AE 12: Economic DevelopmentEconomicsthe study of how human beingscoordinate their wants and desires,giventhedecision-makingstructures working together, socialcustoms, and political realities ofthe society.can be defined as a social sciencewhich deals with the properallocation and efficient use ofavailableresourcesforthemaximum satisfaction of humanwantsRESOURCESResources refers to the factors orinputs of production. They are thosewhich are needed to produce goodsand services. These include:1.Economic resources. These arethose with price tag because they arescarce.2. Free resources. These are those thathas no price (because they areabundant).Classification of Resources1. Land. This pertains to the naturalresources, not man-made. It includeseverything found on, above or underland.2. Labor. It consists of labor power orthe capacity for human being, bothphysically and mentally, used inproducing goods and services.3. Capital. It is anything that is used toproduce other goods and services.4. Entrepreneurship. It is the ability toorganize and coordinate land, labor,and capital.HUMAN WANTSHuman wants are the goods andservices needed by human beings.Goods and servicesthose that yield satisfaction. It may betangible (i.e. shoes, dress, pencils,food) or intangible (i.e. haircut, footspa, dental care).Classification of Goods1. Consumer goods vs. Capital goodsConsumer goods –Those that yielddirect satisfactionExample: When we eat hamburger, weget immediate satisfaction. Hence,hamburger is a consumer good.Capital goods –Those that are used inthe production of other goods (andservices).Example: The frying pan used in thepreparation of the hamburger does notgive a direct satisfaction (instead anindirect satisfaction because withoutwhich, the hamburger cannot beprepared.2. Essential goods vs. Luxury goodsEssential goods –There are the “basic”needs of man.Luxury goods –These are those thatcontribute to man’s comfort and well-being.MICROECONOMICS VERSUSMACROECONOMICSMicroeconomicsFocusesonfirmsandindividuals.Deals with the effects ofeconomic policies (such aschangingtaxationlevels)onmicroeconomic behavior andthus on the aforementionedaspects of the economy.Deals with the problems andanalysisofbehaviorofindividual economic unit suchas consumer (household), seller(firm) and owners of factors ofproduction.MacroeconomicFocuses on the sum total ofeconomic activity, dealing withthe issues ofgrowth,inflation,andunemploymentandwithnational policies relating tothese issues.Deals with the problems of thewhole economy and howaggregated economic units orsectors such as consumer,business, and government areinterrelated.Microeconomics(fromGreekprefixmikro-meaning small +economics)is a branch ofeconomicsthat studies thebehavior of individuals andfirmsin makingdecisionsregardingtheallocationofscarce resourcesand the interactionsamong these individuals and firms.