Economics

1. Explain economics?
Economics is the study of how society allocates scarce resources and goods. Resources are the inputs that society uses to produce output, called goods. Resources include inputs such as labor, capital, and land. Goods include products such as food, clothing, and housing as well as services such as those provided by barbers, doctors, and police officers. These resources and goods maybe be considered scarce because of society's tendency to demand more resources and goods than are available. Two of the major approaches in economics are called 1) classical and 2) Keynesian. Classical economists believe that markets function very well, will quickly react to any changes in equilibrium without much government policy. On the other hand, Keynesian economists believe that markets react very slowly to changes in equilibrium (especial to changes in prices) and that active government intervention is sometimes the best method to get the economy back into equilibrium.

2. Why study economics?
One of the first benefits of learning about economics is if you get an economics degree. With an economics degree you can work in a variety of different fields from finance and banking, government, sales and marketing, insurance, etc. You can learn a lot of skills and knowledge that you can apply to other jobs or to your personal life. Learning about interest rates, exchange rates, economic indicators and financial markets can help you make better decisions about investing money.

Economics also teaches students how to understand and spot secondary effects. Most economics problems have secondary effects. For example, a government creates a tax to pay for some needed social program, but the secondary effect of that tax is that it changes people's spending behavior, causing economic growth to slow. By learning more about economics and working on hundreds of economics problems, you learn the skill of being able to spot secondary effects in other areas. This can help you make better decisions about your personal life and make you more valuable to business; for example, "what are the possible secondary effects from a marketing program?"

Because you will learn more about how the world works, economics will teach you more about the impact decisions have on a company, industry, and country. You will learn more about the impact of international trade, both good and bad. You will discover the effect government policies have on the economy and on employment. It will help you make more informed decisions as both a consumer and as a voter. Furthermore, I personally believe that having a more economically literate set of bureaucrats, politicians, and journalists would be great for society. Economics, when done properly, shouldn't so much tell people what to think, rather it should give them tools about how to think of things more clearly and realizing the assumptions they may be making.

3. What are the 3 fundamental concepts of economics?
1. Trade Offs
This is probably the most important principle that affects us all. Nothing is free. For example, in order to go to college, one might need to give up 4-5 years of your life, possibly a lot of money, live in small rooms, and go without consistent sleep for literally years. It might be a good decision but it still requires trade-offs. It is important in life to be honest about the trade-offs and the real costs of everything we do, have, and spend money on. This is important, because it allows us to focus on our real priorities. For example, what’s more important: earning extra money we don’t need, or spending time with family? Earning extra money for retirement, or living a luxurious lifestyle that cuts away at savings? Being honest about our priorities, and understanding that everything “costs” something, we’re more likely to pick actions that lead to the best possible benefit for ourselves and our families.
2. Supply and Demand
This is probably the most important issue of economics. If there’s a large enough demand, and we can fill that demand, then the supply will be filled. For example, why do some people decide to work at Jollibee? It’s not a super great job. The answer is in supply and demand. There’s not a greater supply of better jobs, but there is a large enough demand for money that even people who don’t like Jollibee will end up working there. Supply and demand is how the market reacts to individuals who are themselves responding to their own individual incentives. Nothing is exempt from supply and demand. Elections, markets, regulations — they either account for it, or they have serious unintended consequences.
3. Scarcity
We only have so much time on this earth. We only have so much intelligence. We only have so much oil. The same goes for gold, land, etc. Pretending the scarcity doesn’t exist can have huge consequences. Once you understand scarcity, you’re more likely to understand supply and demand. And once you understand supply and demand, you’re more likely to know how to respond to choice by making the right trade-offs. The study of economics isn’t just the study of money — it’s the study of human behavior in general.

4. Distinguish microeconomics from macroeconomics
We know that economics is a social science that studies how individuals, governments, companies and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the total economy; and microeconomics, which focuses on individual consumers. The factors that are studied by macro and micro will often influence each other, such as the current level of unemployment in the economy as a whole will affect the supply of workers which a manufacturing company can hire from.
Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. Macroeconomics, on the other hand, looks at the big picture. It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why a 10% rate of unemployment is not necessarily a bad thing. For an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels.

Macroeconomics is related to forecasting economic conditions to help consumers, companies and governments make better decisions. * Consumers want to know how easy it will be to find work, how much it will cost to buy goods and services in the market, or how much it may cost to borrow money. * Businesses use macroeconomic analysis to determine whether if they expand production they can sell the product. * Governments turn to the macroeconomics when budgeting spending, creating taxes, deciding on interest rates and making policy decisions.
Macroeconomic analysis focuses on three things: national output (measured by gross domestic product or GDP, unemployment and inflation. The most important concept of macroeconomics is gross domestic product. The one negative of the GDP is that because the information has to be collected after a specified time period has finished, a figure for the GDP today would have to be an estimate. GDP should be compared over time to account for highs and lows in production. Highs and lows can be caused by government policy, consumer behavior or international phenomena. Of course, GDP can be compared across economies as well and we can determine which foreign countries are economically strong or weak. The unemployment rate tells us how many people from the labor force are unable to find work. When the economy has growth from period to period, which is indicated in the GDP rate, unemployment levels tend to be low. This is because with rising GDP levels, we know that output is higher, and, hence, more laborers are needed to keep up with the greater production. The third main factor that macroeconomists look at is the rate at which prices rise or inflation. The performance of the economy is important to all of us. We use macroeconomics to study national output, unemployment and inflation. Although it is consumers who ultimately determine the direction of the economy, governments also influence it through policy.

