11

12
SENIOR HIGH SCHOOL

APPLIED
ECONOMICS
Quarter 3 – Module 1
Economics as Social and Applied Science
in Terms of Nature and Scope

I
Applied Economics – Grade 11
Alternative Delivery Mode
Quarter 3 – Module 1: Economics as Social Science and Applied Science in
Terms of Nature and Scope
First Edition, 2020

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 11

Applied
Economics
Quarter 3 – Module 1
Economics as Social and Applied
Science in Terms of Nature and
Scope

2
Introductory Message
For the facilitator:
Welcome to the Grade 11 Applied Economics Alternative Delivery Mode
(ADM) Module on Economics as Social and Applied Science in Terms of
Nature and Scope!
This module was collaboratively designed, developed and reviewed by
educators both from public and private institutions to assist you, the
teacher or facilitator in helping the learners meet the standards set by the K
to 12 Curriculum while overcoming their personal, social, and economic
constraints in schooling.
This learning resource hopes to engage the learners into guided and
independent learning activities at their own pace and time. Furthermore,
this also aims to help learners acquire the needed 21st century skills while
taking into consideration their needs and circumstances.
In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator, you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing
them to manage their own learning. Furthermore, you are expected to
encourage and assist the learners as they do the tasks included in the
module.

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For the learner:
Welcome to the Grade 11 Applied Economics Alternative Delivery Mode
(ADM) Module on Economics as Social and Applied Science in Terms of
Nature and Scope!
This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and
time. You will be enabled to process the contents of the learning resource
while being an active learner.
This module has the following parts and corresponding icons:
This will give you an idea of the skills or
What I Need to Know competencies you are expected to learn in
the module.

This part includes an activity that aims to

check what you already know about the
What I Know
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

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or a situation.

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and understand new concepts and skills.

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practice to solidify your understanding and
What’s More
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

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sentence/paragraph to be filled in to process
what you learned from the lesson.

This section provides an activity which will

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skill into real life situations or concerns.

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 This is a task which aims to evaluate your
Assessment level of mastery in achieving the learning
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In this portion, another activity will be given

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the lesson learned.

Answer Key This contains answers to all activities in the

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included in the module.
3. Read the instruction carefully before doing each task.
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We hope that through this material, you will experience meaningful
learning and gain deep understanding of the relevant competencies. You
can do it!

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 I

Scarcity is the reason why people have to practice economics. Economics, as a study,
is the social science that involves the use of scarce resources to satisfy unlimited wants.
Economics will help the students understand why there is a need for everybody,
including the government, to budget and properly allocate the use of whatever resources are
available of both agents Macroeconomics and Microeconomics.
In this module, we will focus economics as social science and applied science by
differentiating it, understanding how an economic theory puts in application and the
importance of econometrics for new policies.
It covers many different learning situations where you can relate your personal
experiences to different practical scenarios about Applied Economics.

LEARNING COMPETENCY:

▪ Differentiate Economics as Social Science and Applied Science

in terms of nature and scope
(NO CODE)

OBJECTIVES:

K: Define economics and identify the reason why people have

to practice economics;

S: Differentiate and discuss economics as social science and

applied science in terms of nature and scope;

A: Recognize the importance of macroeconomics and

L microeconomics as a subject focus how economic agents
behave or interact.

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 I

Task 1: Let’s check your prior knowledge…

The activity aims to give you a clear understanding of the reason why people have to
practice economics.

Directions: Identify what scarce resource is represented in each picture. Analyze the
supporting sentence of each item and write MICRO if it belongs to microeconomics and
MACRO if it is macroeconomics. Jumbled word is provided to guide you identify the scarce
resource asked. Write your answers in your activity notebook.

OOFD
______
1.
Many people are not able to eat enough in a day because of the lockdowns
during the pandemic.

OMNYE
________
2.
People are having a problem on saving money due to Inflation or increase in
the price level of goods and services.

ERTAW
_______
3.
Global warming has caused water resources in some areas to run-short of.

