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MACROECONOMICS

TYPES OF ECONOMIC SYSTEM


1. TRADITIONAL ECONOMY- it is basically a subsistence economy. A family produces everything
that it consumes. Decisions on the 3 economic questions are made by referring to the traditional
manner of doing things. Production is done through the method of our forefathers- very
primitive backward. It does not allow change.
2. THE COMMAND ECONOMY- means of production are owned by the government. The govt.
dedicates the answers to the three economic questions.
3. THE MARKET ECONOMY- resources are privately owned and decisions are made by the people
themselves. The system depends on the prices set by the forces of demand and supply.
Competition is supreme. there is consumer sovereignty. Prices of is the guiding factor for
producers to throw what and how much to produce.
Need to choose:
Scarcity is the reason why people scarcity is the limitations that exist in obtaining all goods and services
that people need and want. It give rise to economic problems and the reason why people make a choice.
1. What to produce and in what quantities?
a. This depends on what is needed.
2. How are the goods produced?
a. Question of what resources are to be used in production.
b. By whom the goods will be produced.
c. The technology to be used in production.
3. For whom to produced?
a. This is on the problem of distribution.
b. Who will benefit from the production of goods and services.
c. How much of the total production will each consumer get.
d. Will the goods be bought by the rich or by the poor.
THE MIXED ECONOMY
It is very seldom that an economic system exist in pure form.
1. U.S.- market economy- but these still exists some form of government control.
2. CUBA- command economy- decisions are planned by the govt, however the price system still
exists and used nominally.
3. PHILIPPINES- mixed economy- it applies a mixture of three 930 forms of decision making. It is
more market oriented rather than command or traditional.


OPPORTUNITY COST (a sacrifice)
When we make a choice there is an alternative that has to be given up.
1. When a producer decides to produce shall gives up other goods that could be produced with the
some resources.
2. A student to decide to buy books with his limited allowance gives up the chance of buying a new
cell phone or eating out in a fine dining.
3. Buying good A instead of good B.
Opportunity costs then are the values of the alternative given up.
SOCIETYs TECHNOLOGICAL POSSIBILITIES
Since a nation has limited resources it has to undergo the process of choosing:
a. Production techniques
b. Who will consume the goods and services
c. Inputs(LLCE)- commodities or services used to produce the goods and services.
Technology-is used to combine the diff. inputs in production.
Outputs- useful goods and services resulting from the production process.
TOOLS of ECONOMICS
Economics is a positive science- meaning it deals with what it is. While, normative science-deals
with what should be.
Economics is therefore a study that attempts to explain how the economy operates to be able
to understand and explain economic events and theories we must make use of the basic tools of
economics which equip. the economists and students to approach the subject in scientific manner.
1. Observation- recognition (recognize) conditions, behaviors and events in the environment. Look
around to obtain information.
2. Definitions and assumptions
a. Describe the specific uses of the study
b. Describe the various conditions which affect the economic behaviors
3. Deductions- they are hypothesis or theories presented for validation. They are temporary
conclusions made based on ones observations and are still subject to the presentation of
evidences.
4. Empirical testing- presentation of empirical evidences will be the basis for accepting or refilling
hypothesis.