Module

G12-ABM-AS-MELC 1

ECONOMICS AS SOCIAL SCIENCE AND

1
Week
APPLIED SCIENCE IN TERMS OF
NATURE AND SCOPE 1

I What I Need to Know?

While having a basic understanding of economic theory is not perceived as being as

important as balancing a household budget or learning how to drive a car, the forces that
underpin the study of economics impact every moment of our lives. At the most basic
level, economics attempts to explain how and why we make the purchasing choices we
do.

At the end of the module, you should be able to:

1. Define economics.
2. Differentiate economics as a social science and an applied science
3. Appreciate how applied economics helps in addressing simple to complex
economic problem.

D What I Know?

TASK 1: PRE-TEST. Choose the best answer from the given choices.

1. It is the basic and central economic problem confronting every individual and society
A. Choice B. Needs C. Scarcity D. Want

2. This broadly refers to all the resources found in nature and are therefore not man-
made
A. Capital B. Entrepreneurship C. Labor D. Land

3. It refers to the place where resource or the services of resource suppliers are bought
and sold
A. Business B. Market C. Product Market D. Resource Market

4. This refers to the basic economic question that identifies people or sectors that demand
the commodities/goods produced in the society.
A. For whom to produce? C. How to produce?
B. How much to Produce? D. What to produce?

5. It is the foregone value of what you give up when you make a choice
A. Macroeconomics C. opportunity cost
B. Microeconomics D. opportunity loss

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D What is It?

Economics is study of how people make choices under conditions of scarcity, and of the
results of those choices for society.
As a Social Science As an Applied Science
• Economics is a social science because • It involves explorations of economic
the subject matter of economics is theories to determine the likely
people or societies and their behavior, outcomes associated with various
unpredictable in nature possible courses of action in the real
• It deals with how people organize world.
themselves in order to allocate scarce • Economics is an applied science that
resources to produce goods and utilizes scientific knowledge to
services that will satisfy the unlimited develop practical solutions to society’s
and multiplying wants and needs of
problems.
man
BASIC CONCEPTS IN ECONOMICS
• Scarcity explains the basic economic problem that the world has limited—or
scarce—resources to meet seemingly unlimited wants. This reality forces people to
make decisions about how to allocate resources in the most efficient way possible
so that as many needs as possible are met.
• A market system is driven by supply and demand. Generally, low supply and high
demand increase price and vice versa.
• Costs and Benefits - related to the rational expectations and rational choices of
consumers. In every situation, people try to maximize their benefits while
minimizing their costs.
• Everything is in the incentives - what motivates you to behave in a certain way.
Economic incentives provide you the motivation to pursue your preferences.
Factors of Production Basic Economic Questions/ Problems
• LAND – Natural Resources (Water, 1. What to produce and how much?
natural gas, oil, trees (all the stuff we 2. How to produce?
find on, in, and under the land) 3. For whom to produce?
• LABOR – Physical and Intellectual
(Human Input in the production Economic Goals
process) • Economic Efficiency
• CAPITAL - Tools, Machinery, Factories • Income Equity
(The things we use to make things) • Price Stability
• ENTREPRENEURSHIP – Investing • Full Employment
time, natural resources, labor and • Viable Balance of Payments
capital are all risks associated with • Economic Growth
production • Environmental Sustainability

Categories of Economics
• Microeconomics is the study of individuals and business decisions; focuses on
supply and demand and other forces that determine the price levels in the
economy.
• Macroeconomics looks at the decisions of countries and governments; an
analytical tool mainly used to craft economic and fiscal policy.

Circular Flow Diagram

The Circular Flow Diagram is a visual model of the economy that shows how money flows
through markets among households and firms It doesn’t matter where it begins, but
money flows from households to firms when goods and services are purchased, and the
money flows back to households from firms factors of production such as labor and
capital are purchased. This money goes back and forth through the economy hence the
circular flow.

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 • Market- A group of buyers and sellers of a good or service, and how they come
together to trade.
• Product markets- markets for goods and services, such as cell phones and
haircuts.
• Factor markets- markets for the factors of production: labor, capital, natural
resources, and entrepreneurial ability.
• Factors of production- inputs used to make goods and services: labor, capital,
natural resources, and entrepreneurial ability.

