Senior High School

Applied Economics
Quarter 3 – Module 1

Introduction to Applied
Economics
Applied Economics – Grade 12
Alternative Delivery Mode
Quarter 3 – Module 1: Introduction to Applied Economics
Second Edition, 2021

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Published by the Department of Education

Secretary: Leonor Magtolis Briones, PhD
Undersecretary: Diosdado M. San Antonio, PhD
Assistant Secretary: Alma Ruby C. Torio, PhD

Development Team of the Module

Author: Maria Cecilia N. Gabas

Liza C. Carreon
Content Editor: Glenn S. Manlupig
Language Editor: Allen Joy A. Vedra
Illustrator: Marie Antoniette N. Ipanag
Layout Artist: Marie Antoniette N. Ipanag

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Regional Director

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Schools Division Superintendent
Nimfa R. Lago, PhD CESO VI
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Mala Epra B. Magnaong, Chief ES, CLMD

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Applied Economics

Quarter 3 – Module 1
Introduction to Applied
Economics
 Table of Contents
Overview ………………………………………………………………………………. 2
General Instructions…………..………………….………………….………………. 2
What I Know (Pre-test) …………………………………….……….……………….. 3
What I Need To Know ………………………….………………….….……………… 5
Lesson 1 Introduction to Applied Economics………………… ………………… 5
What’s In…………………………………………………………………………. 5
What’s New – Activity 1 (Think and Write)…………………………………… 6
What Is It?
Lesson 1.1. Revisiting Economics as a Social Science……………. 7
Lesson 1.2. Economics as an Applied Science……………………… 10
Lesson 1.3. Basic Economic Problems and the Philippine
Socio-economic Development in the 21st Century…… 10
What’s More – Activity 2 (Making It Count!)…………………………………. 12
What I Have Learned – Activity 3 (Check Your Understanding)…………… 12
What I Can Do? - Activity 4 (I Can Do This!)…………………………………. 13
Additional Activity - Activity 5 (Drawing Out the Artist in You!)……………… 14

Assessment ………………………………………………………………..…………… 14

Answer Key …………………………………………………………………..…………. 15

References ..…………………………………………………………………………….. 15
 OVERVIEW
Dear Teachers and Learners! The writers welcome you all to this Applied Economics
Module. This material tries to bring you to the basic principles of applied economics, and its
application to contemporary economic issues facing the Filipino entrepreneur such as prices
of commodities, minimum wage, rent, and taxes. It also covers an analysis of industries for
identification of potential business opportunities. The main output of the course is the
preparation of a socioeconomic impact study of a business venture.

As your partner in learning, we hope that you will not miss out every detail that we the
writers would like you to learn in this material. Do enjoy it as there are challenging and
interesting activities inside this learning module. Congratulations in advance for this will make
you the master of your own learning.

GENERAL INSTRUCTIONS

For the learners: For the teacher:

To be guided in achieving the To facilitate and ensure the students’
objectives of this module, do the learning from this module, you are
following: encouraged to do the following:

1. Read and follow instructions 1. Clearly communicate learning

carefully.
2. Write all your ANSWERS in your
Activity Book.
3. Answer the pretest before going
through the lessons.
4. Take note and record points for
clarification.
5. Compare your answers against
the key to answers found at the
end of the modules.
6. Do the activities and fully
understand each lesson.
7. Answer the self-check to monitor
what you learned in each lesson.
8. Answer the posttest after you
have gone over all the lessons.
competencies and objectives
2. Motivate through applications
and connections to real life.
3. Give applications of the theory
4. Discuss worked-out examples
5. Give time for hands-on
unguided classroom work and
discovery
6. Use formative assessment to
give feedback
7. Introduce extensions or
generalizations of concepts
8. Engage in reflection questions
9. Encourage analysis through
higher order thinking prompts
10. Provide alternative formats for
student work
11. Remind learners to write their
answers in their Philosophy
Activity Notebook

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 What I Know

Directions. Read the test items carefully and encircle the letter of your choice that
best answers the statement.

