Basic Economics with Taxation and Agrarian Reform -Said temperature

(SOCSCI 4) made survival

HANDOUT NO.1 extremely difficult
I. Basic Economics for many species.
CHAPTER 1: INTRODUCTION TO ECONOMICS
A. Definition of Economics
 Etymology of the word “Economics”
Economics came from the Greek word “oikonomia” or 11,000 -Ice Age – polar -Identification of the most important
“oikonomos” which means management of a household. B.C. and ice caps started resources to survive.
beyond to melt. -Water guaranteed survival of species.
- oikos (house) + nomos (managing) -Earliest known
start of the
 Comprehensive Definition: creation of the
“Economics is a social science that deals with the bodies of water in
efficient allocation of scarce resources to satisfy man’s the world.
unlimited wants and needs.” 9,000 B.C. Earliest traces of -Men made weapons;
nomadic activity - they hunted for food and looked for viable
NB: Take note of the key words in the definition. We can see shelters;
the words: efficient allocation, scarce resources, and unlimited wants and -women took care of children, prepared
needs of men. food, made clothing and maintained shelter;
-nomadic activities were minimized and
B. The History Behind the Word tribal leaders were elected to manage
One must be able to trace the simplest timeline of man’s evolution, household needs; and,
and consequently, the challenges of managing one’s environment. -Self-sufficiency was the main objective of
 Reason: For one to understand how the entire concept of tribes.
managing one’s household ever came into being.
Note:
According to scientists: -The simplest examples of managing a
Period Significant Household Managing Activities household are:
events of the 1. Gathering resources and
period 2. Delegating tasks among members
Prior to -Temperature of of the tribe.
11,000 the world
B.C. changed several -Describe the roles of each member of the
degrees below tribe or clan:
zero in a span of a. Men – known as food providers and very
a few weeks to a good hunters.
few years.
 b. Women – known to take care of shelter 3. Early practices of specialization and;
and make clothing from hunted animals. 4. Early system of government.
c. Eldest of the tribe – known to medicine
men or shamans.
C. WHY STUDY ECONOMICS?
6,000 B.C. Earliest known -Nomads settled near fresh water, built In general:
civilization more permanent shelters, started livestock 1. Economics is so basic and so evident in our everyday life and yet
(China, Yang Tze activities and learned techniques of food not too many appreciate nor understand it.
River) production; 2. We can try our best to understand the world a little better and
-Early traces of agricultural technology such make better decisions by studying Economics.
as cultivation and irrigation; and
-Signs of early government and civilization. Basic reasons:
Note: 1. Economics helps you understand the marketplace and the
Q: Who was said to be the oldest civilization economic system in general.
in the world?
A: The first known settlers were the Chinese Q: How?
along Yang Tze River delta. A: All people are consumers; the course helps us as consumers
to understand the impact of economic and political events (both
3,000 B.C. Next known -Civilizations flourish with the settlement of domestically and internationally) to your decisions of your spending,
civilization people in the communities; and saving and even borrowing.
(India, Indus -Sustainability was the main objective.
River) Note: 2. Essential in a sense that Economics allows us to understand the
Q: Who was the said to be the second following:
oldest known civilization? a. Signals from the marketplace,
A: Settlers in India along the Indus River b. Nature of the cost of products, and
who came around 3,000 B.C. c. Process of making decisions
2,800 B.C. Middle East -Significance of rivers for economic  Particularly: quantified values
civilizations activities like trading and agriculture.
(Tigris and Note: 3. Interaction with other academic disciplines.
Euphrates) Said rivers can be found in modern day
Iraq. 4. Intimately intertwined with the current events and has a profound
impact on political events.
 EFFECT:
It allows us to fully participate in the policies of running
 NB: The major characteristics of civilizations are the following: the economy by: Election and legislative processes.
(TASS) 5. Offers a lucrative career in the future.
1. A more or less permanent territory;
2. Food through field cultivation (Ager cultura) or agriculture;
C1. WHY DO STUDENTS CHOOSE (OR AVOID) ECONOMICS?
As observed, the very reasons for choosing Economics as a
course are actually the very things that dissuade many students from
pursuing the same.
Economics:
1. deals with the vital current problems. Hence, the subject
requires a lot of updated reading and learning.
2. is a successful and prestigious social science.
3. consists of theoretical structures, models and scientific
methods.
4. provides an opportunity to use Math.
5. is a quantitative social science which employs algebra,
geometry and calculus.
