BASIC MICROECONOMICS reach their current degree of economic development.

ECONOMICS is the study of how society uses its scarce resources LEVEL OF DEVELOPMENT
to satisfy unlimited wants and needs. defined by Thomas Carlyle, a
19th century Scottish philosopher and writer. TRADITIONAL SOCIETY
• Characterized by subsistence agriculture or hunting and
Economics emphasis on the need to take full advantage of our gathering; almost wholly a "primary" sector economy
material output given an amount of resources. The crucial truths is • This is where society generally begins before the progressing
these resources are only limited suffering from scarcity-imbalance towards the next stages of growth
between human needs and wants and the means of satisfying
those considering this as the central economic problem. THE PRECONDITIONS FOR TAKE-OFF
• Development of more productive, commercial agriculture and
SCARCITY is the imbalance between human needs and wants cash crops not consumed by producers and /or largely exported.
and the means of satisfying them. • Widespread and enhanced investment in changes to the physical
environment to expand production
UTILITY is the total satisfaction received from consuming a good
or service. TAKE-OFF
• Urbanization increases, industrialization proceeds, technological
Basic graph of supply and demand for some good, with the breakthroughs occur.
equilibrium point being the place where there the price, pp, that • "Secondary" (goods-producing) sector expands and ratio of
consumers are willing to pay matches the quantity of that good, secondary VS. primary sectors in the economy
qq, suppliers are willing to distribute at that price.
DRIVE TO MATURITY
• Diversification of the industrial base; multiple industries expand
and new ones take root quickly
• Manufacturing shifts from investment-driven (capital goods)
towards consumer durable and domestic consumption
• Rapid development.

DEMAND refers to the consumer's desire and ability to purchase a AGE OF MASS-CONSUMPTION
product or service at a given price. • The industrial base dominates the economy; the primary sector
is of greatly diminished weight in the economy and society
SUPPLY refers to the quantity of a good or service that producers • Widespread and normative consumption of high-value
are willing and able to offer for sale at a given price. consumer goods (eg automobiles)

EQUILIBRIUM occurs at the price and quantity where the supply Economics is the study of how society uses its scarce resources to
and demand curves intersect. satisfy unlimited wants and needs.

The price of a product directly impacts the quantity consumers are The Concern of Economics
willing to buy (demand) Economics emphasizes on maximizing the scarce resources it
The quantity producers are willing to offer (supply). concerns the production, distribution and consumption of goods
and services.
PHASES OF ECONOMIC DEVELOPMENT
ECONOMIC DEVELOPMENT PRODUCTION is the creation or addition of utility.
• a total process which includes not only economic growth or the Land, it includes natural resources such as minerals, oil, coal, soil
increase in the given amount of goods and service produced by water and the ground resources are found.
the country's economy, but also considers the social, political,
cultural, and social aspects of the country's growth. LABOR is the work, time and human effort included in the
production. This people are being paid for their work rendered via
ECONOMIC DEVELOPMENT include: wages and/or salaries.
• Economic growth (GDP and GNP)
• Improvement of the Human Development Index WAGE is a compensation based on the number of hours worked
• Availability of benefits provided by science and technology multiplied by an hourly rate of pay.
• Societal improvement of the opportunities and general welfare
of its members SALARY compensation quoted on a monthly or annual basis.

GDP (Gross Domestic Product) and GNP (Gross CAPITAL the money used by entrepreneurs to run their business.
National Product) are both measures of a country's economic Entrepreneurial ability is the effort to organize the production
output, but they differ in what they include. process.

GDP measures the total value of goods and services produced Distribution
within a country's borders, regardless of the producer's nationality. Allocation of the total product (money, Incomes) among factors of
production. Each unit of output corresponds to a unit of income.
GNP, on the other hand, measures the total value of goods and Land- Rent
services produced country's citizens and businesses, both Labor- Wages
domestically and abroad. Capital- Interest
Entrepreneurship- Profit
Walt Rostow took a historical approach in suggesting that
developed countries have tended to pass through 5 stages to
 2. THE MONETARY CIRCULAR FLOWS which show the flow
CONSUMPTION, utilization a good or a service for one's very own of money & income from one sector to another.
satisfaction.