1. There is scarcity of resources because:

A. Man’s wants are unlimited C. Man’s wants are enough

B. Man’s wants are limited D. Man’s wants are satisfied
2. An economic resource that includes the natural resources:

A. Land C. Capital
B. Labor D. Entrepreneur
3. Economics is a social science because it deals with:

A. Human nature C. Experimentation

B. Natural resources D. Plants and animals
4. It is a finished product which is used to produce other goods:

A. Land C. Capital
B. Labor D. Entrepreneur
5. The economic problem that refers to the nature of goods and services the economy
should produce:

A. What to produce C. How much to produce

B. How to produce D. For whom to produce

6. It is also termed as human resource:

A. Land C. Capital
B. Labor D. Entrepreneur
7. Macroeconomics deals with the following except:

A. Gross National Product C. National Income

B. Employment D. Price of rice
8. The word economic is most closely associated with the word:
A. free C. unlimited
B. scarce D. unrestricted

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9. Economics is important so that we may able to:

A. Understand problems facing the citizens and family

B. Help the government promote growth and improve quality of life
C. Analyze fascinating patterns of social behavior
D. All of the above

10. Man’s mental and physical efforts exerted in production:

A. Land C. Entrepreneur
B. Labor D. Capital

Great job!
Later we will see if your answers are correct by reading the rest of this module.

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 Lesson Introduction to Applied
1 Economics

What I Need To Know

Objectives: After going through this module, the learners should be able to:

1. Define basic terms in applied economic;.

2. Differentiate economics as social science and applied science in terms of

nature and scope;

3. Examine the utility and application of applied economics to solve economic

issues and problems; and

4. Explain how applied economics can be used to solve economic problems.

What’s In

Economics is a broad ranging discipline that uses a variety of techniques and

approaches to address important social questions. Because of the great complexity of
human behavior, economists are forced to abstract from many details, to make
generalizations that they know are not quite true and to organize what knowledge they
have in terms of some theoretical structure in our economy.

Furthermore, economics is important in order to understand problems facing the

citizen and the family; to help government promote growth and improve the quality of
life while avoiding depression and inflation and to analyze fascinating patterns of social
behavior. Because economic questions enter into both daily life and national issues,
a basic understanding of economics is vital for sound decision-making by individuals
and nation.

Now, in this lesson, you will get to understand economics as an applied science
and its utility in addressing the economic problems of the country.

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 What’s New
Activity 1. Think and Write

Do you still remember any Economic terms in your Araling Panlipunan subject
during your Grade 10? I want you to list down below all the words you remember and
answer the following questions:

1. Where do you usually apply the term in your daily life?

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___________________________________________________________________

2. In Philippine economy, what is the significance of using that term?

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 What Is It?

You might ask, “why do we need to study economics?” To know how important
the subject is, all you need to do is read the front page of the newspapers to see that
the most important news are economic in nature. Watch the news on TV and for sure,
economic news always presents important issues.

The way of introducing the study of economics is interesting since the issues to
be tackled and how they are resolved affect us all. After all, media commentators,
politicians, and even barbers and taxi drivers constantly talk about these issues. What
we need to understand is how to make more rational decisions in spending money,
saving part of it, and even investing some of it.

On the national level, economics will enable you to take a look on how the
economy operates and to decide for yourself if the government officials and leaders
are effective in trying to shape up the economy and formulate policies for the good of
the nation.

Lesson 1.1 Revisiting Economics as a Social Science

Economics is a social science which deals with the proper allocation of scarce
resources to satisfy the unlimited human wants. Economics is classified as a social
science because it deals with the study of man’s life and how he lives with other men.

Obviously, economics is interdependent with other sciences like sociology,

political science, geography, religion and other social sciences. As a social science,
economics studies how individuals make choices in allocating scarce resources to
satisfy their unlimited wants.