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 TNEMPLMEYO
______________

4.
Overpopulation and oversupply of the labor force have caused many people to
be unemployed.

NETINRET AESSCC
_________________

5.
Some students in rural areas are having trouble doing their work due to lack
of internet access.

LOOHCS SUPPEILS
__________________

6.
There’s a shortage of school supplies in the market of some remote
islands due to the delayed delivery from the suppliers caused by
restrictions on transportation during the pandemic.

CALMEDI SUPPEILS
___________________

7.
Medical practitioners do not have enough supplies to protect themselves during
the COVID-19 pandemic.

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 ’s In

Task 2: Let’s classify…

Directions: Evaluate the following situations and classify if the situation considers
economics as Social Science or Applied Science. You will be given a hint of what is meant
by social and applied. Copy the given format in your activity notebook.

Social – explain how a particular social group or socioeconomic class behaves within
a society, including their actions as consumers.
Applied - application of economic theory to determine the likely outcomes associated
with various possible courses of action in the real world

• Economics students analyze how to maximize the use of available resources to

overcome scarcity
• Motorists complain of high gasoline prices
• Philippine congress passed the Value Added Tax Law to strengthen the Philippine tax
system
• People have no freedom of choice in arriving at decisions on what to buy
• People always complain about having not enough -- not having enough money to pay
one’s debts, not enough food on the table, not enough income to meet all the family’s
needs.
• Business understands Laws of supply and demand by combining past sales data and
marketing research regarding their target market and production decisions

A Social Economics As Applied Economics

1. 1.

2. 2.

3. 3.

Task 3. Let’s define…

Based on the activity found in task 2, can you now define economics as social science
and applied science?

Directions: In the box, identify the sentences that define Economics as social science and
Economics as applied science. Copy the given format in your activity notebook.

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⚫ the study of society and how people behave and influence the world around them.
⚫ is the application of economic theory and econometrics in specific settings with the goal
of analyzing potential outcomes.
⚫ assesses the relationship between the consumption and production of goods and services
in an environment of finite resources.
⚫ application of economic principles and theories to real situations and trying to predict the
outcomes.

Economics as social science Economics as applied science

1. 1.

2. 2.

’s New

Task 4: Let’s analyze the flow…

As illustrated below, analyze the circular flow of the economy and answer the
following questions

Figure 1

1. By looking at the diagram, do you think there’s an economic interaction between

households and firms? Why or why not?
2. How do households and firms interact with each other in a modern economy?
3. What is the role of the household in an economy?
4. What is the role of a firm in an economy?
5. When each agent doing their role, why do you think scarcity is still present in an
economy?

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 is It

Everybody goes through a day faced with constraints or limitations: motorists

complain of high gasoline prices, times when people suffer due to a shortage of chicken in
the market, or insufficient allowance for a student who needs to buy books and school
supplies. People always complain about not having enough-not enough food on the table, not
enough money to pay one’s debts, or not enough income to meet all the family’s needs. This,
in effect, is the existence of what we call scarcity, that is, insufficiency of resources to meet
the wants of consumers and insufficiency of resources for producers that hamper enough
production of goods and services.

Scarcity is the reason why people have to practice economics. Economics, as a study,
is the social science that involves the use of scarce resources to satisfy unlimited wants. Part
of human behavior is the tendency of man to want to have as many goods and services as he
can. However, his ability to buy goods and services is limited by his income and purchasing
power. It is therefore in this context that man has to practice economics.

Economics is derived from the ancient Greek word oikonomia—meaning the

management of a family or a household.

Well-known economist Alfred Marshall described economics as a study of mankind

in the ordinary business of life. It examines part of the individual and social action that is
most closely connected with the attainment and use of material requisites of well-being.

Because of the presence of scarcity, there is a need for man to make decisions in
choosing how to maximize the use of the scarce resources to satisfy as many wants as
possible. A homemaker who has a monthly budget needs to decide on how to utilize it to pay
the rent, to buy food, to pay the children’s tuition fees, and to buy new clothes and shoes. If
the budget is not enough, then the homemaker has to give up some of these things. She needs
to make a choice. If she decides not to buy new shoes for her children at the start of the
school year, then this is the choice to give up.

