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Prices of goods and services

• Many individuals do not really understand how prices of goods and services are being determined. Many people think that prices are determined by the goverment. This is true in some basic goods such as rice,gasoline,or apartment rent. But if government prices are much lower or higher than real market prices, then both sellers and buyers are affected. the role of the price system has been crucial in the operations of the economy.
• Price is the value of a produce or service. It is expressed in terms of monetary unit like peso, dollar or yen. This simply means that goods and services are being acquired by the people by paying them with their money.

Demand

• It is the schedule of various quantities of commodities which buyers are willing and able to purchase at a given price, time and place.

Law of Demand

• As price increases, quantity demanded decreases, and as price decreases, quantity demanded increases.
• Such theory is only true if the assumption of ceteris paribus is applied. It means no change of income, taste or population.
• People buy more goods and services as price decreases, and buy less goods and services as price rises. The rise in price of a certain product reduces the quantity demanded for such product.

Supply

• It is the schedule of various quantities of commodities which producers are willing and able to produce and offer at a given price, place and time.

Law of Supply

• As price increases, quantitiy supply also increases; and as price decreases, quantity supply also decreases.
• Producers are willing and able to produce and offer more goods at a higher price than at a lower price.

Law of Demand and Supply

• When asupply is greater than demand, price decreases. When demand is greater than supply, price increases. When supply is equal to demand, price remains constant. This is the market price or equilibrium price.

Determinants of Demand

• Income-people buy more goods when income increases. Thus a change in income brings out a change in the demand for goods and services.
• Population-more people means more demand for goods and services. More consumers in urban-that is why more buyers in the city stores than in barrio stores. The presence of American soldiers in Clark Base in Angeles, Pampanga has greatly increased the demand for goods and services in that area.
• Taste and preferences-increases when people like them. Influenced by advertisement or fashion.
• Price expectation-buy more goods if prices will rise in the next days, weeks or months. And decrease if the demand will fall.
• Prices of related goods-people choose the competitor if the price of the product they want to buy increase. there are complementary products are those that go together like bow and arrow. If the price of arrow rises then the demand for bow decreases.

Determinants of Supply

• Technology
• Cost of Production
• Number of Sellers
• Price of other goods
• Price expectations
• Taxes and subsidies

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1. Capitalism

• factors of production and distribution are owned and managed by private individuals or corporations. Similar terms like market economy, free enterprise economy, or laissez faire economy. Laissez faire means no government intervention in economic affairs. The essential characteristics of capitalism are private property, economic freedom, free competition and profit motive.

2. Communism

• Exactly opposite of capitalism. The factors of production and distribution are owned and management by the state. It is also called a command economy or classless society. The essential of communism are no private property, no free competition (the government is the only seller) no economic freedoms, no profit motive, presence of central planning.

3. Socialism

• It is a combination of capitalism and communism. the major and strategic industries are owned and managed by the state while the minor industries belong to the private-sector. Examples of major industries are transportation, electrification, mining, etc. Minor industries are candies, cakes, toys, etc.

How to judge an Economic System

1. Abundace-this refers to goods and services that individual members of society have received.
2. Growth-measurable in terms of the number of buildings, houses, schools, cars, hospitals, factories or machines made in a given year. However, destructive fruits like pollution,drug abuse, and sex crimes.
3. Stability-this refers to the absence of inflation and unemployment.
4. Security-It depends on economic stability.
5. Efficiency-it means productivity.
6. Justice and Equity-Fair distribution of wealth, no big gap between the poor and the rich.
7. Economic freedom-freedom to choose his food, style of houses, appliances, recreation, education, etc.

Goal of Economics

• Economic Growth
• Full Employment
• Price stability
• Economic freedom
• Equitable distribution of wealth and income
• Economic Security

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1. Microeconomics- It deals with the economic behavior of individual units and constitutes a very small segment of the whole economy.
2. Macroeconomics- It deals with the economic behavior of the whole economy.

Fundamental economic Questions:

1. what goods and services to produce and how much?
-investors are willing to produce goods and services which give them good profit.
2. how to produce the goods and services?
-Goods and services must be produced in the most efficient manner to maximize profit.
-use of efficient technology.
3. For who are the goods and services?
-For those who have money and are willing to purchase them.

Economic systems

• An economic system is a set of economic institutions that dominates a given economy. An institution is a set of rules of conduct, established ways of thinking, or ways of doing things. Examples are taxation, profit motive, economic planning, production or banking.
• The principal objective of an economic system is to solve the basic economic problems. They have varied concepts, strategies, and ways of improving the living conditions of their peoples. However, all economic systems have one common goal: high standard of living for all their citizens.

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Definition of Economics and its relation to other Social Science

• It is the proper allocation and efficient use of available resources for the maximum satisfaction of human wants.

Nature of Economics

• It is a social science
• Economic problems are not purely economic in nature. These are also caused by no economic factors which may be cultural, educational, social or political. To solve the problem we need reforms in almost every aspects.

Methos of Economics

• It uses scientific methods in gathering data, analyzing data and in making conclusions. Data are mostly obtained through observations and inter views. Conclusion are based on generalizations within the limits of certain specific assumptions.
• The concept of ceteris paribus means "other things being equal or constant".

Summary of History of Economics

• PLATO: idea of justice and division of labor
• Adam Smith's book Wealth of Nations was published in 1776.
• Smith as father of economics
• Ideas of Smith: Free competition would promote the welfare of the individual as well as that of society, invisible hand, laissez faire.
• Industrial Revolution in England.
• Karl Marx: Communist Manifesto, bourgeoisie,proletariat, class consciousness, withering away of the state.

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