OPPORTUNITY COSTS is the foregone value of the next best

alternative the value of things we give up

Production Possibilities Curve that illustrates the production

possibilities for the economy. Represents the frontier of the
economy's production abilities.

FULL EMPLOYMENT society's available human resources are being

maximized efficiently. CIRCULAR FLOW OF INCOME IN DIFFERENT SECTORS

FULL PRODUCTION resources are being allocated in the most 1. TWO SECTOR MODEL
efficient manner they provide the maximum possible satisfaction. It studies the circular flow of income between
- Household sector &
UNDEREMPLOYMENT resources lowers the productive output of - Producing sector
the nation as a whole. Low-capacity utilization. On the assumption that there are only two sectors in the economy

PRODUCTION EFFICIENCY economic level at which the economy 2. THREE SECTOR MODEL
can no longer produce additional amounts of good without It refers to the study of the circular flow of income among
lowering the production level of another. • Household sector
• Producing sector
LAW OF INCREASING COST the output of one good expands, the • Govt. Sector
opportunity cost of producing additional units of this good On the assumption that there are three sectors
increases. It is a closed economy

ECONOMIC GROWTH and increase in the capacity of an economy 2. FOUR SECTOR MODEL
to produce goods and services, compared from one period of time It implies the study of the circular flow of income among
to another. • Household sector
• Producing sector
INTERFERANCE WITH THE PRICE MECHANISM ARE NOT Govt. Sector
ACCIDENTAL Foreign sector
It is a open economy
•PRODUCTION
Any process that creates value to the already existing goods is IMPORTANCE OF CIRCULAR FLOW IN ECONOMIC ACTIVITIES
called production
1. IT HIGHLIGHTS THE STATE OF INTERDEPENDENCE IN THE
•CONSUMPTION ECONOMY
It means the use of utility of goods & services for the direct All sectors household sector, business sector, government sector
satisfaction of individual and collective wants & foreign sector are mutually interdependent & complementary
to one another in such a way that economic activity remains intact
•INVESTMENT OR CAPITAL FORMATION
It is that part of production during a year which is not consumed 2. IT SHOWS THE STATE OF EQUILIBRIUM IN THE ECONOMY
but served as capital formation for further production The circular flow demonstrates the position of equilibrium in the
economy. If there is any distortion in the circular flow, the
economy will be in disequilibrium & the smooth functioning of the
economy will be disturbed

What is DEMAND?
Quantity demanded of a product or service is the number that
would be bought by the public at a given price
► Quantity Demand is the function of Price level.

Law of Demand
Quantity Demand is Inversely Proportional to the Price Level.
while keeping other things constant.
CIRCULAR FLOW CAN BE OF TWO TYPES:
Law of Demand is affected By
1. REAL CIRCULAR FLOWS which show the flow of goods & 1. Substitution Effect
services from one sector to another 2. Income Effect

The Substitution Effect

As the price for one good rises compared to a similar good,
consumers will substitute the similar good for their purchases.
The Income Effect Assumptions:
► As prices go up, your money becomes worth less than it was ► No Change in cost of production
worth before. ► No change in Technology
► People are less likely to buy the good now. ► No change in efficiency of Factors of production
► No new Invention/ Innovation
THE DEMAN CURVE ► No natural Calamities
► No change in Weather conditions
► No change in Government Policies

Supply Curve

Forces Behind the Demand curve

These are the Constant things:
► Average Income
► Size of Market
► Influence of Related Goods
► Taste and Preference
► Special Influence
► Population Growth
► Climate
Shift in Supply Curve
ELASTICITY
Elasticity refers to how responsive the quantity demanded is to a When We relax any of the constant Things there is a Shift in The
change in prices, it is also called price elasticity of demand. Demand Curve.

Types of Elasticity Two Types of Shift

► Price Elasticity
► Outward Shift
► Income Elasticity
► Cross Elasticity ► Inward Shift

Calculating Elasticity
1. Price Elasticity
1. Expenditure Method
2. Geometrical Method
3. %age Method

2. Income Elasticity
%age Method

3. Cross Elasticity
%age Method

Supply Elasticity

► There is only one supply elasticity

Factors Affecting Elasticity
► Price Level % age change in Quantity Supply
► Income Level E(S) =_______________________________
► Price of Substitutions
► Consumer Adjustment % age change in Price level
► Market Size

What is SUPPLY?
Quantity supplied is the quantity of a commodity that producers
are willing to sell at a particular price at a particular point of time.
Quantity Supply is the function of Price level.