Figure 2

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 Economics is defined as the social science that deals with the production, distribution,
and consumption of goods and services. Evolved in the 19th century, the economic studies
have become one of the most significant studies of modern days. From a small shop to a
country, Economics plays a crucial role in the efficient running of both. No business can
flourish without applying the principles of economics. The study of economics is extensive
and varied. The nature and scope of economics depend upon the interaction of economic
agents and how economies work. Let’s analyze the nature and scope of economics deeply.

Nature of Economics
The nature of economics deals with the question that whether economics falls into the
category of science or arts. Various economists have given their arguments in favour of
science while others have their reservations for arts.

Economics is treated as a social science because of the following features:

▪ It involves a systematic collection of facts and figures.

▪ Like in science, it is based on the formulation of theories and laws.
▪ It deals with the cause and effect relationship.

These points validate that the nature of economics is correlated with science. Just as
in science, various economic theories are also based on logical reasoning.

Scope of Economics
Economists use different economic theories to solve various economic problems in
society. Its applicability is very vast. From a small organization to a multinational firm,
economic laws come into play. The scope of economics can be understood under two
subheads: Microeconomics and Macroeconomics.

Economics as a Social Science

Economics is a social science because it studies human behavior just like psychology
and sociology. Social science is, broadly speaking, the study of society and how people
behave and influence the world around them. As a social science, economics studies how
individuals make choices in allocating scarce resources to satisfy their unlimited wants.

So, to define Economics as a Social Science, it is a science concerned with using

scarce resources to obtain the maximum of the unlimited wants of society

Economics = Social Science

We use real-life scenarios to build models
No scientific experiments! upon, with which assumptions are made

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 Economics is a social science. This means that 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.

The evaluation of human interactions as it relates to preferences, decision making, and

constraints is a significant foundation of economic theory. The complexity of the dynamics of
human motivation and systems has led to the establishment of assumptions that form the
basis of the theory of consumer and firm behavior, both of which are used to model circular
flow interactions within the economy.

Circular Flow of the Economy

Economics provides an accessible foundation for understanding the complexity of the

interactions in the world. For example, the circular flow diagram displays the economic
framework related to the dynamic interconnectedness of economic agents. In the graph above
the display is limited to households and firms but other depictions of circular flow
incorporate the government and international trading partners.

Economics provides distilled frameworks to analyze complex societal interactions, as

in the case of consumer and firm behavior. An understanding of how wages and consumption
flow between consumers and producers provide agents with an ability to understand the
symbiosis of the relationship rather than fixating on the contentious components that surface
from time to time.

By developing an understanding of the foundations of economics, individuals can

become better decision makers with respect to their own lives and maintain a balance with
respect to an externality that has the potential to supplement or deter their plans. Since
economic theories are a basis of decision making and regulatory policy, being knowledgeable
about economics foundations allows an individual to be an active and aware participant rather
than a passive economic agent.

Economics is a social science that assesses the relationship between the consumption
and production of goods and services in an environment of finite resources. A focus of the
subject is how economic agents behave or interact both individually (microeconomics) and in
aggregate (macroeconomics).

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 Microeconomics examines the behavior of individual entities such as the consumer,
the producer, and the resource owner or firms within the market. It is more concerned with
how goods flow from the business firm to the consumer and how the resources move from
the resource owner to the business firm. It is also concerned with the process of setting prices
of goods that are also known as Price Theory.

Microeconomics examines individual economic activity, industries, and their

interaction. It has the following characteristics:

• Elasticity: It determines the ratio of change in the proportion of one variable to

another variable. For example- the income elasticity of demand, the price
elasticity of demand, the price elasticity of supply, etc.
• Theory of Production: It involves an efficient conversion of input into an output.
For example- packaging, shipping, storing, and manufacturing.
• Cost of Production: With the help of this theory, the object price is evaluated by
the price of resources.
• Monopoly: Under this theory, the dominance of a single entity is studied in a
particular field.
• Oligopoly: It corresponds to the dominance of small entities in a market.

