Wednesday, March 20, 2013

All about ECONOMICS

What is economics and why we should know economics?

They say economics is a home management, came from its meaning but what is real economics and why should people specially student must study economics?

Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

Why should we study economics?
Economics can help us to know what is happening in everyone of us, in our environment and in the government.

Now let me share to you what I've learned in economics.

Economics (personal perspective) is an art or science of making rational choice.
Economics (social science) study of how social system work or interact with each other.

There are also Principles in Economics that can explain how it can affect each of us:
How People Make Decisions
  • People Face Trade offs. To get one thing, you have to give up something else. Making decisions requires trading off one goal against another. 
  • The Cost of Something is What You Give Up to Get It. Decision-makers have to consider both the obvious and implicit costs of their actions. 
  • Rational People Think at the Margin. A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. 
  • People Respond to Incentives. Behavior changes when costs or benefits change. 

How the Economy Works as A Whole
  • Trade Can Make Everyone Better Off. Trade allows each person to specialize in the activities he or she does best. By trading with others, people can buy a greater variety of goods or services. 
  • Markets Are Usually a Good Way to Organize Economic Activity. Households and firms that interact in market economies act as if they are guided by an "invisible hand" that leads the market to allocate resources efficiently. The opposite of this is economic activity that is organized by a central planner within the government. 
  • Governments Can Sometimes Improve Market Outcomes. When a market fails to allocate resources efficiently, the government can change the outcome through public policy. Examples are regulations against monopolies and pollution. 

How People Interact
  • A Country's Standard of Living Depends on Its Ability to Produce Goods and Services. Countries whose workers produce a large quantity of goods and services per unit of time enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average income. 
  • Prices Rise When the Government Prints Too Much Money. When a government creates large quantities of the nation's money, the value of the money falls. As a result, prices increase, requiring more of the same money to buy goods and services. 
  • Society Faces a Short-Run Trade off Between Inflation and Unemployment. Reducing inflation often causes a temporary rise in unemployment. This trade off is crucial for understanding the short-run effects of changes in taxes, government spending and monetary policy. 

These principles are also connected in our daily choices or decision. Which means how we react in circumstances can also affect others.

Example: Market is composed of buyers and sellers.
If you are going to choose between a goods imported from other country rather than the goods sold by our own country, it will affect our economy because it will increase the demand in other country and decrease our own production of goods. The money or the profit will go to others rather than in our economy.

Our way of thinking and choosing will also have a great impact in our economy in terms of supply and demands which will affect in our GDP (Gross Domestic Product).

Law of Demand cet. Par as price increase quality demanded decrease.

What is GDP? It is a market value of all final goods and services produce within a country in a given period of time.

Equilibrium is a state in which price has reach the level where quality supply is equal to quality demand, which means you satisfy the customers demand by giving them the supplies they needed.

Economics also measures “Elasticity”- a measure of how much buyers and sellers respond to changes in market conditions.

Reason we should consider for shifting or changes: price of related goods, consumer income, taste, expectations and number of buyers. It will be a great help for the suppliers to know this because they can base their production in this guidelines for their target market.


Our government has ways to increase productivity
1. Encourage savings and investments
2. Encourage investment from abroad(foreign direct investments and foreign port folio investment)
3. Increase education and training
4. Establish secure property rights and political stability
5. Promote free trade
6. Promote research and development

To avoid the decrease of productivity they encourage savings and investors from inside and from outside the country to have more jobs and production of goods. They also increase education and training that is why we have our K12 program in education to make sure that they have all the knowledge needed to work. Additional training, student having their on-the-job training to make sure that they have idea in their chosen field; In workers they give seminars and additional training to improve their knowledge and to cope up in fast technologies and economic changes. We also have laws to protect our property and our ownership, and to make sure that we have what we deserve especially for the workers. We also encourage sectors to have additional research and development to make sure that we are not late in improving product quality and services, especially in technologies for fast production and distribution.


We also have the effect of population growth to an economy:
1. Stretch natural resources
2. Dilutes capital stock
3. Increase probability for progress

Due to the growing population of our nation we stretch the use of our natural resources to improve production and distribution and because of the increase in production we increase in the total value of a company's stock with no change in the value of company assets. Because of the good production in our economy we continue to progress.

The role of the government is that it is the one that design taxes, expenditures and regulation to make sure there is a fare distribution to the market and to the economy of the country.

Economics is not just about the government and companies but it’s also about us on how we make choices and how we value things around us, because even if we have lots of product and natural resources if we don’t know how to address each of them, we will not know how to improve or how to sustain our economy in its best.

Economics is not just giving what they want and how to earn money it’s about how to control and sustain, knowing your limitations and improving what you have without over using it.

“Remember what we have today is the result of what we did yesterday but what we do today will determine of what will happened for tomorrow.”


~ Carmina Flores





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