Scarcity is the reason why people have to practice economics. Part of human behavior
is the tendency of man to want to have as many goods and services as he can.
Scarcity is that fact of life which makes man’s material wants never fully satisfied
because the resources he has are limited while his wants are almost unlimited.
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.

From the resources point of view, some would define economics as the study of
the efficient allocation of scarce resources. Since resources are generally scarce while
human wants tend to be unlimited, economics encounters not a few problems. The
root problem, which is the real problem, is the unjust distribution of productive

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resources among the members of the society. The fundamental problem of unfair
allocation of resources has been a global problem. There are extremely very few rich
while there are very many poor.

Thus, in a broad sense, economics can be defined as a social science that

studies and seeks to allocate scarce human and non-human resources among their
alternative uses in order to satisfy unlimited human wants and desires.

The Economic Resources

Our economic resources are also known as factors of production or inputs.

There are five major factors of production, which are utilized in our economy. These
are land, labor, capital, entrepreneur, and foreign exchange.

1. Land - These resources consist of free gifts of nature which includes all natural
resources above, on, and below the ground such as soil, rivers, lakes, oceans, forests,
mountains, mineral resources and climate. Land is considered economic resources
because it has a price attached to it. One cannot utilize this natural resource without
paying for it usually in the form of rent or lease.

2. Labor - This is also termed as human resources. Labor refers to all human efforts,
be it mental or physical, that help to produce want satisfying goods and services. This
applies not only to workers, farmers or laborers, but also to professionals like
accountants, economists or scientists. Labor is an indispensable factor in the
production of goods and services. In return, he earns an income in the form of wages
and/or salaries.

3. Capital - It is a finished product, which is used to produce goods. It consists of all

man-made aids to further the production process such as tools, machinery and
buildings. Capital also serves as an investment. Income derived from capital is
interest.

4. Entrepreneur - An entrepreneur is the organizer and coordinator of the other factors

of production: land, labor, and capital. An entrepreneur is one who is engaged in
economic undertakings and provides society with goods and services it needs. He
utilizes his initiative, talent and resourcefulness in the creation of economic goods. He
is able to compensate himself through the acquisition of profits.

5. Foreign Exchange - This refers to the dollar and dollar reserves that the economy
has.

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Branches of Economics

The study of Economics is divided into two branches: Microeconomics and

Macroeconomics.

1. Microeconomics - It deals with the economic behavior of individual units such as the
consumers, firms, and the owners of the factors of production. Such specific economic
units constitute a very small segment of the whole economy. For example, the price
of rice, the number of workers of a certain firm, the income of Mr. Cruz, the
expenditures of PLDT, etc. Microeconomics is also known as the Price Theory.

2. Macroeconomics - It deals with the economic behavior of the whole economy or its
aggregates such as government, business and households. An aggregate is
composed of individual units. The operation of the various aggregates and their
interrelationship is analyzed to provide a profile of the economy as a whole.

Macroeconomics is concerned with the discussion of topics like gross national

product, level of employment, national income, general level of prices, total
expenditures, etc. It is also known as employment and income analysis.

The Basic Economic Problems

All societies are faced with basic questions in the economy that have to be
answered in order to cope with constraints and limitations. These are:

1. What to Produce? - First of all, the system must determine the desires of the
people. Goods and services to be produced are based on the needs of the consumers.
However, there are some factors that should be taken into consideration in producing
the goods and services the individuals need. These are:

1.1. Availability of resources;

1.2. Physical environment; and
1.3. Customs and traditions of the people.

2. How much to Produce? - Knowing what to produce is not enough. The system
must know how much of the chosen goods should be produced. It must determine
how many of these buyers are willing to buy the goods and services produced by the
economy. Here, the people’s taste and preference plays a major factor in determining
production.

