PPP3

Objectives:
At the end of the lesson, you shall be able to;

Know the definition of economics
Define economics as Social Science
Differentiate normative and positive economics
Identify the 4 factors of production
Compare the different economic system
Differentiate the major Division in Economics
Scarcity and the
Application of
Economics
What is economics?
Economics is the use or allocation of
scarce resources to meet man’s
unlimited needs and wants. –Richard
Lipsey
(people cannot have everything they want. Consumers are limited by their income while
producers are limited by the factors of production.)
Is economics a social science?
Social science is the branch of science devoted to the

study of societies and the relationships among
individuals within those societies.
Yes! Economics is considered a social science because it
tries to understand how people behave and interact
within a society.
It’s all about choices…
Scarcity is the insufficiency or

inadequacy of economic resources and as
a result, we have to decide and choose.
*Scarcity is a condition of why people study and

practice economics.
Why do we have to choose?
*consumers cannot spend money twice

Ex. Money spent on a cellphone cannot be spend again buying a TV.
*Producers cannot use resources again once they are used up.
Ex. A farmer who decides to use his land for producing corn gives up the
opportunity to produce rice.
Law of Scarcity
As an economic system cannot
produce all goods and services that
consumers want, and most
Limited economic resources
consumers do not have the
resources to purchased everything
Unlimited Needs and they want.
Wants
Since there is scarcity, we have to choose…
Trade-off –the exchange or choosing between alternatives, it is a reality of life that getting
one thing would mean giving up another thing.
vs
House Renovation Buying a car

Since there is scarcity, we have to choose…
Opportunity cost is the value cost of the next best forgone choice/alternative.
In other words, opportunity cost represents the benefits that could have been gained by
taking a different decision.
Ex.
Normative and Positive Economics
Positive economics describes and Normative economics focuses on the

explain various economic value of economic fairness, or what
phenomena or the “what is” scenario. the economy “should be”. In the other
Positive economics is based on facts. words, normative economics is based
on value judgements.
Ex. “Public healthcare increases
government expenditures.” Ex. “Best healthcare must be free to
all citizens.”
Major Divisions of Economics
MICROECONOMICS MACROECONOMICS
Microeconomics is the close-up view Macroeconomics is the overall view of

of the economy, studying individual the economy looking at the decisions
and business decisions. It is also of countries and governments. It takes
called the bottom-up approach that a top-down approach that tries to
focuses on supply and demand, and determine the course of the economy
other forces that that determine as a whole. It focuses on the aggregate
price levels. supply and demand.
Microeconomics VS Macroeconomics
MICROECONOMICS MACROECONOMICS
• Studies individual income • Studies national income
• Analyzes demand and supply of • Analyzes total employment in the
labor economy
• Deals with households and firms • Deals with aggregate decisions
decisions
• Studies overall price level
• Studies individual prices
• Analyzes and aggregate demand
• Analyzes demand and supply of
and aggregate supply
goods
Factors of Production
In economics, the factors of production (something called economic resources or
inputs) are essential to produce goods and services. These are…
4 factors of Production
LAND includes all the natural resources such as fertile soil, trees, minerals, and water
which can be sources of raw materials to produce goods or products.
Capital
CAPITAL refers to anything that people produce and later used in the production of other
goods and services such as manufactured aids, tools, machines, equipment, and factories.
Labor
LABOR refers to the physical and mental talents of individuals used to produce
goods/services.
Entrepreneurship
ENTREPRENEURSHIP is the ability to organize the other resources (land,

labor, and capital) to produce goods and services.
It is the ability to establish and operate a business and establish relationships
with suppliers, customers, lenders, investors, and others.
Returns of Factors of Production
The returns to these factors are often described as:

Rent for land
Wage for labor
Interest for capital
Profit for the entrepreneurship
End of the slide
On your previous economics classes,
you were introduced to various terms
and concepts. This activity will help
you recall key terms and concepts
which will help you gauge the next
activities and the content of this
module.
Bear in mind the terms and their definition or description in
doing the activity.
SCARCITY – the limitation of resources to answer

expanding human wants (Tullao, T., 2016)
OPPORTUNITY COST – the benefit or cost you give up
because you choose to take one action in
favor of another (Boado, S., 2020)
RESOURCES – elements used in the production of goods
and services (Carnaje, G., 2016)
TRADE OFFS – situations which involves choosing
between two things (Carnaje, G., 2016)
Read the situation and answer the questions that follow. Write your answers
on your activity sheet. Remember the key terms defined above. Each item
corresponds to 2 points.
Ana wants to buy a new phone, but in order to do this, she has to save from her
Php. 800 weekly allowance which is allocated for food and transportation.
1. Is scarcity depicted in Ana’s situation? Why?

2. What is the resources in the situation?
3. How can trade off be observed in Ana’s situation?
4. If Ana decides to cut back on her food allowance in order to
buy a phone, what would be the opportunity cost of her
decision?
5. If she decided to walk every afternoon from work to her
house to save and buy a phone, what is the opportunity
cost?
Ana wants to buy a new phone, but in order to do this, she has to save from her
Php. 800 weekly allowance which is allocated for food and transportation.
1.Is scarcity depicted in Ana’s situation? Why?

2.What is the resources in the situation?
3.How can trade off be observed in Ana’s situation?
4.If Ana decides to cut back on her food allowance in
order to buy a phone, what would be the
opportunity cost of her decision?
5.If she decided to walk every afternoon from work
to her house to save and buy a phone, what is the
opportunity cost?

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Objectives:

At the end of the lesson, you shall be able to;

Social science is the branch of science devoted to the

Scarcity is the insufficiency or

*Scarcity is a condition of why people study and

*consumers cannot spend money twice

House Renovation Buying a car

Positive economics describes and Normative economics focuses on the

Microeconomics is the close-up view Macroeconomics is the overall view of

ENTREPRENEURSHIP is the ability to organize the other resources (land,

The returns to these factors are often described as:

SCARCITY – the limitation of resources to answer

1. Is scarcity depicted in Ana’s situation? Why?

1.Is scarcity depicted in Ana’s situation? Why?

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