How a market works, people act in their self-interest. With protection of private property
and entrepreneurs, we get a functioning market system where resources are allocated to
those who can best use them through the price system.

CONSIDERATIONS IN APPLIED ECONOMICS

• Marginal Benefit – additional benefit derived from an additional activity
• Marginal Costs – additional cost incurred from an additional production of a good
or service
• Explicit Costs - easily recognized since they are expressed in monetary terms and
may involve actual financial outlays
• Implicit Costs - may not have to incur any monetary expense.
Ex. Opportunity Costs or the foregone value for choosing one alternative
(best alternative) over the other (second best alternative).
• Explicit Benefits - can be measured in monetary terms or levels of satisfaction or
utility
• Implicit Benefits - non-measurable

*Implicit benefits and implicit costs are harder to recognize because of the special
consideration of the decision maker who may not be aware of the social or public
effect of his actions
*Exclusion of implicit social benefits and implicit social costs will lead to improper
allocation of resources with its accompanying consequences

• Cost-Benefit Analysis - The practice of examining the cost and expected benefits
of a choice as an aid to decision making; An approach that weighs the benefits of
an action as against the cost
Ex. The cost of buying a new machine with an increased capacity as
against the income derived from using the new machine.

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 E What’s More?

TASK 2: Under normal circumstances, assuming that you have a daily budget allowance
of P150.00
How do you allocate you daily/weekly budget as a student?
Item Amount
__________ ___________
__________ ___________
__________ ___________
__________ ___________
__________ ___________
Others (Specify) ___________
Total ___________

Briefly explain the reason for the difference in the allocation per identified items/expense?
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________

E What can I Engage In?

TASK 3: You are a newly elected Mayor of a small municipality in Laguna. You have
noticed that your municipality log off behind its nearby municipalities in terms of
progress. What would be your first 3-priority projects/programs in order to develop your
area and activate its economy?

Project/Programs Expected Results

A What I have Learned

TASK 4: Consider the following situation and answer the questions below.
With the outbreak of Covid-19 in the Philippines, government issued a locked down
order in areas severely affected by the pandemic. Brgy. Magiting, in the locality of
Laguna is one of the areas with a high number of Covid 19-positive cases and the
number continuously rises.

Questions:
What do you think will happen to the following:
1. Pedro, a Restaurant Manager in the locality, the Head and the only working
member of the family?
_____________________________________________________________________.
2. To the Family of Pedro with 5-Members?
_____________________________________________________________________
3. To the Grocery shops in the locality?
_____________________________________________________________________

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 4. To the Drugstores in the area?
_____________________________________________________________________
5. To the Public Resort in the area?
_____________________________________________________________________

Putting yourself in each circumstance, how will you cope in response to the impact of
the situation?
1. As Pedro
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
2. As Family Member
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
3. As Grocery Owner
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________

A What I can do

TASK 5: POST-TEST. Choose the best answer from the given choices.
1. Economics is the study of how
A. society manages its unlimited resources.
B. to reduce our wants until we are satisfied.
C. society manages its scarce resources.
D. to fully satisfy our unlimited wants.

2. It is the basic and central economic problem confronting every individual and
society.
E. Choice
F. Needs
G. Scarcity
H. Wants

3. Economics is a social science because

A. It uses economics principles in an attempt to predict the future and solves
societal problems
B. It is about understanding how and why people behave and organize themselves
to manage scarce resources
C. It is about allocation of scarce resources to satisfy human needs and wants
D. It is part of our daily lives.

4. Economics is an applied science because

A. It uses economics principles in an attempt to predict the future and solves
societal problems
B. It is about understanding how and why people behave and organize themselves
to manage scarce resources
C. It is about allocation of scarce resources to satisfy human needs and wants
D. It is part of our daily lives.

