APPLIED ECONOMICS

LESSON 1 REVISITING ECONOMICS

AS A SOCIAL SCIENCE

WHAT IS ECONOMICS?
-The study of human efforts to satisfy
what appears to be unlimited and
competing wants through the careful
use of relatively scarce resources.
-Understanding how society allocates its
scarce resources.
-Study of what constitutes rational
human behavior in the endeavor to fulfill BASIC ECONOMIC CONCEPTS
needs and wants.
-It is concerned with what is produced o SCARCITY
and who gets how much. Refers to the limitation of resources,
-It deals with the description of particularly economic resources such as
economic activities. land, labor, capital, and
entrepreneurship.
ECONOMIC ACTIVITIES
 Earning money o BRANCHES OF MODERN
 Buying goods and services ECONOMICS
 Depositing and withdrawing  POSITIVE ECONOMICS
money  NORMATIVE ECONOMICS
 banks.

ECONOMICS FROM DIFFERENT

PERSPECTIVES
o FAJARDO
Economics is the proper allocation and
efficient use of available resources for
the maximum satisfaction of human
wants.

o NORDHAUS
Economics is the science of choice. It
studies how people choose to use
scarce resources to produce various
commodities

o SICAT
Economics is a scientific study which
deals with how individuals and society
may general choices.

o WEBSTER
Economics is a branch of knowledge
that deals with production, distribution
consumption of goods and services.
DIVISIONS OF ECONOMICS
1. PRODUCTION
This refers to the process of producing
or creating goods needed by the
households to satisfy their needs.
Factors of Production - Inputs
Goods and Services – Outputs

FACTORS OF PRODUCTION
LAND
Refers to the “gift of nature", or natural
resources not created by human effort.

CAPITAL
Include the tools, equipment, and
factories used in the production of
goods and services.

LABOR
Refers to all people with all their efforts,
SERVICES
abilities, and skills, except for a unique
A work that performed for someone.
group of individuals called
entrepreneurs.

ENTREPRENEURS
Risk-takers in search of profits.

2. DISTRIBUTION
Refers to the marketing of goods and
services to different economic outlets.
3. EXCHANGE
Refers to the process of transferring
goods and services to a person in return
for something present medium of
exchange money.

4. CONSUMPTION
Refers to the proper utilization of
economic goods.

3 BASIC ECONOMIC QUESTIONS

LESSON II: Economics as an Applied EARLY ECONOMIC THEORIES
Science
Theory
The study of economics in relation to - well substantiated explanation of some
real life situations. aspects of the natural world.

Economic theory
-theory on commercial activities such as
the production and consumption of
goods.

Malthusian Theory of Population

Growth
 Thomas Robert Malthus
-English cleric and scholar.
-Examined the relationship between
population growth and resources.
-If left unchecked, populations can
APPLIED ECONOMICS outgrow their resources.
-is the study of how theories function in - The Malthusian Theory of Population is
practice. a theory of exponential population
growth and arithmetic food supply
o Jean-Baptiste Say (1767 – growth.
1832) -Malthus believed that through
-French economist and businessman. preventative checks and positive
-Famous for his Say’s Law or the law of checks, the population would be
market. controlled to balance the food supply
He wrote about applying the “general with the population level.
principles of political economy” to
“ascertain the rule of action of any
combination of circumstances presented Adam Smith and the Wealth of
to us.” Nations
 Adam Smith
o John Stuart Mill (1806 – 1873) -Scottish economist and philosopher.
-British political economist, philosopher, -Pioneer in political economy and
and civil servant. modern economics.
-Principles of Political Economy with -Describes the basic principles of
Some of Their Applications to Social economics in his book “The Wealth of
Philosophy. Nations” (1776).
- Applying economics to the state of a
country's, household's, or company's Economic Ideas of Adam Smith
economy helps to eliminate any 1. Productivity and Wealth
attempts to make a situation appear - Smith observed that labor becomes
better or worse than it is. more productive as each worker
becomes more skilled at a single job.
Applied economics is the application
of economic theory and econometrics in 2. Invisible Hand
specific settings. (Market Business - Smith argued that competition,
News, 2016) together with the free market system,
would act as an invisible hand that
would guide resources to their most
productive use

3. Laissez-Faire
- A doctrine that claims that an
economics system should be free from
government intervention or moderation,
and be driven only by the market force.

