INTRODUCTION

TO E C O N O M I C S
LEARNING
OBJECTIVES
 DEFINE TERMS RELATED TO ECONOMICS

 ENUMERATE SOME ECONOMIST OF THE PAST

AND THEIR CONTRIBUTIONS

 ARTICULATE THE DEFINITION OF BASIC

CONCEPTS RELATED TO SCARCITY

 DIFFERENTIATE MACROECONOMICS AND

MICROECONOMICS, POSITIVE AND NORMATIVE
ECONOMICS
 INTRODUCTION TO AGRICULTURAL ECONOMICS
ECONOMICS
Economics is defined as
allocation of scarce resources
into unlimited demands and
wants. It examines how people
make choices about using
limited resources to fulfill their
seemingly desires.

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 THOUGHT
ECONOMIC
SCHOOLS OF

4 INTRODUCTION TO AGRICULTURAL ECONOMICS

 INTRODUCTION TO AGRICULTURAL ECONOMICS
H I S TO RY O F E C O N O M I C S

Economic theories are

constantly being PROVEN,

In Assist
Thomas Malthus Social Darwinism
DISPROVEN and REVISED

1798, ance
he to

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 H I S TO RY O F E C O N O M I C S

INTRODUCTION TO AGRICULTURAL ECONOMICS

CLASSICAL ECONOMICS

Capitalism – free market and private property

Adam Smith David Ricardo

“The Theory of
wealth of Comparati
nation” ve

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
COMMUNISM
•Collective ownership of the means of
production in a stateless and classless system
KARL MARX
•Communist Manifesto by Karl Marx and Friedrich Engels,
1848 – History is explained by the conflict between
workers and property owners. Establishment of the
Soviet Union (command economy) in 1922 that thrive
during the Great Depression (severe global economic
downturn from 1929 to 1939, with high rates of
unemployment and poverty; drastic reduction in liquidity,
industrial production and trade; widespread bank and

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
CLASSICAL ECONOMICS

•Market-based economics embodied in a

book “Principle of Economics” in 1890 by
Alfred Marshall. He organized concept like
Supply and Demand, and Marginal Utility

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
J O H N M AY N A R D K E Y N E S

•Proposed answers to the Great Depression in his

book the “General Theory of Money” introduced
the concept of Macroeconomics. Keynes claims
that markets and economies don’t self-correct
quickly because prices and wages take time to
adjust. During recessions, the government must
get involved by using Monetary (action of central
bank for price stability and max employment) and
Fiscal Policy (government spending and tax
policies) to increase output and decrease

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
KEYNES ECONOMICS

•Socialism – the means of producing and

distributing goods is owned collectively or by a
centralized government.

•Private property and markets

• Government ownership of industry

•Significant regulations.

•Big public programs like universal healthcare,

free education for 6-18 years old. Examples:
Norway, Sweden, Spain, France…

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
AUS T R I A N S C HOOL OF E C ONOM I C S

•Friedrich Hayek and Ludwig Von Mises

•Regulation and government involvement has

never produced the results its promised. It’s seen
as a problem, not a solution.

M I LT O N F R I E D M A N

•Chicago School of Economics, proposing

privatization, deregulation and school vouchers

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
M O N E TA R I S M

•Focus on price stability ad argue the money

supply should be increased slowly and
predictably to allow for steady growth

S U P P LY- S I D E E C O N O M I C S O R
TRICKLE-DOWN ECONOMICS

•Deregulation and cutting taxes, especially

corporate taxes

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
NEW NEOCLASSICAL SYNTHESIS

•Unified theory that includes ideas from

classical economics, including monetarism,
and Keynesian economics. It is the basis of
mainstream economics today. China and
Cuba are not communists anymore,
they’re capitalists. North Korea is
communist

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
S E AT W O R K

1. What is the study in which the allocation of

scarce resources into unlimited demands
and wants?

2. Who argued that population growth would

outpace food production?

3. Who wrote “The wealth of Nation” and has a

capitalistic approach, believing in free
market and private property

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
S E AT W O R K
4. Who wrote “Principle of Economics” that summarizes the
Classical economics?

5. Who wrote the “General Theory of Money” and

introduces the concept of Macroeconomics?