5. This refers to the market where inputs for production were exchange.
A. Households
B. Firms
C. Product Market
D. Resource Market

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References

Griffiths, A and Stuart, W. (2004). Applied Economics 10th Ed. England, UK. Pearson
Education
Online:

https://www.investopedia.com/articles/economics/11/five-economic-concepts-need-to-know.asp
https://www.investopedia.com/terms/s/scarcity.asp#:~:text=Scarcity%20refers%20to%20the%20basic,ma
ny%20additional%20wants%20as%20possible.
https://opentextbc.ca/principlesofeconomics/chapter/1-1-what-is-economics-and-why-is-it-important/
https://policonomics.com/circular-flow-diagram/
https://www.thebalance.com/factors-of-production-the-4-types-and-who-owns-them-4045262

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 Module

G12-ABM-AS-MELC 2

THE UTILITY AND APPLICATION OF

2
Week
APPLIED ECONOMICS TO SOLVE
ECONOMIC ISSUES AND PROBLEMS 2

I What I Need to Know

Prior to the global Covid-19 pandemic, amidst rising global uncertainties, the Philippine
economy reportedly remains strong and is projected to grow 5.8% in 2019, before
recovering to 6.1% and 6.2% in 2020 and 2021, respectively according to the World
Bank. But last July 2020, the Philippine Statistics Authority reported that the country’s
economy shrank for the first time in over two decades, plunging the country to recession.

The above is just among the many economic issues facing the country. This module will
provide learners with insights about the issues affecting the Philippines and how Applied
Economics come into play to solve those problems.

At the end of the module, you should be able to:

1. Identify the different economic problems in the Philippines;
2. Explain each economic problem and how it affects Philippine development
in the 21st century;
3. Explain how applied economics can be used to solve economic problems
confronting the country.

D What I Know

TASK 1: Identify what is being asked in the following statements. Choose the best answer
in the box.
R.A.10351 4Ps Build Build Build
Poverty Income TRAIN LAW
Subsistence incidence poverty incidence Scarcity

________________1. The basic economic problem.

________________2. The proportion of Filipinos whose income is not enough to meet even
the basic food needs.
________________3. A law that corrects a longstanding inequity of the tax system by
reducing personal income taxes for 99% of taxpayers.
________________4. A human development measure of the national government that
provides conditional cash grants to the poorest of the poor, to improve the health,
nutrition, and the education of children
________________5. The government’s aggressive infrastructure program aimed to jack up
infrastructure and social spending.

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D What is It?

The fundamental economic problem is the issue of scarcity and how best to produce and
distribute scarce resources. Because of unlimited wants – People would like to consume
more than it is possible to produce (scarcity)
Answers to Basic Economic Questions/ Problems in a Capitalist Economy
What and how much to How to produce? For whom to produce?
produce?
• The consumer is • The basic objective of • Distribution of total
regarded as “king” the producers is to output of goods and
• The basic objective of earn maximum profits. services depends upon
the producers is to • A producer must the distribution of
earn maximum profits. minimize the cost of income.
• Producers will likely production • Incomes of different
produce goods and • The cost of a technique individuals as
services which would of production is determined by price
yield higher profits determined by the mechanism determines
• An increase in the prices of inputs and the distribution of
demand for a the input prices are goods and services.
particular commodity determined by price • As a result of this
will lead to a rise in its mechanism in the inequal distribution of
price. A rise in the factor market income, the
price of a commodity, distribution of goods is
given the cost of Technique of production to also very much
production, will lead to be used inequal.
more profits • The producer chooses • The rich people get a
that technique of larger share of the
production which is national product.
least costly. • The poor people with
• The cheapest way of low incomes, receive a
producing a commodity smaller share of the
depends on relative national product.
resource prices:
• If labor is relatively
cheaper than capital,
the producer will adopt
a labor-intensive
technique
• If capital is cheaper
than labor, capital
intensive technique,
will be employed by the
producer.

Economic Problems facing the Philippines in the 21st Century

Unemployment
The Philippines' unemployment rate for April surges to 17.7%, the highest ever on record,
as the coronavirus pandemic wipes out jobs accounting to 7.3 million unemployed
Filipinos in the labor force in April 2020. 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. Unemployment rate in January 2020 was 5.3% while in April
2019, it was recorded at 5.1%. After January 2020, an additional 4.9 million people
became jobless.

