Transcript
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
CHAPTER 1 NATURE AND SCOPE OF ECONOMICS1st Semester, S.Y 2014 – 2015
JAMESON ESTRADAPangasinan State University
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
A. Definition of EconomicsB. Importance of EconomicsC. Microeconomics vs. MacroeconomicsD. Nature of Economic Choice (Scarcity and Opportunity Cost)E. Economic ActivitiesF. Economic ResourcesG. Economic GoalsH. Fundamental Economic Problems / QuestionsI. Types of Economic SystemJ. Economic ModelsK. Ceteris Paribus L. Normative and Positive EconomicsM. Scientific MethodN. Circular Flow ModelO. The Production Possibility FrontierP. Graphs Q. Linear Relationship
Chapter Outline
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
What is Economics?
The study of how individuals and societies choose to allocate and use scarce resources to satisfy unlimited wants.
Embedded in the definition are four key words: Choice Resource Allocation Scarcity Unlimited Wants
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Economics involves Examining how individuals, businesses,
governments, and societies choose to use scarce resources to satisfy their wants.
Organizing, analyzing, and interpreting data about those economic behaviors.
Developing theories and economic laws that explain how the economy works and to predict what might happen in the future.
What is Economics?
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
A good understanding of this subject will not only help us learn economics as an academic discipline but would also help us understand the world and the reality that we are in. Specifically, a study of this course will help us:
1. Appreciate events in economic history and understand how the present-day system of economics came to be.
2. Learn the ways in which economics explain the activities of man through its tools, models, principles and standards.
3. Make use of production and consumption concepts in business endeavors or simply in understanding people’s economic behavior.
Why Study Economics?
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
4. Manage economic and financial affairs; thereby, achieving a good standard of living for ourselves, our families and our nation.
5. Understand government’s functions in economics and choose leaders who are economically sensible.
6. Understand what is happening in the economy of the Philippines and the world and know how nationwide and worldwide economic policies and events affect us all.
Why Study Economics?
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Microeconomics A branch of economics which is concerned
with the behavior of individual entities such as markets, firms, and households.
Macroeconomics A branch of economics which is concerned
with the overall behavior and performance of the economy as whole.
Two Branches of Economics
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Scope of Microeconomics
Microeconomics studies Buying decisions of the individual Consumers’ satisfaction Buying and selling decisions of the firm The determination of prices and in markets The quantity, quality and variety of products Profits
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Macroeconomics studies Economic growth Unemployment and inflation Aggregate demand and aggregate supply Economic policies – fiscal and monetary International trade – exports and imports Money supply
Scope of Microeconomics
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Which of the following questions involve microeconomics, and which involve macroeconomics? In each case, explain your answer.
1. Why did consumers switch to using Smart TVs in 2013?2. Why did overall consumer spending slow down in 2013?3. Why did the standard of living rise more rapidly in the
current administration compared to previous administration?
4. Why have starting salaries for students with geology degrees risen sharply of late?
5. What determines the choice between rail and road transportation?
6. Why did the computers get cheaper over the past 5 years?
Let’s Check Your Understanding!
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Concept of Scarcity
Scarcity exists because individuals want more than can be produced. It implies that there are not enough resources to satisfy human wants.
The condition in which our wants are greater than the resources available to satisfy them.
Scarcity means making choices. Wants are unlimited and resources are limited. Therefore, scarcity exists, and people must make choices.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Wants versus Needs
Wants are desires that can be satisfied by consuming a good or service.
Needs are things, such as food, clothing, and shelter, that are necessary for survival.
Necessities are few but our wants are endless.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Let’s Check Your Understanding
Determine whether each of the following is a want or a need.
1. Fruits and Vegetables
2. Education
3. Medicine
4. Luxurious car
5. Jewelry
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Goods versus Services
Good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used to denote tangible commodities such as products and materials that can be purchased and consumed.
Goods can be categorized as: Economic Good and Free Good Durable Good and Nondurable Good Intermediate Good and Final Good Consumer Good and Capital Goods
.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Service is an intangible commodity. More specifically, services are an intangible equivalent of economic goods. These are tasks that you pay other people to perform for you.
Services are work that one person performs for another for payment. Services include the work of sales clerks, technical support representatives, teachers, nurses, doctors, lawyers, etc.
Goods versus Services
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Determine whether each of the following is a good or a service.
1. Beauty shop or barbershop.
2. Furniture
3. Pineapples
4. Legal counsel
5. Books
Let’s Check Your Understanding!
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
This is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice“.
It is the cost of any activity measured in terms of the value of the best alternative that is not chosen (that is foregone).
