them to satisfy the need and wants of their members.
It is also defined as the proper allocation and use of
available resources for the maximum satisfaction of human wants.
BRANCHES OF ECONOMICS
Economics is divided into two branches:
1. Macroeconomics which
deals with the economic behavior of the whole economy or its affricates such as
government, business and the like.
It is concerned about the
gross national product, level of production, unemployment rate, etc.
2. Microeconomics deals
with the economic behavior of individual units or specific segments of the
whole economy such as firms, consumers, price of commodities and the like.
DIVISIONS OF ECONOMICS
1.
Production
– the process of manufacturing goods needed by the people to satisfy their
needs.
2.
Consumption
– the proper utilization of economic goods.
3.
Distribution
– the marketing of goods and services to different economic outlets for
allocation to individual consumers.
4.
Exchange
– the process of transferring goods and services from one person to another in
exchange for something.
5.
Public
Finance – the activity of the government regarding taxation, borrowings and
expenditures
FACTORS OF PRODUCTION
Factors of producing are economic resources that are necessary
to produce economic goods. They are the following:
1.
Land
– natural resources
2.
Labor
– human resources or manpower
3.
Capital
– manmade physical productive capacity such as plants, machine tools and the
like.
4.
Entrepreneur
– the person who organizes and coordinates all the other factors of production
to produce economic goods.
5.
Foreign
Exchange – the foreign currency reserve used for importing goods and
services in the process of production.
THE LAW OF DIMINISHING RETURNS
If states that when successive unit of a variable input (like
farmers) work with a fixed input (like one hectare of land ) beyond a certain
point , the additional product (output) produced by each additional unit of a
variable input decreases (Fajardo,1986)
SUPPLY AND DEMAND
Supply is the flow of goods and services which the firms are
willing or can make available in the market at a given price structure.
Demand is the relationship between market price and the quantity
demanded, expressing how much of the same commodity or services one consumer or
all consumers would buy at a given real price schedule.
Price is the value of a product or service
The Law of Supply and Demand
It states that when the supply is greater than the demand, the
price of goods or services decreases; whereas, if the demand is greater than
the supply, the price increases, and if the supply is equal to the demand, the
price remains constant.
MARKET MODELS
Market is an
impersonal set of pressures bringing together supply and demand.
The different market models
are the following:
1. Pure competition – a
market situation where there is a considerable number of sellers offering the
same products.
2. Pure monopoly – a
market situation where there is only one seller of a particular good or service
3. Monopolistic competition
– a market situation where there is a relatively large number of small sellers
offering where similar but not identical products.
4. Oligopoly – a market
situation where there are few firms offering standardized differentiated goods
and services.
ECONOMIC
An economic system is a set of economic institutions that dominates a given economy (Fajardo, 1986). The following are the major economic systems in the world today
1.
Capitalism.
In this economic system, the factors of production and distribution are owned
by the private individuals or corporations.
2.
Socialism.
It is the bridge between capitalism and communism. It is a combination of
capitalism and communism. Under this system, the major factors of production
distribution and industries are owned and managed by the state, while the minor
industries are owned by the private sector.
3.
Communism.
It is exactly the opposite of capitalism, where all the factors of production
and all the industries are owned and managed by the state. It is also known as
command economy, where private property ownership is not allowed.