Macroeconomics analyzes the entire economy and the issues affecting it. Primary
focus areas are unemployment, inflation, economic growth, and monetary and fiscal policy.
Macroeconomics is about the nature of economic growth, the expansion of productive
capacity, and the growth of national income.

It is the study of an economy as a whole. It explains broad aggregates and their

interactions “top down.” Macroeconomics has the following characteristics:

• Growth: It studies the factors which explain economic growth such as the
increase in output per capita of a country over a long period of time.
• Business Cycle: It advocates the involvement of the central bank and the
government to formulate monetary and fiscal policies to monitor the output over
the business cycle.
• Unemployment: It is measured by the unemployment rate. It is caused by various
factors like rising in wages, a shortfall in vacancies, and more.
• Inflation and Deflation: Inflation corresponds to an increase in the price of a
commodity, while deflation corresponds to a decrease in the price of a
commodity. These indicators are valuable to evaluate the status of the economy of
a country.

Economics as an Applied Science

Applied Economics - is the study of economics in world situations as opposed to the theory
of economics. It is the application of economic principles and theories to real situations and
trying to predict the outcomes.
Put simply; applied economics is the study of observing how theories work in practice. The
discipline may be practiced at macroeconomic or microeconomic levels.

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Macroeconomics’ refers the whole aggregate economy, while Microeconomics’ looks at
economics at the individual consumer company level.

Figure 3. Economic Theory is all about thinking things up, while Applied Economics is about trying things out

- is the application of economic theory and econometrics in specific settings with the goal of
analyzing potential outcomes. As one of the two sets of fields of economics (the other set
being the core), it is typically characterized by the application of the core, referring to
economic theory and econometrics, as a means of dealing with practical issues in fields that
include demographic economics, labor economics, business economics, agricultural
economics, development economics, education economics, health economics, monetary
economics, economic history, and many others. John Neville Keynes is attributed to be the
first to use the phrase “applied economics” to designate the application of economic theory to
the interpretation and explanation of particular economic phenomena.

What is Econometrics?

Econometrics – is the application of statistical and mathematical theories to economics for

the purpose of:

⚫ Testing hypotheses
⚫ Forecasting future trends
⚫ The results of econometric are compared and contrasted against real life examples.

Part of Econometrics is converting economic theories into data that policy

makers can use

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Econometrics Example:

Real life application of econometrics would be to study the hypothesis that as a

person’s income increases, spending increases

What is the Importance of Applied Economic Application?

1. Applying economics to a company, household or a country helps sweep aside all attempts
to dress up a situation so that it will appear worse or better than it actually is.
 applied economics becomes a powerful tool to reveal the true and complete situation in
order to come up with things to do

Example:

Applied economics can assess the profits of a certain company. The result can help
the executives to do some strategies in order to boost its sales.

2. Applied economics acts as a mechanism to determine what steps can reasonably be taken
to improve the current economic situation
 to examine each aspect, one can strengthen areas where performance is weak

Example:
• Purchase of goods and services
• Usage of raw materials
• Division of labor within the entity (e.g. firm, company, agency)

3. Applied economics can teach valuable lessons on how to avoid the recurrence of a
negative situation, or at least minimize the impact.
 to review what steps were taken to improve and correct similar situations and continue
good strategies to keep the economy flowing in a correct direction

We should be able to improve human welfare among Filipinos by the investigation

and analysis of economic problems in the real world. Applying economic theory in our lives
means trying to address actual economic issues and be able to do something about it. The
concept of scarcity and choice should encourage us as individuals to help in our own way to
provide solutions to the country’s economic problems.

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 ’s More

Task 5: Let’s check your understanding…

Directions. Give what is asked for in each item. Write your answers in your notebook.

1. Explain briefly and concisely the economic process where it shows why people have to
practice economics by analyzing the flow of the diagram/illustration below.

2. The scope of economics can be understood under two subheads: Microeconomics and
Macroeconomics. Explain in the venn diagram their differences and similarities.

Micro Macro

3. What is the contribution of econometrics in solving economic issues? Explain the

illustration given below.

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4. Explain applied economics application by stating its importance and their examples.
Make use of a diagram to show your explanation.

