Module 1: Economics
Thinking
Prepared by: ERIC B. ANDRADE
.
Grading System
The students will be rated based on the following:
Particulars Weight
Written Works 20%
Performance Task 40%
Major Examination 40%
100%
Learning Outcomes
By the end of the lesson, students will be able to:
1. Explain what economics is and why it is important
[Link] mathematics in common economic applications
[Link] graphs in common economic applications
What is ECONOMICS?
Definition of Economics
Economics is the study of how society manages its
scarce resources.
Fundamental economic problem: scarce resources
-- Scarcity… means that society has limited resources
and therefore cannot produce all the goods and services
people wish to have.
S
KEY CONCEPTS RES OU RC E
I T ED
LI M
E D S
N E
I T ED S
There are two NLI M A N T
U D W
conflicting concepts AN
that underpin the idea
of scarcity
Unlimited Needs and Wants
I want a new
In economics, humans are model of
assumed to have unlimited IPHONE!
needs and wants.
Example:
Once you buy a smartphone, you
might want a newer model with
better features.
Limited Resources
Unfortunately, all resources are
limited to some degree, humans
simply cannot have everything
they have.
What does this mean for us?
People need to make a choice.
Scarcity means that humans needs to use
resources efficiently so that as many needs and
wants are met as possible.
NATURAL TIME
MONEY RESOURCES
MONEY
Governments print money in a place called a
mint.
If a government prints too much money, it can
lose its value or even become worthless.
Let’s look at an example!
GERMANY, 1923
- In Germany in 1923, an economic
crisis caused what is called
hyperinflation. The German
currency, the mark, suddenly lost
its value because the government
printed too much money.
NATURAL RESOURCES
All resources are limited on Earth. The rarer
they are, the more valuable they become.
An example of that is gold which is very rare
so the demand for it makes it very valuable.
It is the scarcity of gold that makes it
valuable
OPPORTUNITY COST
Understanding opportunity cost
Every choice involves a trade-offs, you must give up something if
you want to get something, Whatever you give up is called an
opportunity cost.
What is Opportunity Cost?
Opportunity cost is the cost of a decision in terms of the
best alternative given up in order to achieve it.
It is the best alternative forgone.
Let’s take an example!
You have P100 and you can either:
• Buy a meal at your favorite fast food (Option A), or
• Buy mobile load to access online learning for a day
(Option B).
If you choose the meal, your opportunity is the learning
opportunity and mobile data you gave up.
Let’s take an example!
Let’s say the Philippine government has ₱1 billion in public funds. It
can:
• Build new farm-to-market roads (Option A), or
• Invest in free Wi-Fi in public schools (Option B).
If the government chooses Option A (roads), the opportunity cost is
the benefit of improved online learning and access to digital
Enter
education that public school students would have gained.
r
What is the opportunity
cost of attending this
class?
Importance of Opportunity Cost
• Helps individuals make better decisions
• Promotes efficient use of resources
• Guides business strategy
• Influences government policy.
• Foundational to economic thinking
LABOR, MARKETS, AND TRADE
What is Labor?
• Labor refers to the human effort used in
the production of goods and services. It
includes physical and mental work
provided by individuals in exchange for
income (wages and salaries)
• One of the four factors of production
Types of Labor:
Type Description
Unskilled Minimal training or education
Semi-skilled Some training or practice
Skilled Formal training or experience
Professional Requires degree or licenses
Employment rate
for April 2025 was
recorded at 95.9%,
translating to
48/.67% million
employed persons
Economic Relevance
• Labor contributes directly to national
output (GDP)
• More productive labor = higher economic
growth
• Education and training improve labor
quality, increasing competitiveness
Market
Market is a place where buyers and sellers
come together to exchange goods, services,
or resources – not always physical,
sometimes digital.
Types of Markets
• Financial market
• Product market
• Auction market
• Underground market/Informal market
Trade
Trade exchange of goods and services
between people, businesses, or countries
Two types of trades:
Domestic trade – trading within the
country
International trade – trading with other
countries
Why do people and countries trade?
• To get goods or services they don’t produce
• To earn money (revenue or profit) from
exports
• To access better quality or cheaper
products
Governments may impose barriers to trade, such as:
• Tariffs (taxes on imports)
• Quotas (limits on import quantity)
• Subsidies (government support for local firms)
MICROENOMICS AND
MACROECONOMICS
Micro vs. Macro
Macroeconomics: the branch of economics that
focuses on broad issues such as growth,
unemployment, inflation, and trade balance.
Microeconomics: the branch of economics that
focuses on actions of particular agents within the
economy, like households, workers, and businesses.
Using Economic Model:
Economic Model: a simplified version of reality
that allows us to observe, understand, and make
predictions about economic behavior.
Economic Models and Math
Economic models can be represented using words
or using mathematics.
Algebra and graphs are utilized to explain
economic models.
Example:
SUPPLY AND DEMAND MODEL
Purpose of functions in economics
In economics, functions are used to represent
relationships between variables in a clear and
mathematical way. They help economists analyze,
predict, and explain how changes in one
variable (like price) affect another (like demand or
supply).
Purpose of Functions in Economics:
[Link] model economic behavior
Example: A demand function shows how quantity demanded changes with
price.
[Link] simplify complex relationships
Real-world behaviors are complex; functions help simplify and clarify these
relationships.
[Link] make predictions
If you know the function, you can predict future outcomes by plugging in
values.
4. To analyze cause-and-effect
Functions help show how changes in one variable cause changes in another.
Solving simple equation:
Creating and Interpreting Graph
intercept: the point on a graph where a line
crosses the vertical axis or horizontal axis.
slope: the change in the vertical axis
divided by the change in the horizontal axis.
variable: a quantity that can assume a
range of values.
x-axis: the horizontal line on a graph,
commonly represents quantity (q) on graphs
in economics.
y-axis: the vertical line on a graph,
commonly represents price (p) on graphs in
economics
Interpreting slope
Economic Interpretations of Slope
Demand Curve
•A typical downward-sloping demand curve has a negative slope.
Interpretation: As the price of a good increases, the quantity
demanded decreases (law of demand).
Supply Curve
•A typical upward-sloping supply curve has a positive slope.
•Interpretation: As the price increases, quantity supplied increases
(law of supply)
.
Types of Graphs
Line Graph .
- Shows how one variable changes in response to another, typically over
time or across values.
Types of Graphs
Bar Graph
Uses bars to show the size of different categories.
Types of Graphs
Pie Chart
A circular chart divided into slices to show proportion.
QUIZ 1
1. In your own understanding, what is Economics?
2. Differentiate Microeconomics from Macroeconomics
3. What is Scarcity?
4. Define “market” in your own words.