PAGBILAO, LEA LANE B.

MTWTH 2:00 – 4:30

Economics - Economics is a word made up from two Greek words "oikos" and "nomos”
(oikonomonia) meaning “household management" it is the study of how societies use scarce
resources to produce valuable commodities and distribute them among different people and it is a
broad discipline that helps us understand historical trends, interpret today’s headlines, and make
predictions about the coming years.

Supply - it’s the producer's willingness and ability to supply a given good at various price points,
holding all else constant. An increase in price will increase producers' revenues, so they'll be
willing to supply more; a decrease in price will reduce revenues, and so producers will supply
less.

Demand - is an economic principle referring to a consumer's desire and willingness to pay a

price for a specific good or service. Holding all other factos constant, an increase in the price of a
good or service will decrease demand, and vice versa.

Scarcity - refers to the basic economic problem, the gap between limited – that is, scarce
– resources and theoretically limitless wants. This situation requires people to make decisions
about how to allocate resources efficiently, in order to satisfy basic needs and as many additional
wants at possible. Any resource that has a non-zero cost to consume is scarce to some degree, but
what matters in practice is relative scarcity. Scarcity is also referred to as "paucity."

Microeconomics - is the social science that studies the implications of individual human action,
specifically about how those decisions affect the utilization and distribution of scarce resources.
Microeconomics shows how and why different goods have different values, how individuals
make more efficient or more productive decisions, and how individuals best coordinate and
cooperate with one another. Generally speaking, microeconomics is considered a more complete,
advanced and settled science than macroeconomics.

Macroeconomics - is a branch of the economics that studies how the aggregate economy
behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined
such as inflation, price levels, rate of growth, national income, gross domestic product
(GDP) and changes in unemployment.
PAGBILAO, LEA LANE B.
MTWTH 2:00 – 4:30

Economics is the science of analyzing the production, distribution, and consumption of goods and
services. In other words, what choices people make and how and why they make them when making
purchases.

The Law of Demand

The law of demand states that, if all other factors remain equal, the higher the price of a good, the less
people will demand that good. In other words, the higher the price, the lower the quantity demanded. The
amount of a good that buyers purchase at a higher price is less because as the price of a good goes up, so
does the opportunity cost of buying that good. As a result, people will naturally avoid buying a product
that will force them to forgo the consumption of something else they value more. The chart below shows
that the curve is a downward slope.

A, B and C are points on the demand curve. Each point on the curve reflects a direct correlation between
quantity demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will
be P1, and so on. The demand relationship curve illustrates the negative relationship between price and
quantity demanded. The higher the price of a good the lower the quantity demanded (A), and the lower
the price, the more the good will be in demand (C).
The Law of Supply
Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price.
But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher
the price, the higher the quantity supplied. Producers supply more at a higher price because selling a
higher quantity at a higher price increases revenue.
PAGBILAO, LEA LANE B.
MTWTH 2:00 – 4:30

A, B and C are points on the supply curve. Each point on the curve reflects a direct correlation between
quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 and the price will be P2,
and so on.

Scarcity is the basic economic problem that exists because we as humans have unlimited wants that
cannot be met by the limited amount of resources our world has. Any good or service that has a non-zero
price is considered scarce. It will cost you something to consume that good or service. Without scarcity,
there would be no reason to study economics. People would consume everything they could possibly
consume and not have to make choices or trade-offs between goods and services.

The study of economics can be subcategorized into microeconomics and

macroeconomics. Microeconomics is the study of economics at the individual or business level; how
individual people or businesses behave given scarcity and government intervention. Microeconomics
includes concepts such as supply and demand, price elasticity, quantity demanded, and quantity
supplied. Macroeconomics is the study of the performance and structure of the whole economy rather
than individual markets. Macroeconomics includes concepts such as inflation, international trade,
unemployment, and national consumption and production.