MODULE 3|APPLIED ECONOMICS

MODULE 3: BASIC ECONOMIC

P a g e | 1 PROBLEMS AND
PHILIPINE SOCIOECONOMIC DEVELOPMENT
IN THE 21ST CENTURY

Subject: Applied Economics

Teacher: Ruby B. Cocal
Year: Grade 12
Timeframe: Week 2

Introduction

The drive toward economic development means that our country has to confront various obstacles
to economic development as well as social, political, and economic issues that hamper our country’s
growth. The various theories and models of economic development can help you get a better sense of what
defines economic development as well as its challenges.

Topic

Content:
Introduction to Applied Economics: Basic economic problems and the Philippine
socioeconomic development in the 21st century
Content Standard:
The learner demonstrates an understanding of economics as an applied science and its
utility in addressing the economic problems of the country
Performance Standard:
The learners shall be able to… analyze and propose solution/s to the economic problems
using the principles of applied economics
Learning Competencies:
Examine the utility and application of applied economics to solve economic issues and
problems.

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Specific Objectives

At the end of the lesson, the learners will be able to:

1. Discuss the economic problems.
2. Describe how economic problems affect the growth of an economy.
3. Explain how applied economics solve economic issues and problems.

Learning Activities

I. Economic Problems

Poverty

Unemployment/ ECONOMIC Inequality

Underemployment PROBLEMS

Inflation

Activity 1: Discuss each economic problems.

Poverty Inequality Inflation Unemployment/

Underemployment

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II. Economic Problems and Economic Growth

Activity 2: Explain the following:
A. How economic problems affect the growth of the economy of a country?

B. How applied economics solve the economic problems and issues?

Knowledge Check

Answer the following questions?

1. How did poverty, inequality, unemployment, and inflation become the problem in the
economy of our country?
2. What is the effect of those economic problems to the economy of our country?
3. Site an example of economic issue/problem in the country and explain how applied economic
solve that issue.

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Supplementary Aid
4.

THEORIES OF ECONOMIC DEVELOPMENT

The theories of economic development discuss the nature of development and describe tools and
strategies that lead to development. These theories focus on the following factors in determining the state
of economic growth:
1. Level of Production – Economic growth is measured by the increase in a country’s Gross
Domestic Product (GDP) , which is often juxtaposed with the population. This indicator,
however, mainly focuses on material wealth. It has been noted that an increase in GDP, among
other indicators of economic growth, does not necessarily translate to create improvements in the
lives of citizens.
2. Quality of Life – This variable considers aspects such as health, nutrition, education,
environment, and income distribution in analyzing development. Development is defined as a
significant change in the quality of life of individuals such as less poverty, improved health and
nutrition, better education, clean environment, greater freedoms and more opportunities and a
richer culture.
3. Sustainable Development. This factors considers the impact of human activities on the
environment and believes that environmental degradation has significant economic impact.
In turn, the implementation of sound environmentally responsible economic policies can
contribute to addressing environmental problems
.
The earliest economic theories equated economic development with prosperity. Capitalism, in
particular, advocated free trade, private property, and competition as forces that will bring about
economic development.

The theories of economic development propose various models of economic development, which
identify the ideal condition that make development possible and outline the stages an economy
goes through as it achieves development. These theories also pay close attention to
underdevelopment, which is economic condition characterized by low production and standard of
living. Several theories of development explain how underdevelopment happens, and propose
models which will address underdevelopment and foster economic development. Table 2 outlines
the classic and contemporary theories of economic development.
TABLE 2. THEORIES OF ECONOMIC DVELOPMENT

THEORY CONCEPT OF DEVELOPMENMT

Linear Stages of Growth Economic development is a process which follows
a sequence of historical stages: (1) traditional
society, (2) preconditions for take-off (3) take-off,
(4) maturity, and (5) high mass consumption
Structural Change Models Development is defined by the reallocation of
labor from agriculture to industrial sector. A
country’s development is also defined by factors
such as income level and comparative advantages.

