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Economics
- may be defined as the science which deals with the activities of man in obtaining wealth for the
satisfaction of his wants.
- Originally meant “household management” a concept that is associated with the individual
family.
- Some writers use the term “national economy” to convey the idea that the subject matter is
national in scope
- Other writers use the terms “social economy” or “social economics” to indicate the
essentially social character of the study.
Antoine de Montchretien (1615)
- A Frenchman, who used the term “political economy” to signify that the economy of modern
times was no longer that of the household, but that of the nation.
Economics as a Science
- It is concerned with the classification and logical arrangement of economic phenomena and of
the principles and laws that concern the relation between man and wealth.
Economic Law
- It may mean the statement of the relationship of phenomena which holds under given
conditions.
- States that is certain changes occur, certain results are sure to follow; the relation of facts is
expressed in a statement designated as a law.
- Is interchangeably used with economic principle, economic theory and economic doctrine.
o Principle generally describes a simple relationship of facts while law refers to the
statement of a more complex relationship
o Theory means an idea or scheme of thought used on the known facts
o Doctrine means a body of principles
Fundamental Institutions of the Present Economic System
1. Private Property
2. Competition
3. Free Enterprise
4. Cooperation
Divisions of the Field of Economics
1. Production deals with the factors necessary in the creation of wealth. These factors are
land, labor, capital and the enterpriser or business organization. The nature of these factors is
analyzed including their utilization and organization for production.
2. Exchange the principles of money, credit and banking and their relation to price and the
exchange of goods are subjects in this division
3. Distribution deals with the appointment of the social income or national dividend among the
different factors that cooperate in production
4. Consumption deals with the utilization of goods and services in the satisfaction of human
wants.
Free goods unlimited quantities without exerting any effort in acquiring them
Economic Goods goods that are scarce
Wealth all things that have utility and are limited in quantity
Attributes of Wealth
1) Possession of utility
2) Must be transferable
3) Must be material and external to man
4) Must be scarce
Producers’ goods or capital
- The goods that satisfy our wants indirectly
Consumers’ goods
- Those goods that satisfy our desires directly
Capital
- Is defined as produced goods utilized for further production.
Income
- Consists of the goods and services resulting from the productive activities of the people.
- Takes the form of material or immaterial goods
- Is often defined as an inflow of satisfactions from economic goods
Different Kinds of Income
1) Money income or nominal income
2) Real income consist of material goods in the form of clothing, rice, meat, vegetables and
other concrete objects.
3) Psychic income by Professor Frank A. Fetter, defines as “desirable results produced in the
realm of feeling by valuable objects or by valuable changes in the environment which accrue
to or affect an economic subject within a given period.
4) Gross income means the total receipts that he receives within a certain period of time
5) Net income the amount that he saves/ remains from the total receipts

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