6. involves abstract thinking and theory.
7. is difficult
8. is a narrowly focused discipline, unlike other social sciences.
9. can be stifling in terms of economic reasoning
 Examples: particularly when issues and decisions are
based on quantified means and measurements which
may not be what society wants in general.
C2. WHY MAJOR IN ECONOMICS?
Economics majors:
1. Get better preparation for vocations in which knowledge in
economics is vital.
 Examples:
Law, Politics, Social Sciences, Business, Government,
etc.
2. Have the option to be in the academic, business, government,
and non-government institutions – a flexibility many other majors
do not have.
3. Get better jobs and better pay than most graduates due to
technical competencies they develop.
 Examples:
- Calculations, Analysis, Interpretation, Abstract and
critical thinking, establishing relationships among
events, research, project proposals and feasibility
studies.
D.CAREER OPPORTUNITIES FOR ECONOMISTS
Short list of possible careers for economists:
A. Academe – academicians (teachers), professional researchers,
project coordinators, extension service providers, university planners,
administrators.
B. Business – those involved in the marketing, management, finance,
financial management, research and development; analysts,
statisticians; entrepreneurs; advisers; planners; public relations
officer; and corporate think tanks.
C. Social Sciences fields – liberal arts people, historians, political
scientists, social scientists, lobbyists, journalists, policy makers,
lawyers
D. Non-government Organizations – micro-financers, project
proponents, feasibility study consultants, researchers, project
administrators, project evaluators, labor and political group’s advisers.
E. Freelance – independent researchers, professional consultants,
freelance writers, campaign managers, ghostwriters, independent
businessmen.
E.THE ECONOMIC METHOD
Economics uses a standard method of analysis. The economic method is
based on a blend of both the scientific method and policy analysis.
 STEPS:
1. State the problem.
2. Apply the relevant economic model.
3. Identify solutions
4. Evaluate solutions.
5. Select and implement a solution.
State the problem.
 A very important step in economic thinking.
 Reason: Defining the problem allows analysts to narrow
down and focus on the specific aspect that needs to be
solved.

Apply the relevant economic model.
 Purpose of applying economic model:
a. Make predictions of what will happen given the
phenomenon being studied.
b. Generate abstract;
c. Try to simplify reality
 Characteristics of Economic Model:
Usually consist of, but not limited to –
a. Graphs
b. Charts
c. Tables and figures
F. Limitations on the Economic Model
a. Liberal use of assumptions –
Although these assumptions have solid bases, there is no
guarantee that these assumptions are error-free.
b. Caeteris paribus –
A Latin phrase which means “Everything else is held
constant”. For models and laws to hold true, it should be
free from the influence of others.
c. Short Run and Long Run –
1. Short Run – it means the effect in the immediate
future following the occurrence of a phenomenon.
2. Long Run - it means the effect in the continuing
future, beyond the immediate period.
d. Use of graphs -
Graphs are usually limited to the variables incorporated
into the graph.
Identify solutions
G. Analysts or economists are required to list all possible solutions.
Evaluate solutions.
H. It considers the various advantages and disadvantages of the
identified solutions.
I. At this stage, the work of the economist begins to overlap that of the
policy maker, who also evaluates solutions.
Select and implement a solution.
 The Policy Maker is the one tasked to select and implement
a solution.
 COMMON PITFALLS IN USING THE ECONOMIC METHOD
1. Biases and Preconceptions -The use of personal judgments in the
analysis of the facts.
2. Loaded Terminologies – employing long definitions for some
concepts
3. Fallacy of Composition
Assumption that what is true to the parties is true for the whole.
4. Post Hoc, Ergo Propter Hoc Fallacy
Presumption: If one event precedes another, it necessarily is the
cause of the latter
5. What is true for depression is true for prosperity fallacy
Using similar theories in varying situations.
F1. THE SCIENTIFIC METHOD
Definition:
It is the process by which scientists, collectively and over time,
endeavor to construct an accurate representation of the world.
Objective:
Minimize the influences brought about by the personal and cultural
beliefs when developing a theory.
It attempts to minimize the influence of bias or prejudice in the - He feels internal or external pressure to get a specific
experimenter when testing a hypothesis or theory. result.