3. How to Produce? - When producing goods and services, one has to think of how
best to do it. The best way to make goods is not to spend too much. This also means
you have to make goods with quality. To make goods like these, one has to know the
best way of making goods. You have to choose the cheapest way. But this way must
also let you make something with good quality.

4. For Whom Shall Goods and Services be Produced? - The last question has
something to do with the problem of distribution. Once the goods are produced, how
shall they be distributed. Thinking about this problem means asking, “Who gets what?”
on a bigger scale. In this case, this means whatever is being sold can be

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bought. But only those who have money and who want it can buy what is being sold.
The poor cannot buy the same goods and services as rich people. When you have
money, you have purchasing power. It means, you have the power to buy things.

Lesson 1.2 Economics as an Applied Science

Applied Economics is the application of economic theory and econometrics in
specific settings with the goal of analyzing potential outcomes. 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 (Dinio, et al., 2017).

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.

Lesson 1.3 Basic Economic Problems and the Philippine

Socioeconomic Development in the 21st Century

A solid understanding of economic principles and how they are applied in real-
life situations can serve as significant tools to help address the country’s economic
problem.

To understand the basic economic problems, imagine two countries, one of them
rich and the other poor. Do they have the same economic problems? The answer is
yes, but it is not that simple. There is a difference.

The rich country can solve problems easier. They can solve problems faster. They
do not have to worry about basic problems. But for poor countries, finding food for
daily living is in itself a problem. They have a hard time finding shelter, clothing, health
services, or even education.

Another reason why even rich nations have economic problems is because of the way
human beings act. Human nature means an endless list of wants. But there are not
enough things to give us what we want. Even rich nations cannot escape human
nature and limited resources.

Applied Economics in Relation to Philippine Economic Problems

The Philippine economy has grown significantly during President Benigno Simeon
Aquino’s administration. With a growth rate of the country’s Gross Domestic Product
of 6.8% in 2012, improving to 7.2% in 2013, and slowing down to 6.1% in 2014, these
rates are an improvement of past rates preceding President Aquino’s

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term. It is also higher than its Asian neighbors such as Malaysia, Thailand, South
Korea, Hongkong, India, and Indonesia (CIA World Factbook, 2013).

Despite this admirable growth, people, especially the poor, have been complaining
of non-inclusive growth. Millions of Filipinos are claiming they experience hunger or
they still live below the poverty level.

Unemployment is still a main problem of the Philippine economy with an

unemployment rate rose to 17.7 percent accounting to 7.3 million unemployed
Filipinos in the labor force in April 2020. According to the Philippine Statistics Authority,
this is a record high in the unemployment rate reflecting the effects of Corona virus
disease 2019 (COVID-19) economic shutdown to the Philippine labor market.

Employment rate in April 2020 fell to 82.3 percent from 94.7 percent in January
2020. In April 2019, it is posted at 94.9 percent. This translates to 33.8 million
employed persons in April 2020 from 41.8 million in April 2019. All regions reported
double-digit unemployment rates. The highest unemployment rate was in Bangsamoro
Autonomous Region in Muslim Mindanao (BARRM) at 29.8 percent. It is followed by
Region III (Central Luzon) and Cordillera Administrative Region (CAR) with
unemployment rates recorded at 27.3 percent and 25.3 percent, respectively
(https://psa.gov.ph/content /employment-situation-april-2020).

Another significant socioeconomic problem in the country is poverty. According

to the Philippine Statistics Authority, in the first semester of 2018, a family of five
needed no less than P7,337, on average, to meet the family’s basic food needs for a
month. On the other hand, no less than P10,481, on average, was needed to meet
both basic food and non-food needs of a family of five in a month. This amount is the
poverty threshold. These are 10.9 percent higher than the food and poverty thresholds
from the first semester of 2015.

