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1 - Core Concepts of Economics RBF

The document discusses core economic concepts including economics, managerial economics, the theory of the firm, neoclassical economics, the nature and function of profit, and managerial economics in an international framework. It also covers basic economic concepts, resources, factors of production, basic economic questions, and branches and approaches of economics.

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39 views

1 - Core Concepts of Economics RBF

The document discusses core economic concepts including economics, managerial economics, the theory of the firm, neoclassical economics, the nature and function of profit, and managerial economics in an international framework. It also covers basic economic concepts, resources, factors of production, basic economic questions, and branches and approaches of economics.

Uploaded by

brentdumangeng01
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CORE CONCEPTS OF

ECONOMICS

1
ECONOMICS
…is a social science that deals with the
effective and efficient allocation and
utilization of scarce resources to bring
maximum satisfaction to the unlimited
wants and needs of man.
Managerial economics
• is a branch of economics involving the application of
economic methods in the organizational decision-
making process.
• Economics studies the production, distribution, and
consumption of goods and services.
• Managerial economics involves using economic
theories and principles to make decisions regarding
allocating scarce resources.
• It guides managers in making decisions about the
company's customers, competitors, suppliers, and
internal operations.
What is the Theory of the
Firm?
The theory of the firm refers to the
microeconomic approach devised in neoclassical
economics that every firm operates in order to
make profits. Companies ascertain the price and
demand of the product in the market and make
optimum allocation of resources for increasing
their net profits.
Neoclassical economics
is a broad approach that attempts to explain the
production, pricing, consumption of goods and
services, and income distribution through supply
and demand.
Nature of Profit
• Profitability is the most important concept in
the theory of the firm.
• Profit is such a key element in the market
economy that the market system will fail to
operate without profit and profit motive.
• It is a measure of the firm’s performance in
the market and it is often cited by both
economist and managers as the primary
objective of the firm.
Function of Profit
• Profit works as a reward to entrepreneurs for
accepting the risk associated with their
business decisions.
• Profit is the reward for taking uncertainty and
risk by the business firms and managers. So, it
encourages them to make new innovations
and follow the dynamism of societies.
Managerial Economics in International
Framework
Many of the commodities we consume today are imported,
and American firms purchase many
inputs abroad and sell an increasing share of their products
overseas.
-Specifically, as consumers, we purchase Japanese
Toyotas and German Mercedes, Italian
handbags, Hong Kong clothes, American suit, Swiss
chocolates, and Brazilian coffee. Often, we
are not even aware that the products, or parts of them, are in
fact made abroad.
- American multinational corporations produce and
import many parts and components from abroad and export
an increasing share of their output.
ECONOMICS
…is a social science that deals with the
effective and efficient allocation and
utilization of scarce resources to bring
maximum satisfaction to the unlimited
wants and needs of man.
BASIC ECONOMIC
CONCEPTS
Effective vs. Efficient
Effective : doing the right things
Efficient : doing things right

Allocation vs. Utilization


Allocation : how a resource is assigned or
distributed
Utilization : how resources are used after
allocation
BASIC ECONOMIC
CONCEPTS
Scarcity
- The limited nature of society’s resources.
- Fundamental economic problem of infinite
(unlimited) human needs and wants, in a
world of finite (limited) resources.

stickfigureeconomics.blogspot.com
BASIC ECONOMIC
CONCEPTS

Needs: basic requirements for survival.


Wants: not absolutely or necessarily essential
for survival.
RESOURCES
The basic categories of inputs used to produce
goods and services.
1. Natural resources – raw materials supplied
by nature
2. Human resources – people who work to
produce goods and services
3. Man-made resources – tools, equipment,
and buildings used to produce goods and
services
4. Personal resources – time, skills used to
satisfy our wants
Factors of production
- an economic term to describe the inputs
used in the production of goods or services
Payment for factors of production
- Each payment correlates to a factor of
production:

Factor of Production Payment


Land Rent
Labor Wages/Salaries
Capital Interest
Entrepreneurship Profit
BASIC ECONOMIC QUESTIONS
- Questions to be answered in economics
- Guide to achieve efficient and effective
allocation and utilization of resources
1. What to produce?
2. How much to produce?
3. How to produce?
4. For whom to produce?
5. At what price to produce?
Economic questions
1. What to produce?
Determines what would be the best used of each resources
Determines the needs and wants of customers
Can be goods(tangibles) or services(intangibles)
2. How many and how much to produce?
3. How to produce?
4. For whom to produce?
5. At what price to produce?
Economic questions
1. What to produce?
2. How many and how much to produce?
Production are based on how much products are needed by the society
3. How to produce?
4. For whom to produce?
5. At what price to produce?
Economic questions
1. What to produce?
2. How many and how much to produce?
3. How to produce?
Determines the specific method needed in production that would require
minimum costs.
4. For whom to produce?
5. At what price to produce?
Economic questions
1. What to produce?
2. How many and how much to produce?
3. How to produce?
4. For whom to produce?
Determines the users of the product and how the product would be
delivered to the users
5. At what price to produce?
Economic questions
1. What to produce?
2. How many and how much to produce?
3. How to produce?
4. For whom to produce?
5. At what price to produce?
Determines the willingness of consumers to pay and if price is agreeable to
the producer of goods and services
ECONOMIC ACTIVITIES
- Set of activities carried out by human beings
to satisfy their wants and needs
- Addresses the Economic questions
1. Production
2. Distribution/Commercialization
3. Exchange
4. Consumption
Economic Activities
1. Production
Addresses the questions
What to produce?
How many to produce?
How to produce?
1. Production
Types of goods produced
1. Consumer Goods – Goods that yield direct satisfaction
a) Basic/Essential goods – needed by man to survive
b) Luxury goods – desired by man to have a more
comfortable life
2. Capital goods – goods that are used in the production of
other goods
3. Public goods – goods that are provided by the
government
4. Free goods – goods that are abundant and do not need to
be paid
Economic Activities
2. Distribution
Addresses the question
For whom to produce?
Distribution Channels
Economic Activities
3. Exchange
Transfer of goods or service from the producer to
the consumer
Answers the question
At what price to produce
Producer gives the agreed quantity of
goods/service to customer and customer pays
the producer on an agreed price.
Barter is an example of exchange
Economic Activities
4. Consumption
The ultimate consumer gets to enjoy the goods
and services he/she paid that was produce and
distributed to his/her specific needs and wants.
ECONOMIC ACTIVITIES
Economic Questions Economic Activities
What to produce?
How many and how
much to produce? Production

How to produce?
For whom to produce? Distribution
At what price to
Exchange
produce?
Consumption
BRANCHES OF ECONOMICS
Microeconomics
- analyzes the behavior of individual economic
units such as industries, firms and households
- individual supply and individual demand
- also known as “price theory”

Macroeconomics
- studies the relationship of the broad economic
sectors making up the entire national or global
economy
- aggregate supply and demand
APPROACHES TO ECONOMICS
Positive Economics Normative Economics
- Studies the way the world
- Studies the way the world
should be: “what ought to
is: “what is” of economics
be”
- Factual, objective and is - Subjective and judgmental
used to describe the
occurrence of a
phenomenon
- Usually quantified - Far more difficult to quantify
- More descriptive than - More predictive than
predictive in its usage descriptive in it usage
Examples of positive
statements
The economy is now experiencing a slowdown
because of too much corruption in the
government.
The inflation rate of the Philippines in 2015 is at
3%.
Examples of normative
statements
The Philippine government should initiate
political reforms in order to regain investor
confidence.
In order to minimize the lash of global, the
Philippine government should release a stimulus
package geared towards encouraging economic
activity.

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