It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices.
Opportunity Cost
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Opportunity Cost Examples
What to DoWhat you
have Done Opportunity Cost
Watch a television Read a book
The opportunity cost of watching television is reading a book.
Going to college Having a jobThe opportunity cost of going to college is having a job
Buy good A Buy good BThe opportunity cost of buying good A is buying good B.
Produce tabletProduce laptop
The opportunity cost of producing tablet is producing laptop
Spend on infrastructure
Spend on national defense
The opportunity cost of spending infrastracture is spending on national defense
Opportunity Costs
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Individuals do make their choices randomly. Rather, they carefully looked at the benefits they would gain and the opportunity costs they would incur from their decisions. This practice of examining the costs and the expected benefits of a choice as an aid to decision making is called cost-benefit analysis. It is an approach that weighs the benefits of an action against its costs. Cost-benefit analysis is one of the most useful tools for individuals, businesses, and governments when they need to evaluate the relative worth of economic choices.
Cost-Benefit Analysis
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Economic Activities
1. Production. The process of transforming inputs into outputs.
2. Distribution. The way total output, income, or wealth is distributed among individuals or among the factors of production
3. Exchange. The process of trading goods between buyers and sellers in a particular market.
4. Consumption. The process of how goods and services are utilized that give satisfaction to the consumers.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Land includes all natural resources, such as minerals, timber, and water, as well as the land itself.
Labor refers to the physical and intellectual services of people and includes the training, education, and abilities of the individuals in a society.
Capital refers to products such as machinery and buildings that are used to produce other goods and services
Entrepreneurship is a human resource that com bines these factors of production creatively and efficiently.
Categories of Economic Resources
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
The entrepreneur takes the initiative in combining the resources of land, labor, and capital to produce a good or a service.
The entrepreneur makes the strategic business decisions that set the course of an enterprise.
The entrepreneur is an innovator.
The entrepreneur is a risk bearer.
Functions of an Entrepreneur
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Determine what category of economic resources each of these belongs.
1. Factory worker
2. Company’s CEO
3. Assembly plant
4. Industrial robots
5. Mineral deposits
Let’s Check Your Understanding!
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Economic Resources (also called factors of production or productive inputs) are what people use to produce goods and services. These are inputs used by the firm to produce a good or service. These inputs include the following:
Land Labor Capital Entrepreneurship
Economic Resources
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
1. Economic efficiency2. Economic growth and economic development 3. Economic freedom4. Economic security5. Equitable distribution of income6. Full employment 7. Price level stability8. Reasonable balance of trade
Economic Goals
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Economic System is the way in which a society decides what goods to produce, how to produce them, and for whom goods will be produced. Whether rich or poor, every nation must answer the same three fundamental economicquestions:
1. What to produce?
2. How to produce?
3. For whom to produce?
Three Economic Questions
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
What to Produce?
To answer the first fundamental economic question, a society must decide the mix of goods and services it will produce. Will it produce mainly food, or will it also produce automobiles, televisions, computers, furniture, and shoes? The goods and services a society chooses to produce depend, in part, on the natural resources it possesses.
Because of scarcity, no country can produce every good it wants in the quantity it would like. More of one good (say, television sets) leaves fewer resources to produce other goods (such as cars). No matter what nation we are talking about—the United States, China, Japan, India, Russia, Cuba, or Brazil—each must decide what goods will be produced.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
How to Produce?
The next question every society has to answer deals with the ways in which people produce the goods. Will farmers using modern tractors produce food, or will farmers using primitive tools produce it? Will the food be produced on private farms, where production decisions are made by individual farmers, or will it be produced on collective farms, where production decisions are made by people in the government?
Answering this second question involves using scarce resources in the most efficient way to satisfy society’s wants. Again, decisions on methods of production are influenced, in part, by the natural resources society possesses.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
For Whom to Produce?
This answers how goods and services are distributed among people in society. This actually involves two questions. Exactly how much should people get and how should their share be delivered to them? Should everyone get an equal share of the goods and services? Or should a person’s share be determined by how much he or she is willing to pay? Once the question of how much has been decided, societies must then decide exactly how they are going to get these goods to people. To do this, societies develop distribution systems, which include road and rail systems, seaports, airports, trains, ships, airplanes, computer networks—anything that helps move goods and services from producers to consumers in an efficient manner.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
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Economic System
An economic system is a set of economic institutions that dominates a given economy.
a particular set of institutional arrangements and a coordinating mechanism—to respond to the economizing problem. It is a society decides what goods to produce, how to produce them, and for whom goods will be produced.
