School: Gabi National High School Teacher: Nilda N.

Seno
Subject: Applied Economics Quarter 1 Week 2: LAS 1
Learning Competency: *Examine the utility and application of applied economics to solve economic
issues and problems

Applied Economics – The use of this term is believed to have started nearly 200 years ago, in the
writings of Jean-Baptiste Say (1767-1832) and John Stuart Mill (1806-1873). This is the application
of economic principles and theories to the present economic condition.
Applying economic theories to current economic conditions can be helpful in the following reasons:
1. It enables the true picture of the situation to show.
2. It helps determine the steps to be taken to improve the present economic condition.
3. It helps to avoid the recurrence of a negative situation or at least minimize the effect.

Econometrics – Application of statistical and mathematical theories to economics to test

hypothesis and forecast future trends.
An example of real-life application of econometrics would be to study the hypothesis that as a
person’s income increases, spending increases.
Scarcity – is the limited nature of resources. Resources for an individual includes time, money and
skill. For a country limited resources include natural resources, work force or we call it also as
labor force where most of them work abroad to seek higher salary to meet financial needs. Other
limited resource of a country is technology. The lack of technology available leaves some of our most
precious natural resources useless because we cannot use them.

These resources are all limited as compared with our unlimited wants and needs. Because of this,
people and nations should choose which goods and services they can avail and which one they
should give up during this pandemic. People opted to choose to buy basic needs necessary for
survival.

What is the basic economic problem? Scarcity. Because of this people and nation must choose
how to use their available resources efficiently. Every economic system is faced with the following
problems:
1. What to produce? – What is the desire of the people? Goods and services to be produced should
be based on the needs of the people. However, a very important factor like availability of resources
should be considered. A good example of this is the production of rice. Since the Philippines is
known to be an agricultural country because of its extensive rice fields.

2. How to produce? - What are the resources to be used? How much labor is needed to produce the
needed quantity? Quality should come first before quantity. Rice planting requires a lot of labor
(workers) to plant rice.

3. For whom shall goods and services be produced? – How are the goods distributed among
consumers? Goods are produced to meet the urgent needs of the people. How much goods are
produced for the basic needs and how much goods are produced for our wants.

There are two other problems connected with resource allocation and economic growth.

4. Are the country’s resources being utilized, or some of them are lying idle and unemployed? –
When resources are scarce it is not good to see available resources idle. Example of this is there are
a lot of people (labor) who are not employed or they are without jobs. As a consequence, production
cannot meet its maximum level capacity.

5. Is the economy’s capacity to produce goods growing or remaining the same overtime? – To
achieve a growth in productive capacity is a universal objective. This makes possible an
improvement in the standard of living if the rate of population growth is not very high.

Checked by:
RONALD A. DERANO
Asst. School Principal II
 APPLIED ECONOMICS
Parallel Test 1

Name:__________________________________ Section:_____________ Score:________________

Identify the word/s being described by the following sentences. Choose your answer from the box
below. Write your answer in the space provided.

___________1. This is the application of economic theories and principles to real world situations
with the desired aim of predicting potential outcomes.
___________2. Came from nature that are used in production including land, raw materials and
natural processes.
___________3. Once the goods are produced, how they shall be distributed?

___________4. Goods and services to be produced are based on the needs of the consumers.

___________6. This has something to do with the combination of resources to be used.

___________7. Is the application of statistical and mathematical theories to economics for the
purpose of testing hypotheses and forecasting future trends.
___________8. One of the medical products being produced in bulk quantities to prevent the spread
of the novel corona virus disease covid-19.
___________9. An economic problem resulted due to the pandemic caused by Covid-19.

___________10. Grocery stores are running out of goods to sell during the advent of Enhance
Community Quarantine due to