Athelryn D.

Cada EconDev-B
First Year - BS Accountancy

Assignment

1. Goals of Economics (at least 5)

 Economic Growth
 Economic Stability/Price Stability
 Full Employment
 Efficiency and Equity
 Economic Security
 Economic Freedom
2. 10 Economic Principles to follow. Explain each.
1) People face trade offs
>>This includes giving up one feature or characteristic of something in exchange for a better or
enhanced quality. Wise decision making is needed here for us to determine what are the things that
we must give up to get the better thing we want.
2) The cost of something is what you give up to get it
>>The costs and benefits of various options must be weighed while making decisions. For example
is it costs less to make dinner at home than to eat out, but ordering food over the phone requires far
more time.
3) Rational people think at the margin
>>When considering marginal changes, as consumers, our goal is to maximize satisfaction with
the products we make while staying within our means of support. For an instance, If you buy a used
car, and plan to spend $10,000, but the car is only priced at $6,000, would you still buy it if it needed
$6,000 in repairs? of course not because you are a rational thinker and you would end up spending
more than you planned to.
4) People respond to incentives
>>People responds to incentive because people make decision by comparing costs and benefits so
incentives may be positive or negative. For example, a positive incentive would be offering
employees a bonus if they work extra hours. However, a negative incentive can be exemplified by
extra taxes governments might put on things like fuel that encourage people to use it less.
5) Trade can make everyone better off
>>Trade enables nations/countries to specialize based on their comparative advantages and to
access a wider range of commodities and services.
6) Markets are usually a good way to organize economic activity
>>An economy that allocates resources through the decentralized decisions of many firms and
households as they interact in markets for goods and services.
7) Government can sometimes improve market outcomes
>>When the market is unable to allocate resources efficiently, market failures happen. To enhance
efficiency and equity, governments can step in and take action. Environmental protection and
pollution are two examples of this. Without government interference, the market can unintentionally
have a harmful effect.
8) A country’s standard of living depends on country production
>>The more goods and services produced in a country, the higher the standard of living. People's
standard of life will rise as they consume more products and services.
9) Prices rise when the government prints too much money
>>There will be more demand for products and services when there is too much money floating
around in the economy. Over time, this will force businesses to raise their prices, which will lead to
inflation.When governments print more money and there’s more available, its value decreases.
10) Society faces a short-run trade-off between inflation and unemployment
>>A decreased rate of employment is another effect of increased money circulation. To explain the
relationship between the two and how they are correlated, economists utilize the Phillips Curve.

3. What are economic systems? What are the types of economic systems? Explain each.
>>Countries and governments transfer resources and trade products and services through economic
systems. They are employed to regulate the five production components, which are: labor, capital,
entrepreneurs, physical resources, and information resources. Based on my research, we have 5 types
of economic system, First is the Traditional economic system wherein each member of a community
or society has a specific role that contributes to the whole progress of the community. Second is
Command economic system wherein allocating and distributing resources, goods, and services are
among the many economic activities that are under the jurisdiction of governments and other
centralized powers. Third is the Centrally planned economic system, In here, the society creates and
dictates economic plans to drive the production, investments and allocation of goods, services and
resources. Next is Market economic system, the communities, firms and proprietors act in self-
interest to decide how to allocate and distribute resources, what to produce and who to sell to. Lastly
is the Mixed economic system, it is a system that combines elements of socialism and capitalism. It
protects private property and permits some economic freedom in the use of capital, but it also
permits government intervention in the economy to further social objectives.

4. The Circular Flow Diagram (Draw and Explain)

The illustration we see on the left

side is what we call the circular flow
diagram. It shows here how how
money moves through society. As
we can see on the diagram, We have
elements that make up a circular
flow and those are the businesses/
companies, the households, factor
market and product market. Those
elements are connected to each other
which explains the basic functioning
of the economy. We’re aware that
companies generate products,
services and jobs for the population
that helps a country’s economy to
function. Then the household
economies have human capital,
money, equipment and land and sell
them to investors or businessmen to
exploit commercially. The firms will then use these factors of production to produce goods and
services to be sold in the markets for goods and services. The households will then buy these goods
and services from the firms through the market for goods and services.The flow of the money or the
outer part which are the green arrows are is that firms pay wages, rent, and profit to the households
for their supply of the factors of production in the market for factors of production. Households will
use these income to spend on goods and services supplied by the firms in the market for goods and
services. When households spend money on these goods and services, firms will earn a revenue
which can then be reinvested to obtain more factors of production.