APPLIED ECONOMICS

Name: ___________________________________________________ Grade Level: ___________

Learning Competency
I. Differentiate economics as social science and applied science in terms of nature and scope.
Overview
Subject Matter: Economics as social science and applied science in terms of nature and scope.

In this lesson, the learners shall be able to understand the difference between economics as social
science and applied science. This will also test their critical think ability as they answer all the activities
given as they go deeper to the lesson.
Different mind enhancers are also being provided to boost higher order thinking skills.

Guide Questions:
1. What is economics?
2. What is the difference between economics as a social science and applied
science?
3. What is the relationship of social science and applied science?

Motivational Question:
Answer what is being asked. Write your answer on the space provided after the question.
1. What do you think is economic as social science?
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2. What do you think is economic as applied science?

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Pre-Assessment:
Give your own definition of the following words.
1. Economics- ________________________________________________________________________
2. Microeconomics-___________________________________________________________________
3. Macroeconomics-___________________________________________________________________
4. Social Science-_____________________________________________________________________
5. Applied Science-____________________________________________________________________

Economics is a social science concerned with the production, distribution, and consumption of goods
and services. It studies how individuals, businesses, governments, and nations make choice in
allocating resources to satisfy their wants and needs, trying to determine how these groups should
organize and coordinate efforts to achieve maximum output.

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Fill in the web with all of your ideas about microeconomics and macroeconomics.

Microeconomics Macroeconomics

THE FIELDS OF ECONOMICS

Microeconomics and macroeconomics has perspectives on the economy.

*Microeconomics: focuses on the behavior of individual economic units
and the functioning of markets. Its perspective focuses on parts of the economy:
individuals, firms, and industries
*Macroeconomics: studies the functioning of economics as an
aggregate (production, employment). Its perspective looks at the economy as a whole,
focusing on goals like production, the standard of living, unemployment and inflation.
Macroeconomics has two types of policies for pursuing these goals: monetary policy
and fiscal policy.
Microeconomics Macroeconomics
•Studies of markets of •Studies the economy as a whole
good and services •Focuses on aggregate indicators
•Focuses of the (such as production, employment,
behaviour of individual in the market etc.)
 Explains how and why these
units make economic
decisions
Micro vs Macro Economics

Economics is a social science. This means economics has two important attributes. Economics studies human
activities and constructions in environments with scarce resources, and uses the scientific method and empirical
evidence to build its base of knowledge.

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Applied Economics is a study of economics in relation to real world situations. It is the application of economic
principles and theories to real situations, and trying to predict what the outcomes might be or in another words it is the
study of observing how theories work in practice.
THE NATURE AND SCOPE OF ECONOMICS
According to ` Molina, J. A. & Nadal, G. J I (2020), economics is a SOCIAL SCIENCE concerned with the
explanation and prediction of observed phenomena in the society.
Economics studies the way in the societies solve the fundamental problems of reconciling the unlimited desires of
individuals with scarcity of resources, susceptible to numerous alternative uses.

Economics is also an APPLIED SCIENCE because it uses the scientific method in its explanations, which consists of
observing reality and presenting questions and problems to arrive at the formulation of theories and models. As an
applied science, it follows a systematic procedure to solve issues and problems of the society.

Identify the differences and similarities of economic as social science and as an applied science using the Venn
diagram.

The Economic Agents/Stakeholders:

1. Consumers
• Consume goods and services /offer production factors
• Maximize utility
2. Producers
• Produce goods / demand productive factors
• Maximize profit
3. The public sectors
• Attempt to maximize the well-being of society
*The agents interact among themselves in a specific territorial, social, natural
and/or cultural framework that determines their relationships → Market
BASIC TERMS TO UNDERSTAND ECONOMICS
It is essential that you familiarize yourself with the study of economics
It is essential that you familiarize yourself with the study of economics. This will facilitate your understanding of
economic analysis. Specifically, you meet GOODS – which yields to your satisfaction. It is anything used to satisfy
your wants and needs.

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 TANGIBLE GOODS –material INTANGIBLE GOODS – when they are
goods or commodities. in the form of services. Those
rendered by doctors, engineers,
doctors and other professionals
Goods may also be classified according to use.
 CONSUMERS GOODS – goods for the ultimate consumption of the consumers.
Ex.: toothpaste, bath soap, etc.
 ESSENTIAL GOODS- used to satisfy the basic needs of man
Example: foods and
medicine.
 CAPITAL GOODS or INDUSTRIAL GOODS - used in theproduction of other goods and services.
Ex.: buildings, machinery, equipment.

