Nature and Scope of Economics and Microeconomics (Chapter 1) PDF

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DEL ROSARIO, MARY JANE R. 1BSBA-FM-B

NATURE AND SCOPE OF ECONOMICS AND MICROECONOMICS Chapter 1

When I hear the word Economics, the first word that comes to my mind is people and their behavior. But according to the module it seeks to explain the relationships between people and societies. In which economics is all about how people spend money and use resources. It’s about how people choose among the resources that are available to them. It is important to study economics because it gives us a knowledge about the resources we have in our economy. Economics teach us how to save money, it teaches us how to spend money in a sense that we spend it accordingly. There are wo branches of economics: Microeconomics and Macroeconomics. Microeconomics is about the people in the small market, it’s about how they consume and spend money in the small market. The difference between Microeconomics and Macroeconomics is that microeconomics is about in the small market and the economic decisions made by separate decision-making units while macroeconomics is about how the people spend and consume in the big market and the effect of choices on the whole level of economic activity, or aggregate level of economic activity. There are three ideas central to economics: First is the Scarcity, which explains that our resources are limited. It discusses that our wants, our desires for the things that we can produce with those resources, are unlimited. We constantly want more and better homes, more and better education, and more and better of almost anything. We could say yes to all of our desires if our resources were similarly limitless, and there would be no need for economics. We can't say yes to everything since our resources are limited. Saying yes to one thing necessitates saying no to another. We must make decisions whether we like it or not. For Example, If I want to buy clothes in online shopping, such as Shopee or Lazada, my money is the scarce resources in which it is limited, so by just buying clothes in online shopping I would rather save it so that I can spend it in the most important matter. Second is the Choice, which explains how we pick something that is relevant, it’s about deciding to something that affects us in good condition. For example, my choice is selling my laptop and my alternative is buy a new gadget, the opportunity cost of buying a new gadget is selling my laptop to have a money that can buy a new gadget. And lastly the Opportunity cost, this is the value of the best alternative forgone in making any choice. Spending 1,000 pesos for a potted plant means renouncing the benefits of spending the same money on pizzas, a paperback book, or a movie night. If the book is the most valuable alternative, the plant's opportunity cost is the value of the pleasure you would have gotten from reading it instead. The term "opportunity cost" should not be confused with "purchase cost” the cost of an item. If achieving one thing necessitates sacrificing another, the anticipated advantages of the choices we make will be influenced by the options we confront. Most decisions, according to economists, are made "at the margin." The present level of an activity is referred to as the margin or marginal analysis. Think of it as a cliff from which you can't go away whereby a decision must be taken. A decision to do anything on the margin is referred to as a choice at the margin a drop more or a drop less of something. Insights can be gained by evaluating options on the margins. Rational economic decision making makes them more likely to choose people with more benefits but less cost. Through market analysis, rational economists use this decision-making tool to further increase their potential profits. Marginal cost is the cost added by producing an additional unit of a product or service while the Marginal benefit is the additional benefit arising from a unit increase in a particular activity. Incentives is about something that benefits you, it’s about something that inspires someone to take action, it is our rewards. Incentives help us to increase our productivity. Drives one to do something. For example, when I was young, I had to be kind and study hard so that my parents would give me what I wanted, like candies or chocolates, in that way, it motivates me to study hard.

Wants is the desire to a certain thing in which an individual like to have as a part of his caprices. This is something you wish to have that is inessential. For example, my want is to buy new iPhone even though my old phone is still working, buying a new iPhone doesn’t benefit me. Needs are the fulfillment to a certain thing; it refers to an individual basic requirement that must be fulfilled in order to survive. This is something you must have that is essential. For example, midterm examination is coming, and I need scientific calculator for my examination, so buying a calculator helps me during my midterm examination, I cannot just use it during my exam but also in other circumstances, so calculator is essential for me. Goods are tangible in nature, they are visible and touchable. They can be kept and used at a later time. It is possible to shift them from one area to another. Goods are created first and consumed afterwards, hence there is a temporal difference between production and consumption. For example, a chair. A chair is visible and can be touched. It is originally constructed at the carpenter's workplace. After acquiring it from the market, you put it to use. As a result, there is a time gap between chair manufacture and chair usage. If you don't need that chair right away, you may keep it in your store and utilize it whenever you need it. You can also sell it or gift it to someone else. Services are non-tangible in nature, they are invisible and can't be touched. There is no time gap between the development of services and their use. As a result, they are both generated and eaten at the same time. Services are not able to be saved. It is not possible to transfer the service. For example, the services of a Doctor during this pandemic, the doctor examines a patient and provides prescriptions for medications. He has now provided a service for the patient's therapy that we cannot see or touch. He has supplied his services, which are also consumed by the patient, the instant he examines the patient. As a result, there is no time gap between service creation and consumption. This service can no longer be saved or used. Land it is the geography, the natural resources. Land resources can be reduced air and water pollution. Example is the animal resources, solar energy, natural gas and etc. Labor it is the physical and mental talents of individuals, including management skills. That’s why employers require labor because employees are an essential component of the manufacturing process. Workers utilize tools and equipment to turn inputs into outputs. Employers couldn't manufacture goods or services and make money if they didn't have workers. Example is our frontline workers, doctors, teachers and etc. Capital this are the cash and manufactured items, such as tools and equipment used to produce other products. When capital resources investment rises, the economy gains since it signifies that productive output will rise as well, resulting in additional employment and an overall improvement in the economy. Capital resources are valued items that are required to start and run economic operations. An office building, an office copying machine, pots and pans, and a wrench are all examples of capital resources. Entrepreneurship the person with the willingness and ability to start a business, innovate new ideas, bear the risk of owning a business, and build business relationships with suppliers, customers, lenders. An example of it are the Entrepreneurs such as Jeff Bezos the Founder, Chairman & CEO of Amazon, and also Tim Cook, CEO of Apple, and lastly Reed Hastings, Co-founder & CEO of Netflix. I therefore conclude that Chapter 1 is all about nature and scope of economics and microeconomics that focuses on our industry that includes people who are using goods and services that is what a market produced....