I Have Learned

Task 6: Let’s reflect and realize…

Direction: In your notebook, complete the following statements.

1. I have learned that

__________________________________________________________________

2. I have realized that

__________________________________________________________________

3. I will apply what I have learned

__________________________________________________________________

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 I Can Do

Task 7: Let’s prove it now…

Direction: Do what is asked. Write your answers on your notebook.

1. Why is economics deeply rooted in the concept of scarcity?

_________________________________________________________________________
_________________________________________________________________________
2. Why is economics important in everyday life?
_________________________________________________________________________
_________________________________________________________________________

3. Why economics considered as social science and applied science?

_________________________________________________________________________
_________________________________________________________________________

4. As a student, how does Applied Economics work in your life situation and your family as a
whole?
________________________________________________________________________
________________________________________________________________________

5. Give at least (1) importance of Applied Economics and explain its contribution to the
consumers or the producers as well.
________________________________________________________________________
________________________________________________________________________

RUBRICS
Excellent Proficient Developing Poor
(4pts) (3pts) (2pts) (1pt)
Information and evidence
are accurate, appropriate,
and integrated effectively

Claims and ideas are

supported and elaborated
Sentence form and word
choice are varied and
appropriate

Creativity/originality is
evident

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Let’s check it out…
Directions: Read carefully the statements or questions below and write your answers on your
activity notebook.
I. Classify the following topics. Write MIC if it falls under Microeconomics; MAC if it falls
under Macroeconomics.

_______1. The inflation rate in the Philippines in the last quarter of 2019 was 4.8%.
_______2. A P340-billion deficit in the Philippine budget is expected in the year 2021.
_______3. Prices of Tire Less vehicles are predicted to go up in December.
_______4. Garlic prices in the past months have risen because producers hoarded their
supplies in their bodega.
_______5. The unemployment rate has dropped because of the increase in the number of
OFWs.
_______6. In the past year, Soda Cola was named the fastest selling product in the market.
_______7. Rental on land could not be increased by landowners because of the Rent Control
Law.
_______8. Prices of apples and grapes tend to increase during the Christmas season.
_______9. The Philippine economy grew at the rate of 5.8% in 2019.
_______10. Philippine congress passed the Value Added Tax Law to strengthen the
Philippine tax system.

II. Multiple Choice: Write only the letter of the correct answer.

1. Is the study that attempts to explain how an economy operates and how the consumer
attempts to maximize his/her wants within limited means.
A. Economics C. scarcity
B. Microeconomics D. Macroeconomics
2. Is a condition where there are insufficient resources to satisfy all the needs and wants of a
population.
A. Scarcity C. insufficiency
B. Economics D. none of the above
3. Economics as __________ because it studies of observing how theories work in practice
A. Social C. psychology
B. Applied D. Scarce
4. Economics as ____________ science, because it studies human behavior and how
individuals make choices in allocating scarce resources to satisfy their unlimited wants.
A. Applied C. social
B. Scarce D. econometrics
5. An applied economics where there is an application of statistical and mathematical theories
to economics for the purpose of testing hypotheses, forecasting future trends and compare
and contrast against real life.
A. Microeconomics C. Economics
B. Macroeconomics D. Econometrics

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III. Essay:

If you were to advise the president of the Philippines on how to cope with the crisis on
Pandemic we are facing today to solve and improve the lives of the Filipino people, what
would you tell him and why?

Let’s go beyond…

Directions. Show your regular allowance for the week and how you budget this for your
school and personal expenses. Show details by using Pie chart.

Follow up questions:
1. As a student, have you experienced scarcity? How did you manage it?
2. How your family able to cope with the insufficiency of the resources in order to survive?
3. What were your reactions upon knowing the way they allocate budget for your schooling
and other basic expenses for the whole family?