Law Of Supply
► "Other things remaining same, when price of a commodity
increases its quantity supplied increases and if price of a
commodity decreases, quantity supplied also decreases".

► Quantity Supply is Directly Proportional

To the Price level.
THE ENTREPRENEURIAL MIND Small and Medium Enterprises

What is an Entrepreneur? Entrepreneurs are engaged in either small or medium business.

- one who organizes, manages, and assumes the risks of a business This is because basically the establishment of business is
or enterprise. dependent upon on the amount of capital that you can invest in
and the sustainable numbers that you hire.
ENTREPRENEURS
The word “entrepreneur” was derived from the French verb
Entrepreneurship in Small and Medium Enterprises
enterprendre, which means “to undertake” a term by Richard
Cantillon a French economist. This is pinpointing to those who
“undertake” the risk of enterprise. The enterprise is created by an
entrepreneur and the process is called “Entrepreneurship”.

Are Entrepreneurs and Business Owners the same?

Entrepreneurs and business owners both own and run businesses,

but the scale and scope of their business defines the difference
between them.
Entrepreneurs are future-oriented, while business owners
typically focus on the present.
Businessmen run their business for the primary purpose of making Importance of Selling in the Economy
profits. Entrepreneurs intend to make profits but with a purpose
Selling is the transfer of goods and services from the producer to
of making a difference.
the customers and the transfer of money from the customer to
the producer.
In essence, while entrepreneurs are often business owners, not all
business owners are entrepreneurs. Without the process of exchange for goods and services, the
economy will not move.
INNOVATION is the specific tool of entrepreneurs by which they
exploit change as an opportunity for a different business or
service.

Entrepreneurship refers to an individual’s ability to turn ideas into PRICE noun

action. Synonyms of price >
1 a : the amount of money given or set as con sideration for the
SUCCCESSFUL ENTREPRENEURS IN THE PHILIPPINES sale of a specified thing

Henry Sy a Chinese-Filipino businessman and the founder of SM b: the quantity of one thing that is exchanged or demanded in
PRIME HOLDINGS. In 1958, Sy opened the first Shoe Mart store barter or sale for another
and has since evolved into a dynamic group of companies with five
lines of businesses-shopping malls, real estate development and 2 : the cost at which something is obtained
tourism, retail, financial services, hotels and conventions. Forbes
Magazine listed him as one of the richest men in the Philippines.
Price Ceiling VS Price Floor
Lucio Tan was once the longest running richest man in the
Philippines not until his great rival, Henry Sy took over the throne. Government Policies That Alter the Private Market Outcome
Tan is a Chinese-Filipino billionaire. He has interests in airline, Price Controls measures:
banking, tobacco, liquor, real estate industries and education. In
Price Ceiling: a legal maximum on the price of a good or service.
1966, Tan started his own cigarette company named Fortune
Example: rent control.
Tobacco. He also established and put up Asia Brewery in 1982.
Now a subsidiary of LT Group, the brewery was the only one then Price Floor: a legal minimum on the price of a good or service.
to compete with the market leader San Miguel. Also, In 1993, Tan Example: minimum wage.
secured control of the country’s airline carrier PHILIPPINE
AIRLINES (PAL)
COMPETENCIES OF AN ENTREPRENEURS
Four basic aspects of being an entrepreneur
1. Decisive an entrepreneur must be firm in making
1. Creation of something of value. Create products decisions.
or services that can be offered for a price.
2. Devotion of necessary time and effort. 3. Communicator - an entrepreneur must have a
3. Assumption of necessary risks convincing power.
4. Getting rewards.
4. Leader - an entrepreneur must have the charisma to be
obeyed by his employees.
Role of Entrepreneurs in the economy. They provide employment
and income that moves the economy forward. 5. Opportunity Seeker - an entrepreneur must have the
ability to be the first to see business chances.

6. Proactive - controlling a situation by making things to

happen or by preparing for possible future problems.
 7. Risk Taker - they have the courage to pursue their
business ideas.

8. Innovative - the entrepreneurs have big business ideas

and they do not stop improving and thinking of new
worthwhile ideas for their business.