The way a society uses its scarce resources to satisfy its people’s unlimited wants.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
1. To produce the goods for consumption of the population
2. To utilize the resources in efficient method of production
3. To employ the labor force in occupations where productivity is at optimum
4. To apportion the wealth and income available to everyone in an equitable manner
5. To encourage innovation and technology in order to maximize efficiency, optimize satisfaction and minimize waste
Salient Functions of an Economic System
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Pangasinan State UniversitySocial Science Department – PSU Lingayen
1. Traditional Economy
2. Market Economy
3. Command Economy
4. Mixed Economy
Classification of Economic System
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Traditional economy is an economic system
in which the society produces what best ensures its survival.
Resources are allocated according to long-lived practices from the past.
People make economic decisions based on customs and beliefs that have been handed down from generation to generation.
Traditional Economy
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Market economy is characterized by the private ownership of resources and the use of a system of markets and prices to coordinate and direct economic activity.
Private individuals own most, if not all, the resources and control their use.
The prices of goods and services are determined in a free price system .
Market economy or capitalism is sometimes called laissez-faire; translated from the French, this phrase means “to let do,” or to let people do as they choose without government intervention.
Market Economy
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Characteristics of a Market Economy
1. Private Property2. Freedom of Enterprise or Choice3. Self-interest4. Competition5. Markets and Prices6. Technology and Capital Goods7. Specialization8. Use of Money9. Active, but Limited, Government
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an economy characterized by public ownership of virtually all property resources and the rendering of economic decisions through central economic planning.
Government owns most of the businesses and makes all economic decisions.
There is no free competition because the government is the only seller.
Countries using mainly the command system include Turkmenistan, Laos, Belarus, Libya, Myanmar, Iran, North Korea and the former Soviet Union.
Command Economy
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Flaws of Command Economy
1. Running an economy is so complicated that some resources are used inefficiently.
2. Because nobody in particular owns resources, each person has less incentive to employ them in their highest-valued use, so some resources are wasted.
3. Central plans may reflect more the preferences of central planners than those of society.
4. Because government is responsible for all production, the variety of products tends to be more limited than in a capitalist economy.
5. Each individual has less personal freedom in making economic choices.
In practice, the pure command system also has flaws, most notably:
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Mixed Economy is a blend of market system and some form of government regulation and control. Private ownership of resources exists side by side with substantial public ownership of resources and government participation in economic activities.
This involves a degree of private economic freedom mixed with a degree of government regulation of markets.
The major and strategic industries are owned and managed by the state while the minor industries belong to the private sector.
Mixed Economy
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Consumption goods and services Goods and services that are bought by individuals
and used to provide personal enjoyment and contribute to a person’s quality of life.
Capital goods Goods that are bought by businesses to increase their
productive resources.Government goods and services Goods and services that are bought by governments.Export goods and services Goods and services that are produced in one country
and sold in other countries.
Categories of Goods and Services
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A simplified representation of economic forces.
It is a simplified representations of complex economic activities, systems, or problems—to clarify trade-offs.
It is also a simplified description of reality used to understand and predict the relationship between variables.
Economic Model
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Forms of Economic Model
Descriptive economic model (words, statements)
Assumption Mathematical model (Equations and
Functions) Graphs
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Ceteris Paribus Assumption
Ceteris paribus assumption is a Latin phrase that means while certain variables change, “all other things remain unchanged.”
This assumption allows analysis of the effect of a change in one factor by holding all other relevant factors unchanged.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Positive Economics It is concerned with “what is”. A statement that can be proved or disproved by reference to
facts A way of describing and explaining economics as it is, not as
it should be. Normative Economics It is concerned with what should be. A statement that reflects an opinion, which cannot be proved
or disproved by reference to the facts. a way of describing and explaining what economic behavior
ought to be, not what it actually is. It does involve value judgments because it seeks to make recommendations for actions
Positive and Normative Economics
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
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Determine whether each of the following statements is normative or positive.
1. The inflation rate in this country is too high. 2. The government should increase the minimum wage in Metro
Manila. 3. Increasing the minimum wage results in more unemployment. 4. What government policies should be adopted to make it
easier for low-income students to attend college?5. How many people are employed in the economy as a whole
this year?
Let’s Check Your Understanding!
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To study economic problems, economists employ a process of theoretical investigation called the scientific method. Scientific method consists of four steps. 1. Step One: Identify the Question and Define
Relevant Variables2. Step Two: Specify Assumptions3. Step Three: Formulate a Hypothesis4. Step Four: Test the Hypothesis
Scientific Method
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The Circular-Flow of Income Diagram
Circular-flow diagram is a visual model of the economy that shows how income flows through markets among households and firms.
