3. Capital (Money) is not actually considered as capital in economics as it does not produce a good and service but it is rather a form of asset that is used as a medium of exchange. 4. Entrepreneurship
The 3 E’s in ECONOMICS
1. Efficiency refers to productivity and proper allocation of economic resources. 2. Equity means justice and fairness.
3. Effectiveness means attainment of goals and objectives.
Types of Economic Systems
To address economic problems, several economics systems have been created and applied throughout history.
Traditional Economy -is basically subsistence (survival)economy.
Command Economy- a type of economy wherein the manner of production is dictated by the government.
– or capitalism’s basic characteristic is that the resources are privately owned, and that the people themselves make the decisions.
Socialism is an economic system wherein key enterprises are owned by the state.
Socialism is considered as an economy bordering between capitalism and communism.
-is a mixture of market system and the command system.
THE BASIC ECONOMIC QUESTIONS
What is to be produced?
Refers to the kinds and quantities of goods and services to be produced refers to the level or degree the available resources to be utilized in the production process.
How is it to be produced?
Refers to the combination of various resources and the techniques to use in production.
Who is to receive it?
Refers to how to divide up what has been produced among consumers in the society.
How should a system be adapted to change?
Refers to how the economic system can make significant reallocations of resources in order to preserve efficiency in their use. .
THE BASIC ANALYSIS OF DEMAND AND SUPPLY
The quantity of a good or service that people are ready to buy at a given prices within a given time period. SUPPLY
the quantity of good and services that firms are ready and willing to sell at a given price within a period of time, other factors being held constant.
Law of Demand
states that if price go UP, the quantity demanded will go DOWN. Conversely, if price goes DOWN, the quantity demanded will go UP . The REASON for this is because consumers always tend to MAXIMIZE SATISFACTION.
The following are the more general
reasons for the change in demand.
1. Taste or preferences pertain to the personal likes and dislikes of
consumers for certain goods and services.
2. Changing Incomes
-Increasing incomes of households raise the demand for certain goods or service and vice versa.
3. Occasional or seasonal products. Events or seasons in a given year also result to a movement of the demand curve with reference to particular goods.
4. Population change
– an increasing g population leads to an increase in demand in some types of goods and services, and vice versa.
5. Substitute goods
-substitute goods are goods that are interchanged with another goods.
6. Expectations of future prices
-if buyers expect the price of good and service to rise (or fall) in the future, it may cause the current demand to increase (or decrease). Also, expectation about the future may alter the demand for a specific commodity.
Law of Supply
-states that if the price of a good or service goes UP, the quantity supplied for such good or service will also go UP; if the price goes DOWN the quantity supplied also go DOWN.
Reasons that cause the supply to change.
1. An optimization in the utilization of resources will increase supply, while a failure to achieve such will result to a decrease in supply. Optimization means efficient use of resources.
2. Technological change- the advantages and disadvantages of technology.
3. Future expectations-this factor impacts sellers as much as buyers. If sellers anticipate a rise in prices, they may choose to hold back the current supply. If sellers however expect a decline in the price for their products, they will increase present supply.
4. Numbers of sellers
-The numbers of sellers has a direct impact on quantity supplied.
5. Weather conditions-bad weather, typhoon, drought and other natural disasters reduces the supply of agricultural commodities, while good weather has an opposite impact.
6. Government policy
-removing the quotas and tariffs on imported products also affects the supply. Lower trade restrictions and lower quota or tariffs boost imports, thereby adding more supply of goods in the market.
the meeting of supply and demand wherein supply equals demand at a particular price and quantity.