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International Dependence The dominance of developed countries and

multinational corporations over developing
countries leads to dependence and
underdevelopment.
Neoclassical Ttheory Underdevelopment is mainly caused by domestic
issues brought about by poor economic policies
and resource allocation, as well as government
corruption. Development arises due to the
promotion of free markets and reduction of
government control over the economy

New Growth Theory Underdevelopment is due to the slow transmission

of technologies to the developing countries.
Knowledge and technology are vital to
development thus, investments in education and
research and development are encouraged.

Theory of Coordination Failure Underdevelopment is caused by uncoordinated

activities in the market.

O-ring Theory Development is a result of efficient production

wherein similarity skilled workers work together
to accomplish tasks. High wages and investment
in human capital are essential.

ECONOMIC PROBLEMS AS OBSTACLES TO DEVELOPMENT

The models of economic development not only chart the most ideal course for economic growth and
prosperity, they also propose solution solutions to address significant economic problems which serve as
hindrances to development. Among the major obstacles to development are poverty, inequality,
unemployment, and inflation
POVERTY AND INEQUALITY
Todaro defines poverty as the condition where population is only able to meet its basic subsistence needs
such as food, clothing, and shelter. Economic inequality, which refers to the unequal access to wealth and
income, is a major factor which brings about poverty. The two commonly used measures of economic
equality are the Gini coefficient and Kuznet’s ratio of inequality

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The Gini Coefficient is a ratio which indicates how much a certain population’s distribution of income
deviates from a set standard of equality. A Gini coefficient of zero indicates perfect equality, while a value
of one indicates the greatest possible level of inequality
Kuznet’s ratio compares the income of the highest-earning or richest 20% of the population with the lowest
earning or poorest 40%. The ratio of the income between top 20% and the low 40% indicates the level of
inequality in a population. The higher the value of the ratio, the greater the inequality, and vice versa.
ABSOLUTE POVERTY
Refers to the severe deprivation of basic human needs which include food, safe drinking water, sanitation
facilities ,health, shelter, education, and information. Absolute poverty is not defined merely by low income
but also by lack of access. People who earn $1 or less per day are considered to experience absolute poverty.
UNEMPLOYMENT
To understand the problem of unemployment, we must first be familiar with the labor force in the country.
The latest figures (2016) put the labor force of the Philippines at around 68 million individuals aged 15
years old and over.
Unemployment refers to the portion of the labor force who is willing to engage in productive activities yet
fails to do so. A population with high unemployment rate means that a large portion is unable to engage in
productive work. Unemployment can hinder economic development since the human resources of the
country are not efficiently utilized.
FRICTIONAL UNEMPLOYMENT
Occurs when a worker is ”between jobs” which means that he or she has left a job and was looking for
another. Cyclical unemployment is brought about by the changes in the economy or the business.
There is seasonal unemployment when people find themselves unemployed at certain times of the year
This is mainly seen in industries such as tourism, retail, construction and agriculture.
Structural unemployment is related to the first two types. This type of unemployment arises when workers
experience longer periods of frictional or cyclical unemployment.
Underemployment is another significant concern related to labor. This refers to the state of an individual
being employed, but his or her talents and expertise are underutilized or are not matched on the job.
Underemployment may be visible or invisible visible underemployment includes workers who work for
less than the normal and who look for additional w8ork. Invisible underemployment includes workers who
work the normal or even more in their jobs, but their talents are underutilized or they receive inadequate
compensation for their work.
Philippine Economic Problems (www.opinionfront.com):
o Unemployment
o Poverty
o Poor infrastructure
o Heavy dependence on remittances

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Referrences

Manapat, C. 2018. Aplied Economis for Senior High School. C&E Publishing, Inc., South Triangle,
Quezon City, Philippines. Pp. 21-37
Opinion Front. 2019. All About the Economic Problems of the Philippines.
https://opinionfront.com/economic-problems-of-philippines. Date accessed 08/26/2020

Next Topic:
Review of Market Analysis

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