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The Circular-Flow Diagram
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Households are individuals or groups of people living together and considered the consuming-unit of the economy. They sell economic resources and buy goods and services
Firms are the institutions that organize the production of goods and services and are considered the producing-unit of the economy. They buy economic resources and they sell goods and services.
Components of the Circular-Flow Model:Households and Firms
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Market is a place or any arrangement that brings buyers and sellers together and enables them to get information and do business with each other. The circular flow model has two classifications of market.
Resource Market is a market in which a resource (land, labor and capital) is bought and sold.
Land market, capital market, labor market
Product Market is a market in which a good or service is bought and sold.
Components of the Circular-Flow Model:Resource Market and Product Market
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Real Flows (input-output flows) depicts the flows of the economic resources (inputs) that go from households through resource markets to firms and of the goods and services that go from firms through goods markets to households.
Money Flows indicates the flows of payments made in exchange for the services of factors of production and of expenditures on goods and services.
Components of the Circular-Flow Model:Resource Market and Product Market
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When households choose the quantities of services of land, labor, capital, and entrepreneurship to offer in resource markets, they respond to the incomes they receive—rent for land, wages for labor, interest for capital, and profit for entrepreneurship. When firms choose the quantities of factor services to hire, they respond to the rent, wages, interest, and profits they must pay to households. Similarly, when firms choose the quantities of goods and services to produce and offer for sale in goods markets, they respond to the amounts that they receive from the expenditures that households make. And when households choose the quantities of goods and services to buy, they respond to the amounts they must pay to firms
Real Flows and Money Flows
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The production-possibility frontier (or PPF ) shows or measures the maximum quantity of goods that can be efficiently produced by an economy, given its technological knowledge and the quantity of available inputs.
Production Possibility Frontier
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Like all other economic models, the PPC is based on assumptions that simplify the economic interactions. For the PPC these assumptions are: 1. Resources are fixed. There is no way to increase the
availability of land, labor, capital, and entrepreneurship.2. All resources are fully employed. There is no waste of
any of the factors of production. In other words, the economy.
3. Only two things can be produced. This assumption simplifies the situation and suits the graphic format, with one variable on each axis.
4. Technology is fixed. There are no technological breakthroughs to improve methods of production.
Production Possibility Frontier
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The PPF model demonstrates the following economic principles:
The economy is said to be operating efficiently if it is operating on the production possibilities frontier (e.g. Point A or B) because it is producing a mix of output that is the maximum possible from the resources available.
Points inside the curve (e.g. Point C) are therefore inefficient while points outside the curve (e.g. Point D) are currently unattainable.
If the economy is operating on the production possibilities frontier, we can see the tradeoffs society faces. To produce more of one good, it must produce less of the other. The amount of one good given up when producing more of another good is the opportunity cost of the additional production.
PPF: An Analysis
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The production possibilities frontier is bowed outward because the opportunity cost of producing more of a good increases as we near maximum production of that good. This is because we use resources better suited toward production of the other good in order to continue to expand production of the first good.
A technological advance in production shifts the production possibilities frontier outward. This is a demonstration of economic growth.
PPF: An Analysis
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Combination Capital Goods
Consumer Goods
A 160 0
B 140 40
C 80 80
D 0 100
Production Possibility Frontier
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One way to express the relationship between variables is with a graph.
Graphs serve two purposes:
1. Graphs offer a way to visually express ideas that might be less clear if described with equations or words.
2. When analyzing economic data, graphs provide a way of finding how variables are related in the world.
Graphs in Economic Analysis
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Pie graph is a circular chart divided into sectors illustrating proportion. It is a
convenient way to represent the different parts of something that when added together equal the whole.
Bar graph is a chart with rectangular bars with lengths proportional to the
values that they represent. The bars can be plotted vertically or horizontally. It is used for marking clear data which has learned value.
Line Graph is a type of graph, which displays information as a series of data
points connected by straight line segments. It is an extension of a scatter graph, and is created by connecting a series of points that represent individual measurements with line segments.