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Solving Unemployment
1. Appropriate economic policies for labor-intensive industries
2. Improve the educational system of the country especially in the rural areas
3. Minimize rural-urban migration by improving the economic environment in rural areas
4. Proper coordination between government and the private sector to solve the problem of
job mismatch
5. Slowing population growth. Philippine growth must increase faster than the population.
6. Limit the size of families
7. Provision of more investment opportunities to encourage local and international
investment

Poverty
The full year 2018 poverty incidence among
population, or the proportion of poor
Filipinos whose per capita income is not
sufficient to meet their basic food and non-
food needs, was estimated at 16.67%. This
translates to 17.7 million Filipinos who lived
below the poverty threshold estimated at
P10,727, on average, for a family of five per
month in 2018. On the other hand,
subsistence incidence among Filipinos, or
the proportion of Filipinos whose income is
not enough to meet even the basic food
needs, was registered at 5.2% in 2018. The
monthly food threshold for a family of five
was estimated, on average, at P7,528.

While the country has made great strides in

development, much of the population is still
employed in the informal economy, running
small businesses not recognized by the
government and eking out a living day to
day.

Solving Poverty
1. Create more and better jobs
2. Eradicate corruption
3. Provision of unemployment benefits for those who will be unemployed due to natural or
man-made calamities
4. Increase social services like education, health care and food subsidies for sustainable
poverty reduction (e.g. Pantawid Pamilyang Pilipino Program (4Ps) - a human development
measure of the national government that provides conditional cash grants to the poorest
of the poor, to improve the health, nutrition, and the education of children)
5. Invest in education

Income Inequality
The income gap between the richest and poorest Filipino families narrowed in 2018 but
remained substantial even amid significant increases in family income and savings.

Results of the latest Family Income and Expenditure Survey (FIES) put the Filipino family’s
average income and spending in 2018 at around P313,348 and P238,641 a year, respectively.
These totals translate to average annual family savings of P74,707 in 2018.
FIES is conducted every three years, the results of which provide information on levels of
living, income disparities, and spending patterns.

Adjusted for 2012 price levels, the average 2018 annual family income was P267,134,
compared to P250,491 for 2015. Family expenditure, meanwhile, adjusts to P203,445 in 2018
and P201,693 in 2015.

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 The income gap between the richest and poorest decile groups was 7.6 times in 2018.
Those in the top 10% were earning 7.6 times more than those in the poorest 10% that
year.

To address this, the government issued Republic Act No. 10963 or the Tax Reform for
Acceleration and Inclusion (TRAIN) law, a tax reform package that corrects a
longstanding inequity of the tax system by reducing personal income taxes for 99% of
taxpayers, thereby giving them the much-needed relief after 20 years of non-adjustment
of the tax rates and brackets. Relative to this, studies at the Philippine Institute for
Development Studies (PIDS) demonstrated through numerical simulations that TRAIN
likely worsened poverty and income inequality in the country.

Solving Income Inequality

1. Policies to enforce progressive rates of direct taxation on high wage earners and
wealthy individuals.
2. Direct money transfers and subsidize food programs for the urban and rural poor
3. Direct government policies to keep the price of basic commodities low
4. Increase minimum wage
5. Invest in education

Infrastructure
The UN Economic and Social Commission for Asia and the Pacific, in its Asia-Pacific
Countries with Special Needs Report 2017, said the Philippines posted a score of 0.336
in the Access for Physical Infrastructure Index (APII) for 2015. The APII analyzed the
condition of infrastructure in 41 Asia-Pacific countries over time.

Among southeast Asian countries, the Philippines was placed higher than Indonesia
(0.278), Lao People's Democratic Republic (0.225), Myanmar (0.198), and Cambodia
(0.186). The Philippines, however, lagged behind Thailand (0.418), Vietnam (0.419),
Malaysia (0.502), and Singapore (0.708). Brunei was not in the roster.

