ECONOMICS REVIEWER
ECONOMICS comes from the Greek word “Oekonomia” which means as the
. management of household.
• Oikos means eco while Nomos means to distribute
• It is a branch of social science that studies the production, consumption
(consumer behavior) and distribution (allocation) of goods and services.
• It seeks the efficient allocation of scarce resources to satisfy unlimited human
needs and wants
ECONOMICS HELPS A COUNTRY IN:
Efficient allocation of scarce resources to satisfy unlimited human needs and
wants.
It seeks for the solution of nation’s and world’s greatest natural (scarcity),
social and economic problem.
It helps the country to have obtain a growth performance economically.
It conditions the market and maintain a good producer – consumer
relationship.
Decision making and setting rules for the market
IT HELPS INDIVIDUALS IN:
Attaining new way of thinking or what we called critical thinking.
Promoting globalization and global affairs.
Identifying the social and economic issues to understand the society.
In short ECONOMICS is all about the efficient way of using the scarce resources in
order to make products or render services that satisfy the UNLIMITED needs and wants. And
also, economics helps the society to make decisions for the betterment of the whole considering
the consumer, producers and the economy of the country itself.
Branches of Economics
1.) Microeconomics
- a branch of economics that studies the behavior of the individual economic units
Ex. Households, firms
- focuses on the economics of the firm
2.) Macroeconomics
- a branch of economics that studies the behavior of aggregate economic
variables(national level)
- focuses on the economics of the nation
Visualize this: If the economy was a forest, macroeconomics examines the forest
while microeconomics examines the trees.
What are the differences between microeconomics and macroeconomics?
MICROECONOMICS MACROECONOMICS
Scope Firm/Industry National Economy
Viewpoint Business Manager Government Policy Makers
What to produce? Needs of Customers of Buyers and Sellers
How much? Maximum profit, utility, Maximum production,
productivity, employment,
quality equity, stability
How? Available Resources Available resources and
development objectives
For whom? Owners/Shareholders Society at large
Goal Competitiveness Sustained Economic
Development
Economics is strongly based on the decision-making of various actors in the industry,
here is how decision-making takes place on the two branches of economics.
1.) Things considered for the decision-making in Microeconomics
How markets and consumer behaviors affects revenues
How production technology and input costs affect costs
How competition responds to firm’s strategies
Significance: Utility of Tools/Concepts (e.g. market structure, profit max, relative
prices, Porters Five Forces)
2.) Things considered for the decision-making in Macroeconomics
How the macro-and regulatory environment influences the factors of
microeconomics
Significance: Socioeconomic Development Issues/Public Policy/International
Cooperation
It is important for students of accountancy like us to know about the branches of
economics which are the microeconomics and macroeconomics, because here we
could see how the market moves in both the small scale and large scale of the
community. With the information from these, in the future we would be able to have a
better grasp on the current situation in the market and we would be able to advise
the correct plan of action for the company that we are working at.
Principle 1
People Faces Tradeoffs
Efficiency-Producing MORE quality products and services from LESSER resources.
Equality-Equal distribution of wealth in society.
Principle 2
The cost of something is what you give up to get it
If you give up something, it will result to an opportunity cost. It will help a person
decide to look for its benefits or loss.
Principle 3
Rational people think at the margin
Rational people are people who base their decisions by evaluating costs and benefits.
Principle 4
People respond to incentives
Incentives are rewards or consequences that a person can get from its decisions.
Principle 5
Trade can make everyone better off
Countries benefit from tradeoffs by producing goods and services in exchange for the
other goods. This will help them increase the resources or supply that is limited in one’s place.