Microeconomics looks at how companies decide what price to charge for their products. Why are some people willing to pay more for a product than others? How do your decisions play into how companies price their products? The answer to all of these questions and many more is microeconomics. Microeconomics focuses on the role consumers and businesses play in the economy, with specific attention paid to how these two groups make decisions. Microeconomics examines smaller units of the overall economy. Both microeconomics and macroeconomics examine the effects of actions in terms of supply and demand.

Microeconomics breaks down into the following points: * The decision made by the individual is supposed to increase that individual's happiness or satisfaction. This concept is called rational behavior or rational decision-making. * Businesses make decisions based on the competition they face in the market. The more competition a business faces, the less flexible it has in terms of pricing. * Both individuals and consumers take the opportunity cost of their actions into account when making their decisions.
We can analyze the economy by examining how the decisions of individuals and firms alter the types of goods that are produced. Ultimately, it is the smallest segment of the market - the consumer - who determines the course of the economy by making choices that best fit the consumer's perception of cost and benefit.

5. Define Model and Variable
In economics, a model or theory is a theoretical discussion about an economic process which uses two or more variables and logic. The economic model is a simplified way to discuss a complex processes. The use of models includes forecasting economic activity, proposing economic policy, to explain and influence company strategy or to provide intelligent advice for household economic decisions. Models establish a foundation for applying logic and math that can be independently discussed and tested and that can be applied in situations to give validity. Models try to also explain and predict the working of a system, and, specifically, how things will change if something external to the system changes. An example of systems is: the Philippine economy, the solar system, the human body, a household, or the market for cigarettes. In this case, the purpose of the model is to explain and predict what will happen to the consumption of cigarettes if the price of cigarettes increases by 100 pesos. In this case one is not trying to explain/model how the price of cigarettes is determined, but rather how consumption of cigarettes is affected by the price of cigarettes. In this case the variables are the price of the cigarettes and how many people will buy them (demand). 6. Explain ceteris paribus
Ceteris paribus is a Latin phrase that means "holding other things constant" and is usually used in English as "all other things being equal". In economics and finance, the term is used as a way to explain the effect of one economic variable on another, holding constant all other variables that may affect the second variable. For example, when discussing supply and demand, one could say that if demand for a given product is greater than the supply, ceteris paribus, prices will rise. Here, the use of "ceteris paribus" is simply saying that as long as all other factors that could affect the outcome remain constant, prices will increase in this situation.

7. Forms and kinds of business organization * Sole Proprietorship
A sole proprietorship is a business run by an individual. The owner is the business; the owner has all of the profits and losses of the business. The owner also has all the control and all the liability from the business operations. * Partnership
A partnership is a business which operates like a sole proprietorship, but with several individuals running it. The partners share the profits/losses, have control and liability for business operations. * Corporation (or C-Corporation)
A corporation is a business which is set up as a separate legal entity from its owners. The Board of Directors makes operational decisions. Owners are protected from liabilities of the corporation, and the corporation pays corporate income taxes.

8. How are you going to put numerical value to yourself? why and explain
When determining the market value of a product, a company must first determine their cost of goods or service. For simplicity, we will try to determine my value in the Manila market place. Assuming that the average cost to live one year in Manila is equal to 430,000 pesos x my current age of 26 years = 11,180,000 pesos. This is our cost base.
Next we have to determine what the market value or utility would be in order to set the market price. Some of the elements to consider in determining market value will depend on market research which would reveal the competition such as the number of females living in Manila, the age demographics of those females, the number of single versus married females, etc. In order to determine my utility or value, we would have to assign some value to attributes such as age, physical beauty, intelligence, wealth, health, personality, and potential earnings. In addition, we have to determine the product life cycle. Will I physically change over time? Will my value change over time? As a product gets old, typically the value decreases except in the case of antiques or rare products. However, in my case for example, the demand may turn from physical to emotional therefore sustaining the value or even increasing it.
For simplicity, I have determined a unit value of 1,000,000 pesos for each of the following categories. Using a 1-5 unit scale, in which 1 is low and 5 is high, combined with factious market research my value or utility by potential buyers was determined as follows:
Single vs. Married – 5, Physical Beauty – 4, Health – 4, Age – 3, Intelligence - 4
Personality – 4, Potential Earnings – 4, Wealth – 1, Value over time - 4
Total point value = 33
My total market value is determined to be the total points x 1,000,000 pesos’ = 33,000,000 pesos’. In order to determine my total value, we have to take our investment or cost of 11,180,000 pesos + the market value of 33,000,000 pesos’ for a total value of 44, 180,000 pesos.