INTRODUCTION TO ECONOMICS (APPLIED ECONOMICS LESSON 1) Presented by: MS. RICA B. OLIVAR

Objectives: Define economics Identify the key concepts in economics (Goods, Scarcity and Opportunity Costs)

Its definition

Goods Bads Anything that gives a person utility or satisfaction Anything that gives a person disutility or dissatisfaction

EVERYONE WANTS ALL GOODS

Natural resources such as minerals, forests, water and unimproved land.

Physical and mental talents that people contribute to the production process.

Produced goods that can be used as inputs for further production

Ability of people in organizing the resources of land, labor and capital to produce goods, seek new business opportunities and develop new ways of doing things.

Wants Vs Needs

Maslow’s Hierarchy of Need Need is something needed to survive. Want is one step up in the order from needs and is simply something that people desire to have, that they may, or may not, be able to obtain.

Scarcity Condition in which our wants are greater than the limited resources available to satisfy those wants. Candelaria 3 Effects of Scarcity: Choices, Need for a Rationing Device and Competition

“There is no such thing as free lunch.” “free education” “free medical health and so on”

“Zero Price Doesn’t Mean Zero Cost” Situation 1: A friend gives you a ticket to an upcoming event for zero price (you pay nothing). Does it follow that zero price means zero cost? “Zero Price Doesn’t Mean Zero Cost”

Situation 2: Ed, attends classes Monday to Thursday every week. Every time he choses to go to class, he gives up the opportunity to do something else, such as earn Php 150 an hour working at a job. On Tuesday, an offer was offered to Ed Php 500 to skip his class. He knows that if he attends his class, he will forfeit Php 500. What will Ed do? “The higher the opportunity cost of doing something is, the less likely it will be done.”

“Changes in opportunity cost affect behavior.” Because of scarcity, a rationing device is needed Whatever the rationing device, people will compete for it. Scarcity and competition are linked. SCARCITY Because of scarcity, people must make choices When choices are made, opportunity costs are incurred “Changes in opportunity cost affect behavior.”