 LUXURY GOODS – goods man may do without, but may give comfort and satisfaction.
Ex., perfume, cakes; chocolates, expensive cars.

 ECONOMIC GOODS –goods which are useful and scarce; with value attached to them and a price has to be
paid for their use. If a good is so abundant and it can satisfy everyone’s needs without anybody paying for it,
then, that good is free. The air is free, but the air from an aircon is an economic good.

LET’S ANSWER THIS!

CLASSIFICATION OF GOODS

Direction: Please perform independently. Pick all the goods and classify them accordingly. Your mother went to the
market to shop goods for the family. She purchased the following goods. Canned goods; bread; sacks of rice; meat;
vegetables; toothpaste; bath soaps; perfumes; wrist watch; aircon to ventilate her store and coffee maker for her store.

Consumer good -

Luxury goods -

Industrial goods -

Essential Goods -

Economic goods -

ECONOMIC RESOURCES OR FACTORS

In the article of Nowaczyk, J (2020) on Identifying the Factors of Production, he defined economic resources as the
factors of production for goods and services. The factors of production are inputs combinations in the production of
goods and services to make an economic profit for the firms. These factors of production are land, labor, capital, and
entrepreneurship. Resources are limited in nature, but human wants and needs are unlimited, thus, an efficient
allocation of these resources or factors of
production is a big challenge for every economy. Economics also helps the entrepreneurs and the economy to allocate
resources in the production of supplies to meet the demands of the consumers.

Resources of Production and Characteristics

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  Land as a Factor of Production
Land – natural resources available to create supply such as raw materials that comes from
the ground. It can be a nonrenewable resource; commodities such as oil and gold; and renewable resource, such as
timber. Oil is a natural resource, but petroleum gas is a capital good. Farmland is a natural resource, but a shopping
center is a capital good.
 Labor as a Factor of Production
Labor is the work done by people- education, skills, and motivation and productivity. Productivity measures how
much each hour of worker time produces in output. Workforce receives wage for his labor.

 Capital as a Factor of Production

Capital or capital goods are capital –the money that companies used to buy resources; manmade objects like
machinery, equipment, and chemicals that are used in production. For example, capital goods include industrial and
commercial buildings. A commercial aircraft is example of a capital good.

 Entrepreneurship as a Factor of Production

Entrepreneurship develops an idea into a business. An entrepreneur combines the other three factors of production to
add to supply. The most successful entrepreneurs are innovative and risk-takers. The income entrepreneurs earn is
profits.

Characteristics of Resources

1. Scarcity: insufficient resources to supply all the desires and needs of individuals. In the production of goods
and services; there are issues that economics may encounter: these include: for Land – inadequate
land and natural resources; polluted areas; overcrowded spaces; for Labor – unskilled workforce; mismatch
of
jobs; for capital – low quality of equipment/machines; insufficient fund/capital; and for entrepreneurship –
Inadequate training of entrepreneurs; limited opportunity; scarcity of great ideas but many competitors in the
market.

2. Multiple use: Resources can have more than one possible use. For example, a plot of land can be used to plant
coffee or to build a factory.

3. Partially replaceable: one resource can replace another in the production of a good or service (e.g., replace
manual labor with technology).

Scarce resources and unlimited desires → Scarcity

Scarcity and alternative uses → Choice
Choice → Opportunity cost

Direction: Still, please do this independently.

The picture shows the different factors in the production of goods. This will help you become creative in your analysis
on the application of resources you need in the production of goods that are most needed in the society. Please
determine the resources.

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Direction: Determine which factor of production is needed in the following problem

1. The ABM Manufacturing Co. hired a gardener. He uses a lawn mower for landscaping.
Which factor of production would you consider this machine?

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2. The owner of the company withdrew cash for the salaries of the employees. Which
factor of production would you consider cash on hand?
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3. The top manager of the firm said “the great ideas, concepts and emotional
determination of a person to produce something that consumers want to buy”
is very important for the company. What factor of production describes the ability
to create great ideas?
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4. The farmers planted pineapple cuttings in the vacant area located in their locality.
Which factor of production wouldyou consider a pineapple plantation?

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