Modern Economic Theories

1. CONSUMERISM LESSON 3: Philippine Socio-
-States that an increasing consumption economic Development in the 21st
of goods is economically beneficial. Century: Basic Economic Problems

2. KEYNESIANISM The Philippine Socio-economic

-Popularized by John Maynard Keynes Development
(1930).
-Advocates government monetary and Pre-Colonial and Colonial Periods
fiscal programs intended to stimulate • Although strongly Asian in heritage
business activity and increase and culture, the Philippines has a
employment. complex Western overlay that includes
Spanish and American.
3. LIBERALISM
Advocates free competition and a self- Basic Economic Problems of the
regulating market. Philippines

4. MONETARISM • The Philippines has emerged as one of

States that variations in unemployment the fastest growing economies in Asia.
and that rates of inflation are usually
caused by changes in the supply of Basic Economic Problems of
money. the Philippines

5. UTILITARIANISM • According to the Asian Development

Bases the moral worth of an action upon Outlook (ADO) 2022 Update.
the number of people who derive
happiness or pleasure from it.

ECONOMETRICS
The application of statistical and
mathematical theories in economics for
the purpose of testing hypotheses and
forecasting future trends.
Major Economic Problems in the
Philippines

Unemployment Underemployment
-a situation in which a person actively -The situation in which a person is
seeks employment but is unable to find employed but his or her talents and
it. It is regarded as an important expertise are underutilized or are not
indicator of the economy's health. matched to the job.

1.Frictional Unemployment 1. Visible Underemployment

-a form of unemployment that occurs -Employees who work fewer hours than
between someone leaving a job is customary in their field They are
voluntarily and finding another. Occurs willing and able to work more hours, but
when a worker is "between jobs," he or they are unable to obtain full-time
she has left one job and is looking for employment. They frequently work two
another. part-time jobs to make ends meet.
Ex. Parents who rejoin the workforce
after taking time to stay home and raise 2. Invisible Underemployment
their children are another example. -Includes employees who work normal
hours or even longer in their jobs, but
2. Cyclical Unemployment their talents are underutilized or they are
-is the component of overall paid insufficiently for their efforts.
unemployment caused directly by
economic ups and downs. It is brought Poverty
about by changes in the economy or the -is defined as a lack of material
business. possessions or money to meet basic
needs such as food, clothing, and
3. Seasonal Unemployment shelter.
-occurs when workers in seasonal jobs
become unemployed when demand for 1. Economic Inequality
labor falls. This usually happens when a -Disproportionate wealth. The unequal
season ends or a new one begins, such distribution of income and opportunity
as for a holiday or due to weather among different social groups.
changes.
Ex. - Christmas Jobs: There are a few 2. Absolute poverty
extra jobs that are created during the -is a financial situation in which a person
Christmas and new year eves. or family does not earn enough money
- Someone who works at a resort to meet their basic human needs. They
during the summer may find themselves also do not have access to social
unemployed once the fall arrives and services such as health care, education,
the summer facilities close. and utilities.

4. Structural Unemployment Poor Infrastructure

-is caused by industrial reorganization, -Lack of basic infrastructures.
which is frequently caused by -Issues related to infrastructure include
technological change rather than the quality of roads, improvements in
fluctuations in supply and demand. This public transport, and traffic in urban
type of unemployment occurs when areas.
there is a mismatch between what
companies require and what available
workers offer.
Health and Quality of Life
-The most significant issues regarding
health and nutrition in the country
involve access to health services,
malnutrition, maternal mortality, and
family planning.

Education
-improving educational quality remains a
challenge due to a lack of qualified
teachers, high studentteacher ratios,
and a lack of facilities and classrooms.

Government, Peace and Security

-Corruption is still a major source of
concern in government. The police force
is concerned about urban crime, the
illegal drug trade, and human trafficking.

Environmental Issues
-There is a need to improve
environmental and natural resource
management, particularly the protection
of forests and other critical habitats. • Air
and water pollution continue to be major
issues.