Applied Economics

Revisiting
Economics as a
Social Science
Lesson 1
Specific Objectives
1. Define economics
2. Determine the importance of economics
3. Describe the nature of economics
 Economics

Study of what constitutes rational human

behavior in the endeavor to fulfill needs
and wants
Understanding how society allocates its
scarce resources
Almost always, human activities involve
economics
 OF
ECONOMICS
FROM
DIFFERENT
PERSPECTIVES
1. Fajardo

Economics – is the proper allocation and

efficient use of available resources for the
maximum satisfaction of human wants

2. Nordhaus

Economics – is the science of choice. It

studies how people choose to use scarce
resources to produce various commodities
3. Sicat

Economics – is a scientific study which

deals with how individuals and society
may general choices

2. Webster

Economics – branch of knowledge that

deals with production, distribution and
consumption of goods and services
ECONOMICS IN A
PROCESS

Unlimited Make
Scarcity
wants Choices
Economic activities
Earning money
Buying goods and services
Depositing and withdrawing
money in bank
 Economics from
“ Oikanomia”
Household
Management
 Science

Social
Science

Economics
Economics is classified as a social
science because it deals with the
study of human’s life and how he
lives with other men.
Macroeconomics

ECONOMICS

Microeconomics
Macroeconomics
 Dealswith the economic behavior of the
whole economy or its aggregates
(composed of individual units)

AGGREGATES

Households
Business Government
Macroeconomics
Discusses the following:
- Gross national product
- Level of employment
- National income
- General level of prices

“EMPLOYMENT AND
INCOME ANALYSIS”
Microeconomics
Deals with the economic
behavior of individual units
such as:

Consumers
Firms
Landowners
Microeconomics
 Discusses the following:

- Price of rice
- Number of workers in a certain firm
- Income of Mr. Fu
- Expenditures of PLDT

“PRICE THEORY”
 Production

Public Divisions
Finance Distribution
of
Economics

Consumption Exchange
 Divisions of Economics

1. Production – 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
Goods
Services
 Divisions of Economics

1. Production – 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

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
 Divisions of Economics

4. Consumption – refers to the proper utilization of

economic goods. However, goods and services could
not be utilized unless you pay for it. Hence, consumption
could also be spending money for goods and services

5. Public Finance – pertains to the activities of the

government regarding taxation, borrowings and
expenditures. It deals with the efficient use and fair
distribution of public resources.
ECONOMIC
RESOURCES
Factors of production or inputs

Labor Foreign
Land
exchange
Entrepreneurs Capital
1. Land
These resources consist of free gifts of nature
which includes:
- soil
- rivers
- lakes, oceans
- forests
- mountains
- mineral resources
 1. Land
Land is considered an economic resource because it
has a price attached to it.
* we usually pay for it through rent or lease

Land is a limited resource. Physical

land is a fixed resource.
2. Labor
Also called “human resources”

Labor- refers to all human efforts, be it mental or

physical, that help to produce satisfying goods
and services

In return, he earns an income in forms of wages

and salaries
2. Labor
Labor is a flexible factor of production

- workers can be allocated to different areas of

the economy for producing goods and services
3. Capital
Two economic definitions of capital:

a. Capital – can represent the monetary

resources use to purchase natural resources
Ex: Companies use capital to buy land and
other goods
3. Capital
Two economic definitions of capital:

b. Capital – represents the major physical assets

individuals and companies use when producing
goods and services

Ex: buildings, vehicles, equipments

Income derived from capital is interest

4. Entrepreneurs
French word which means “enterpriser”

Entrepreneur – organizer and coordinator of

other factors of production: land, labor and
capital.

He uses his initiative, talent and

resourcefulness to create economic goods.
 5. Foreign Exchange
Refers to the dollar and dollar reserves that the
economy has.

Foreign exchange is part of economic resources

because we need foreign currency for international
trading and buying materials from other countries

International medium - dollar

QUIZ
 1 point

LET’S TEST
OURSELVES!
1. Economics is derived from the Greek word
“oikanomia” meaning:

a. Economic management
b. Household management
c. Social management
 1 point

LET’S TEST
OURSELVES!
2. Economics is a social science because it
deals with:

a. Human nature
b. Natural resources
c. Experimentation
 1 point

LET’S TEST
OURSELVES!
3. Scarcity of resources means:

a. minimum resources
b. excess resources
c. shortage of resources
d. no resources
 1 point

LET’S TEST
OURSELVES!
4. These are examples of human wants except:

a. smartphone
b. perfume
c. watch
d. clothing
 2 points

LET’S TEST
OURSELVES!
5. Give your definition of
economics
 1 point per item

Identify what type of

economics (Macro or Micro)
discusses the ff:
1. Gross National Product
2. Price of bananas
3. Profits of Bread and Butter
4. Employment