21
 22
Task 2 Task 1
What’s In What I Need to Know
As social economics As applied economics Scarcity of
Motorists complain of high gasoline Economics students analyze how to 1. Food-MICRO
prices maximize the use of available 2. Money-MACRO
resources in order to overcome 3. Water-MICRO
scarcity
4. Employment-MACRO
People have no freedom of choice in Philippine congress passed the Value 5. Internet access-MICRO
arriving at decisions on what to buy Added Tax Law to strengthen the
Philippine tax system 6. School supplies-MICRO
7. Medical supplies-MACRO
People always complain about having Business understands Laws of supply
not enough -- not having enough and demand by combining past sales
money to pay one’s debts, not enough data and marketing research regarding
food on the table, not enough income their target market and production Task 4
to meet all the family’s needs. decisions What’s New
Task 3 Answers may vary
Economics as social science- bullets 1,3; As applied - 2,4 Possible Answer:
1. Yes!
Households and firms interact
in two markets: the market for
goods and services and the
market for factors of
Task 5 production
What’s More 2. households supply economi
1. Answer may vary 2. Answer may vary (possible answer) c resources, such as labor,
Differences: Micro Macro Similarities to businesses in exchange for
-individual markets -whole economics -Allocation of scare resources income, and
-studies the behavior -focused on country wide -both disciplines are about (2) households use their
of individual or global economics maximization incomes to buy goods and
households and firms -dealing issues such as -study how the demand for certain services produced and sold by
in making decisions growth, inflation, resources interacts w/ the ability to business firms
on the allocation of unemployment supply that good to determine how
limited resources 3. They provide firms with
- so on… to best distribute and allocate the
factor services in production,
-so on….. resources among many consumers
and buy finished goods from
firms for consumption.
4. Firms employ different
3. Part of Econometrics is converting economic theories into data that policy makers can factors of production. This
use (possible answer) 4. answer may vary includes employing workers
(labor) to produce goods and
services. By employing
labor, firms pay wages
creating a flow of income to
Task 6 households, which ultimately
Answers may vary can be spent by households on
Task 7 goods produced by
What can I do different firms.
Answers may vary 5. Answer may vary
Assessment Additional Activities
I. 1. MAC 2. MAC 3. MIC 4. MIC 5. MAC 6. MIC 1. Answer may vary
7. MAC 8. MIC 9. MAC 10. MAC 2. Answer may vary
II. 1.A 2. A 3. B 4. C 5. D III. Answer may vary 3. Answer may vary
Glossary
Scarcity - insufficiency of resources to meet the wants of consumers and insufficiency of
resources for producers that hamper enough production of goods and services.

Economics - is the social science that involves the use of scarce resources to satisfy
unlimited wants. A social science that deals with the production, distribution, and
consumption of goods and services

Econometrics - is the application of statistical and mathematical theories to economics for

the purpose of testing hypotheses, forecasting future trends, and the results of econometric
are compared and contrasted against real life examples.

Macroeconomics - analyzes the entire economy and the issues affecting it.

Microeconomics - examines the behavior of individual entities such as the consumer, the
producer, and the resource owner or firms within the market.

Economic Theory - explains economic phenomena, to interpret why and how the economy
behaves and what is the best to solution.

Applied Science - is the study of observing how theories work in practice. The discipline
may be practiced at macroeconomic or microeconomic levels.

Social Science - study of society and how people behave and influence the world around
them.

23
References

Books
Dinio, R. and Villasis, G. 2017. Applied Economics” (1st ed.). Sampaloc, Manila:Rex
Bookstore,Inc.

Online Sources

Applied economics – definition and meaning, MBN Marker business new, N.d, Retrieved
from https://marketbusinessnews.com/financialglossary/applied

Economics as an Applied Science, September 8, 2017, Retrieved from

https://www.slideshare.net/HannahCullen/lesson-2-economics-as-
anappliedscience?next_slideshow=1&fbclid=IwAR1p2N4RmvTcQnnzGqOLmmMs_
CXmOn61_xOp8cNewq5Us5tHmLbXpEDlkJ0

Revisiting Economics as a social science, September 8, 2017, Retrieved from

https://www.slideshare.net/HannahCullen/revisiting-economics-as-a-social-science

The Nature and Scope of Economics, Nd, Retrieved from

https://studiousguy.com/nature-and-scope-of-economics/

What is Econometrics? Definition and Examples, MBN Marker business new, N.d,
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