Forms of Graphs
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88; 10%
76; 9%
100; 12%
67; 8%
55; 6%
60; 7%
40; 5%
45; 5%
56; 7%
68; 8%
78; 9%
125; 15%
Number of Android Tablets Sold in 2013
January February March April May JuneJuly August September October November December
MonthNumber of
Android Tablets Sold
January 88February 76March 100April 67May 55June 60July 40August 45September 56October 68November 78December 125
Pie Graph
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Janua
ry
Febru
ary
March
April
MayJu
neJu
ly
August
Septembe
r
October
November
Decembe
r0
20
40
60
80
100
120
140
8876
100
6755 60
40 4556
6878
125
Number of Android Tablets Sold in 2013
Month
No.
of A
ndro
id T
able
ts S
old
(in th
ousa
nds)
Bar Graph
MonthNumber of
Android Tablets Sold
January 88February 76March 100April 67May 55June 60July 40August 45September 56October 68November 78December 125
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
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Janua
ry
Febru
ary
March
April
MayJu
neJu
ly
Augus
t
Septembe
r
October
November
Decem
ber0
20
40
60
80
100
120
140
88
76
100
67
5560
4045
56
6878
125
Number of Android Tablets Sold in 2013
Month
Num
ber o
f And
roid
Tab
lets
Sol
d (in
thou
sand
s)
MonthNumber of
Android Tablets Sold
January 88February 76March 100April 67May 55June 60July 40August 45September 56October 68November 78December 125
Line Graph
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Graphs of Two Variables: The Coordinate System
Economists are often concerned with the relationships between variables. Thus, they need to display two variables on a single graph. The coordinate system makes this possible.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Variable and Constant
Variable is q quantity that assumes different values in a particular problem. It is a value that may change within the scope of a given problem or set of operations.
Constant is a quantity whose value remains unchanged throughout a particular problem.
Numerical Constant – has the same value in all problems
Parametric Constant (Parameter) – has the same value throughout the problem but may assume different values in different problems
Ex: (Revenue ) , (Cost) , (Demand)
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Dependent and Independent Variables
Function is a relationship between two or more variables such that a unique value of one variable is determined by the values taken by the other variables in the function. These variables can be:
Independent Variable – the variable representing the value being manipulated or changed.Dependent Variable – observed result of the independent variable being manipulated
If every value of x is associated with exactly one value of y, then y is said to be a function of x.In the function, is the dependent variable and is the independent variable.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Direct Relationship is a positive relationship between two variables in which change in one variable is associated with a change in the other variable in the same direction.Ex. Price and Quantity Supplied
Inverse Relationship is a negative relationship between two variables in which change in one variable is associated with a change in the other variable in the opposite direction.Ex. Price and Quantity Demanded
Direct vs. Inverse Relationship
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Inverse and Direct Relationship
Inverse Relationship has a downward sloping curve.
Direct relationship has an upward sloping curve.
Inverse Relationship Direct Relationship
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
The slope of the line represents the change in one variable that occurs when another variable changes.
It is an exact numerical measure of the relationship between the change in and the change in .
Slope measures the rate of change. It is expressed as:
Slope
𝑚=𝑟𝑖𝑠𝑒𝑟𝑢𝑛= ∆𝑌
∆ 𝑋=𝑌 2−𝑌 1
𝑋 2−𝑋 1
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Slope of a Line
Slope is negative if the line slopes downward to the right
Slope is positive if the line slopes upward to the right
Slope of the x-axis or horizontal line is zero
The slope of the y-axis or vertical line is undefined.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Study the four accompanying diagrams. Consider the following statements and indicate which diagram matches each statement. In each of these statements, is the slope positive, negative, zero, or infinity?
1. If the price of movies increases, fewer consumers go to see movies.2. Whatever the temperature outside, people consume the same
number of hotdogs per day.3. Consumers buy more frozen yogurt when the price of ice cream goes
up.4. Research finds no relationship between the number of diet books
purchased and the number of pounds lost by the average dieter.5. Regardless of its price, consumers in Lingayen buy the same quantity
of salt.
Let’s Check Your Understanding
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Linear Equation to Economic Analysis
Linear Equation is an algebraic equation which expresses a relationship between two or more variables.
says the value of is determined by the value of ; is a “function of .”
is the dependent variable is the independent variable
A linear relationship may be in the common form:
where and are variables, is slope, is y-intercept
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
X and Y – Intercepts
The x-intercept is the point where a line crosses the x-axis. The general form of the x-intercept is (x, 0). The y-coordinate will always be zero.
The y-intercept is the point where a line crosses the y-axis. The general form of the y-intercept is (0, y). The x-coordinate will always be zero.
BACHELOR OF ARTS IN ECONOMICS SOC SCI 104 – BASIC ECONOMICS W/ TAR
Pangasinan State UniversitySocial Science Department – PSU Lingayen
Let’s Check Your Understanding!
Given the equation: 1. What is the Y intercept? The slope?2. What is the X intercept? Is this a positive (direct)
relationship or negative (inverse)?
Given the equation 3. What is the Y intercept? The slope?4. What is the X intercept? Is this a positive (direct)
relationship or negative (inverse)?
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