Steps in the Entrepreneurial Process

The Entrepreneurial Personality 1. Discovery
2. Concept Development
1. High need for achievement. The strong desire of an 3. Resourcing
individual to pursue his dream, a dream that could be 4. Actualization
long-range or immediate. 5. Harvesting

2. Strong belief that they can control their Steps in the Entrepreneurial Process
destiny. Destiny is a not a matter of change, it is a
matter of choice; it is not a thing to be waited for, it is a 1. Discovery: The stage in which the entrepreneur generates
thing to be achieved. ideas, recognizes opportunities, and studies the market

3. Risk taker. Risk is present in every activity, but it can be - Idea

lessened. - Innovation
- Opportunity
Types of Businesses
1. SERVICE What is An Idea, Opportunity and Innovation?
• provides intangible products with no physical form such as An idea is a concept for a product or service that doesn’t exist or is
professional skills, expertise, advice, etc. not currently available in a market niche. It may be a brand-new
concept or an improvement of a current product or service.
2. MERCHANDISING BUSINESS
• provides products at whole sale price and sells the same at In contrast, an opportunity is an idea for a new product or service
a retail price. with a market that is willing to pay for that product or service so
• It is called as buy and sell business. that it can form the basis of a profitable business.

3. MANUFACTURING BUSINESS 2. Concept Development:

• It provides products which are used as materials in • Develop a business plan: a detailed proposal describing the
making new consumer products. business idea
• It follows production process which includes
combining the raw materials, labor, and factory - Objective
overhead. - Executive summary
- Mission Statement
The rewards of Entrepreneurship are:
1. Money or material return or profit A trademark is a word, phrase, symbol or design, or a
2. Freedom combination of words, phrases, symbols or designs, that
3. Psychological rewards identifies and distinguishes the source of the goods of one
party from those of
Selling Price- Cost and Expenses= PROFIT
A copyright protects works of authorship, such as writings,
Challenges of Entrepreneurship music, and works of art that have been tangibly expressed.

1. Entrepreneurship demands hard work. A patent for an invention is the grant of a property right to
2. Entrepreneurship demands long working hours. the inventor, issued by the Patent and Trademark Office
3. Entrepreneurship may cause emotional stress.
3. Resourcing: The stage in which the entrepreneur identifies
The Entrepreneur's Confrontation with Risk and acquires the financial, human, and capital resources
needed for the venture startup, etc
• Financial risk versus profit (return) motive varies in
entrepreneurs' desire for wealth. - Start-up resources

• Career risk - loss of employment security 4. Actualization: The stage in which the entrepreneur operates
the business and utilizes resources to achieve its
• Family and social risk - competing commitments of work and goals/objectives.
family
- $$ Grand Opening $$
• Psychic risk - psychological impact of failure on the well-being of - Day-to-Day Operations
entrepreneurs 5. Harvesting: The stage in which the entrepreneur decides on
business's future growth/ development, or demise
 Morality is defined by duties and one's action is moral if it is an act
motivated by duty. According to Kant the only thing that is good in
- What is your 5-year or 10-year plan? itself is the “good will.” The will is what drives our actions and
- Consider adding locations or providing different grounds the intention of our act. It is good when it acts from duty.
products/services
- Will you go public?

Immanuel Kant (born Emanuel Kant; 22 April 1724 – 12 February

1804) was a German philosopher and one of the central thinkers
of the Enlightenment.

ENTREPRENEURIAL ETHICS refers to the moral principles and

values that guide the decisions and actions of entrepreneurs,
ensuring their businesses operate with integrity and social
responsibility.

Why is ethical entrepreneur important?

Entrepreneur ethics are essential for businesses to operate

responsibly and maintain their reputation. By following ethical
business principles and practices, entrepreneurs can ensure that
their businesses are successful and have a positive impact on
society.

ETHICAL DILEMMAS are situations in which there is a difficult

choice to be made between two or more options
The conflict arises for a number of reasons.
Entrepreneur the legal versus ethical dilemma is a vital one. The
law provides the boundaries for what is illegal.

ETHICAL RATIONALIZATIONS are the excuses we give ourselves

for not living up to our own ethical standards. If there is one
overarching finding in behavioral ethics research in the past
decade, it is that people tend to simultaneously think of
themselves as good people.