The booming population growth in the Philippines is another basic economic

problem that can be connected to the issue of scarcity. When population becomes too
big, economic resources may no longer be enough to support the growing population.
According to the 2014 census, the Philippine population stood at 100 million. As of
2020, from World Population Review data, it has reached 110 million people. This is
apparently the reason why schoolrooms are not enough for the children who are of
school age. This could also be an explanation why government hospitals are crowded
with sick people and maternity wards are full of women giving birth with hospital beds
that are not enough to accommodate them.

The country’s problems vary with times and circumstances. It is now a

challenge for the students to observe and identify what these problems are.

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 What’s More
Activity 2. Making It Count!

The Philippines has encountered many serious problems most of the time. In view of
this, list down some of these economic problems the country has encountered for this
year. Opposite that problem, give at least three possible solutions that you think will
help solve the problem.

Economic Problems Possible Solutions

1.
2.
1. 3.

1.
2.
2. 3.

1.
2.
3. 3.

What I Have Learned?

Activity 3. Check Your Understanding

1. Why is economics a study of social science?

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2. Why is economics deeply rooted in the concept of scarcity? How can you relate
scarcity as a Senior High School student?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

What I Can Do?

Activity 4. I Can Do This!

If you were to advise the President of the Philippines on how to cope with the issues
on poverty and unemployment to improve the lives of the Filipino people, what would
you tell him and why?

_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
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_________________________________________________________
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 Additional Activity
Activity 5. Drawing Out the Artist in You!

Create a poster showing a basic economic problem in your locality. To make a poster,
you need white cartolina and some drawing and coloring materials. The poster must
look neat and the labels are readable and relevant.

Assessment

Test I. Memory Recall

Directions. Write down the correct answer in the space provided.

1. _______________ A social science which deals with the allocation of scarce

resources to satisfy the unlimited human wants.
2. _______________ The application of economic theory and econometrics in
specific settings with the goal of analyzing potential
outcomes.
3. _______________ It deals with the economic behavior of the whole economy
or its aggregates such as government, business and
households.
4. _______________ Desires of consumers that have to be satisfied.
5. _______________ A condition where there are insufficient resources to
satisfy all the needs and wants of a population.
6. _______________ Payment made to labor.
7. _______________ It is a finished product which is used to produce other
goods.
8. _______________ It deals with the economic behavior of individual units
such as the consumers, firms, and the owners of the
factors of production.
9. _______________ Man’s needs required for his survival.
10. ______________ It is also termed as human resource.

Congratulations!
You have completed your journey in this module. You did a
great job! It is now time to go on to the next adventure…
Good luck!

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 Answer Key

PRE-TEST ASSESSMENT

10, B 5. A 10. labor 5. scarcity

9. D 4. C 9. basic needs 4. wants

8. B 3. A 8. microeconomics 3. macroeconomics
7. D 2. A 7. capital 2. Applied economics
6. B 1. A. 6. wage 1. Economics

References

Dinio, Rosemary P. and George A. Villasis. Applied Economics. Manila,

Philippines. Rex Book Store, 2017.
Leańo, Roman Jr. D. Fundamentals of Economics with Agrarian Reform,
Taxation and Cooperatives (A Modular Approach). Manila, Philippines.
Mindshapers Co., Inc. 2012.
Pagoso, Cristobal M. et al. Introductory Microeconomics. Manila, Philippines.
Rex Book Store, 2006.
Philippine Statistics Authority. Philippine Unemployment Rate from 1999-2019.
https://www.statista.com/statistics/578722/uemployment-rate-in-philippines/

Villegas, Bernardo M. Basic Economics. Manila, Philippines. Center for

Research and Communication Foundation, Inc., 2010.

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For inquiries or feedback, please write or call:
Department of Education – Division of Misamis Oriental
Don A. Velez St., Cagayan de Oro City
Contact No. (08822) – 724615 / (088) 856 – 4454
Email Address: misamis.oriental@deped.gov.ph
depedmor@gmail.com

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