6. Action of central bank for price stability and max

employment

7. Government spending and tax policies

8. Unified theory that includes ideas from classical economics,

including monetarism, and Keynesian economics

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
S E AT W O R K

9-10 plus one bonus points

Economic theories are

constantly being P_____,
D_______ and R______

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
LEARNING
OBJECTIVES
• Difference between Microeconomics
and Macroeconomics

• Definition and differences of Positive

Economics and Normative Economics

• Nature and scope of Economics

(Problem and Goals)

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
DIFFERENCE OF
MACROECONOMICS
AND
MICROECONOMICS

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BASIS OF DIFFERENCE MICRO-ECONOMICS MACRO-ECONOMICS

INTRODUCTION TO AGRICULTURAL ECONOMICS

Economic Unit It is the study of individual It is the study of economy
economic units of an as a whole and its
economy aggregates
Scope It deals with individual It deals with aggregates
income, individual prices like national income,
and individual output, etc. general price level and
national output, etc.
Central Problem Its Central problem is price Its central problem is
determination and determination of level of
allocation of resources. income and employment
Main Tools Its main tools are demand Its main tools are
and supply of a particular aggregate demand and
commodity/factor. aggregate supply of
economy as a whole

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BASIS OF DIFFERENCE MICRO-ECONOMICS MACRO-ECONOMICS

INTRODUCTION TO AGRICULTURAL ECONOMICS

Use It helps to solve the It helps to solve the
central problem of what, central problem of full
how and for whom to employment of resources
produce in the economy. in the economy
Equilibrium Analysis It discuss how It is concerned with the
equilibrium of a determination of
consumer, a producer or equilibrium level of
an industry is attained. income and employment
of the economy
Determinants Price is the main Physical capital, Fiscal
determinant of policy, human capital,
microeconomics trade, demographics,
problems monetary policy and
financial and
technological factors

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BASIS OF DIFFERENCE MICRO-ECONOMICS MACRO-ECONOMICS

INTRODUCTION TO AGRICULTURAL ECONOMICS

Limitation It is based on unrealistic It has been analyzed that
assumptions, i.e. In “Fallacy of Division” involves,
microeconomics it is which sometimes doesn’t
assumed that there is a full prove true because it is
employment in the society possible that what is true
which is not at all possible for aggregate may not be
-ceteris paribus true for individuals too
Approach While analyzing any The macroeconomics takes
economy, microeconomics a top-down approach into
takes a bottom-up consideration
approach
Examples Individual income, Examples are: National
individual savings, price income, National Savings,
determination of a General Price level,
commodity, individual firm’s Aggregate demand,
output, consumer’s aggregate supply, poverty,
equilibrium unemployment, etc.

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
PHILOSOPHY OF ECONOMICS

POSITIVE ECONOMICS NORMATIVE ECONOMICS

-It focuses on the description, -Discusses prescriptions for what

quantification and explanation actions individuals or societies
of economics phenomena. should or should not take.

-”What is happening” -”What should be done”

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BASIS OF POSITIVE ECONOMICS NORMATIVE

INTRODUCTION TO AGRICULTURAL ECONOMICS

DIFFERENCE ECONOMICS
Meaning Based on actual data, Based on opinion &
facts, and members value of the interpreters
Verification Results an be verified Verification isn’t
possible
Application Safe & beyond doubt & No way to test feasibility
can be proven & applicability in various
scientifically field
Scope of result Doesn’t intend to solve It strives to find
any problems of solutions to problem
economy

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 ECONOMICS
THE NATURE AND SCOPE OF

24 INTRODUCTION TO AGRICULTURAL ECONOMICS

 INTRODUCTION TO AGRICULTURAL ECONOMICS
THE UNLIMITED
WANTS
LIMITED
RESOURCE
F U N DA M E N TA L
ECONOMIC
PROBLEM
SCARCITY

CHOICES

WHAT TO HOW TO FOR WHOM

PRODUCE PRODUCE TO PRODUCE

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
ECONOMIC • Economic Freedom – the freedom to work,
GOALS produce, consume and invest

• Economic Efficiency – the balance between

benefits and cost

• Economic Equity – idea of equal work should

receive equal pay

• Economic Security – absence of economic

insecurity, which can lead to poverty

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 INTRODUCTION TO AGRICULTURAL ECONOMICS
ECONOMIC • Full Employment – ideal situation where anyone
GOALS
who is willing and able to work can find a job

• Economic Growth – increase in overall

production of goods and services in the
economy

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MICROECONOMICS VS MACROECONOMICS

1. It is the study of individual economic units of an economy

2. Its main tools are aggregate demand and aggregate supply of economy
as a whole

P R E S E N TAT I O N T I T L E
3. While analyzing any economy, takes a bottom-up approach

4. Its main tools are demand and supply of a particular commodity/factor.

5. While analyzing any economy, takes a Top-down approach

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6. Philosophy of economics that questions “What is” or “What is happening”

7. Philosophy of Economics that questions “What should be done”

8. The gap between the unlimited wants and limited resources

9-10. Give two (2) Economic Goals

P R E S E N TAT I O N T I T L E
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READING ASSIGNMENT

Read about the Economic ideology of nation.

P R E S E N TAT I O N T I T L E
And Microeconomics Production of cost

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ECONOMIC IDEOLOGY
O F N AT I O N
T H A N K YO U

P R E S E N TAT I O N T I T L E
Gliza Paula C. Agtunong

Agricultural Economics and Marketing

BSA 2

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