The Philippines’ crumbling infrastructure has also resulted in transport and economic
woes. A 2014 study by the Japan International Cooperation Agency (JICA) showed that,
without intervention, traffic costs will likely surge to P6 billion a day by 2030 from P2.4
billion.

The same study also said transport cost will be 2.5 times higher by 2030 if congestion is
not alleviated.

The Duterte government’s aggressive infrastructure program dubbed as “Build, Build,

Build,” aimed to jack up infrastructure and social spending to about 7.1% of gross
domestic product until the end of its term, in a bid to boost the economy to 7-8% growth
until 2022 from 6.9% in 2016, and slash poverty incidence to 13-15% from 21.6% in
2015.

Solving the Infrastructure Problem

1. The government shall implement fiscal reform program
2. Continue reform in key sectors- particularly power, roads and water – to improve cost
recovery, competition, and institutional credibility and to sharply reduce corruption
3. Improving central oversight of the planning and coordination of investments
4. Focus on investments through public-private partnerships to achieve faster delivery of
service

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 E What’s More?

TASK 2
Find an article from any magazine or newspaper discussing economic issues (local,
national or international) that you think will greatly impact the country’s economic
development. Paste the article in a short bond paper and discuss:
1. How will the issue impact the country’s economy?
2. What measures can the government take to address the issue/ problem?

E What can I Engage In?

TASK 3
Interview your parent/ guardian (preferably people who can recall changes in the
country’s economy in the past 5-10 years). Below are sample questions you may ask:
• Have prices of basic commodities increased in the last 5-10 years?
• How did it affect the consumption of the household?
• Were there significant increases in income/ wages as well?
• What significant economic problem/s was/were present during the day?

What have you observed in the course of the interview? Were the issues then vary from
the present? Explain.

A What I have Learned

TASK 4
A. Identify 5 different economic problems in your locality/ municipality that need to be
addressed
B. State the possible causes of the problem
C. What did your local officials do to curb the problem?
D. What can you contribute as an individual to solve the said economic problem?

Name of Barangay/ Municipality:______________________

Problem Cause/s Solution/s Individual
Contribution/s
Example: • Improper waste Issuance of • Abide by the
Flooding disposal municipal ordinance issued
• Use of non- on solid waste ordinance
biodegradable management • Use of eco-bags
products instead of
plastic bags
1.
2.
3.
4.
5.

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A What I can do

TASK 5: POST-TEST. Choose the best answer from the given choices.

1. Why does scarcity exist?

A. Each year workers tend to produce less than previously
B. Machines wear out in time
C. There are not sufficient resources to meet everyone's wants
D. There is a limit to people's wants

2. Poverty is the proportion of poor Filipinos whose per capita income is not
sufficient to meet their basic food and non-food needs.
A. True
B. False

3. Which of the following statements about approaches to poverty is false?

A. Double the income of households.
B. Create more and better jobs.
C. Eradicate corruption.
D. Invest on education.

4. The following will help solve Income Inequality EXCEPT:

A. Policies to enforce progressive rates of direct taxation on high wage earners
and wealthy individuals.
B. Direct money transfers and subsidize food programs for the urban and rural
poor
C. Direct government policies to keep the price of basic commodities low
D. Decrease minimum wage to help business owners.

5. Republic Act No. 10963 corrects a longstanding inequity of the tax system by
increasing personal income taxes for 99% of taxpayers.
A. True
B. False

References

Griffiths, A and Stuart, W. (2004). Applied Economics 10th Ed. England, UK. Pearson
Education
Online:

https://www.bworldonline.com/philippines-infrastructure-challenge-huge-gap-black-hole/
https://www.economicsdiscussion.net/economic-problems/solution-to-the-basic-economic-
problems-capitalistic-socialistic-and-mixed-
economy/31163#:~:text=Under%20such%20economies%2C%20all%20economic,demand%20an
d%20supply%20of%20goods.
https://www.economicshelp.org/blog/glossary/basic-economic-problem/
https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps1827.pdf
https://www.worldbank.org/en/country/philippines/publication/philippines-economic-update-
october-2019-edition
www.dof.gov.ph
www.psa.gov.ph