 Effect:
Steps of Scientific Method: Scientist may have a “psychological tendency” to find
1. Observe and describe “something wrong”.
Observation and description of a phenomenon or group of - Example:
phenomena. Systematic effects - with data which do not support
2. Formulate hypothesis the scientist’s expectations, while data which do
Formulation of a hypothesis to explain the phenomena. agree with those expectations may not be checked
3. Use hypothesis as carefully.
Purpose: Use of hypothesis - NB: All data must be handled in the same way.
3.1 to predict the existence of phenomena, or
3.2 to predict quantitatively the results of new observations. 3. Failing to estimate quantitative errors or (all other errors).
4. Perform experimental tests  Experimenters missed discoveries whose data contained
Performance of experimental tests of the predictions by several new phenomenon but were explained away as a
independent experimenters and properly performed experiments. systematic background.
 This may happen conversely.
 Effect: If the hypothesis is supported by experiments, it
may come to be regarded as a theory or law of nature.
NB: The biases of individuals or groups may be avoided.
Common mistake in applying the scientific method  HOW: By experimental tests which are repeated by different scientists
1. Mistaking the hypothesis for an explanation, followed by an who may have different biases.
explanation, and retaining the explanation.  There are also different experimental set ups which have different
sources of systematic errors.
 Most fundamental error
is to mistake the hypothesis for an explanation of a F2. POLICY ANALYSIS
phenomenon, without performing experimental tests.  Definition:
 Reason: - It is a course of action or inaction chosen by the
Sometimes “common sense” and “logic” tempt us into public authorities to address a given problem or
believing that no tests are needed. interrelated set of problems.
- Basically, an approach to evaluate policies in the
2. Ignoring or ruling out data which do not support the hypothesis; public sector.
and
 Ideally, experimenter is open to the possibility that the  How to approach: Steps
hypothesis is correct or incorrect. 1. Define the problem.
 Errors committed: 2. Define evaluation criteria.
- Scientist may have a strong belief that the hypothesis 3. Identify all alternatives.
is true (or false), or 4. Evaluate alternatives.
5. Choose the best policy.
 Aspect of Microeconomics Macroeconomics
 Basis: It is anchored on a set of values regarding appropriate public Study
goals and a set of beliefs about the best way to achieve goals. Units of Individual consumers, producers, Aggregate units such as:
 Characteristics: the study workers, traders, etc. state National or
1. Assumes that an issue is no longer a private affair. International Economy
2. Policy Analysis and Program Evaluation Activities Optimization and maximization of Long-term growth,
Similarity: a determinant if something works. personal gains and profits maintenance of high levels
Difference: of production and
Policy Analysis is focused on the policies while employment
Program Evaluation is focused on the programs. Origin Micro activities emerge on the Problems of long-term
demand side of consumer’s growth depend upon the
J. APPROACHES TO ECONOMICS choices supply of productive
1. POSITIVE ECONOMICS resources.
It is an approach that tells us what is. Conditions The approach is FUNCTIONAL The approach is
 It is factual, objective and used to describe the occurrence of under static conditions and small FUNCTIONAL under
a phenomenon. time intervals. dynamic conditions and
 More descriptive than predictive in its usage. complex long-run changes.
2. NORMATIVE ECONOMICS Methods Marginal Method – it is It deals with complex,
 It is an approach which tells us what should be or what ought concerned with small dynamic changes inviting
to be. adjustments. the use of advanced
 More subjective and more judgmental. mathematical techniques.
 More predictive than descriptive in its usage. Levels Micro adjustments in resource Macro approach attempts
allocation are made in response to find the conditions of
K. MICROECONOMICS VS. MACROECONOMICS to changes in relative prices of long-term expansions in
 PURPOSE: To analyze economic situations, behaviors, or goods and services. The output as a whole
problems. aggregate level of income or total assuming relative prices as
 CONCEPT: The two branches or methods of exposition of the economic activities is considered constant (or significant).
science of economics. to be constant.

 MICROECONOMICS
It studies decision-making of individual economic units such as:
one producer or one household. It studies individual supply and
individual demand and uses relative prices.
 MACROECONOMICS
It is the study of the relationship of the broad economic sectors
making up the entire national or global economy. It studies
aggregate demand and aggregate supply and uses average,
general absolute price levels.
NB: Distinctions are made for theoretical convenience and relative in nature.
The 2 approaches are complementary and not competitive; one cannot
consider these to be watertight compartments.
REFERENCE:
Azarcon, Marzo, Navarro, Ressureccion, Paca, Degay, Sison and Rojo.
Principles of Economics with Taxation and Agrarian Reform, 2nd Edition