Reviewer of Applied Economics for Periodical exams
Economics - is defined as the science of
scarcity. This is a social science that deals with
the behavior of people in dealing with the
issue of scarcity. Economics is the study of
Production, distribution, and consumption
of goods and services.
Three key words that need to be remembered
in the study of economics
 Ownership
 Use, and
 Exchange of scarce resources.
Applied Economics
- Sees its essence in the study and
dynamics of economics and, in its
broadest scope and sense, human
civilization.
- It is the application of economic
principles and theories to real
situations, and trying to predict what
the outcomes might be.
- The application of economic theory
and econometrics in specific settings.
Roger E. Backhouse and Jeff Biddle in their
book “The Concept of Applied Economics: A
History of Ambiguity and Multiple
Meanings” trace the origin and meanings of
applied economics, which goes back to the
writings of Say and Mill. According to these
two economic experts, it was Say who wrote
about economics as “applying” the “general
principles of political economy” to “ascertain
the rule of action of any combination of
circumstances presented to us.” The full title
of Mill’s (1848) work is principles of political
economy with some of their applications to
Social Philosophy. (Backhouse, R. and Jeff
Briddle, 2000, ‘The concept of applied
economics: a history of ambiguity and
multiple meanings’, History of applied
Economics, 2000.)
ECONOMICS IS NOT A HUMAN BUT
ALSO A SOCIAL SCIENCE.
The claim that there is a body of abstract
economic theory, called the “core” comes
from Modern mainstream economics.
Likewise related claim was also proposed by
the Modern mainstream economics that
applied economics should involve the
practitioner in the lowering of some
elements of the abstraction of this to
examine particular issues.
This lowering of the level of abstraction
may involve the following actions:
1. Relabeling variables as more specific,
concrete concepts;
2. Providing some structure to allow the
drawing of more detailed conclusions;
3. Producing numerical estimates for
some of the parameters;
4. Using the analysis to interpret the
world phenomena which are
interpreted as examples of some more
general class of events that the core
theory might be used to examine.
(Backhouse, R. and Jeff Biddle, 2000,
‘The concept of applied economics: a
history of ambiguity and multiple
meanings’, History of Applied
Economics, 2000)
Four elements to the studying of Economics.
 Description: we need to know what
the rest of the world looks like
compared to us.
 Analysis: we need to know why things
work and how they happen, so we can
better problem-solve.
 Prediction: we need to able to make
choices based on consequences.
Making these choices is the
responsibility of all citizens.
 Explanation: people have to be able to
communicate what they know. After
the economists analyze and understand
why and how things work, they need
to communicate this knowledge to
others.
Reviewer of Applied Economics for Periodical exams
Macroeconomics – the branch of economics
that studies the overall working of a national
economy.
Microeconomics – the branch of economics
that studies the economy of consumers or
households or individual firms.
Economics as both Science and Art – whether
economics is a science or an art or both have
been for a long time a controversy among
economists.
Taylor & Francis provides a very purposeful
view of Applied Economics.
Basic Economic Problem – The basic
economic problem that has confronted
humanity since time immemorial can be
encapsulated in this quote from Mahatma
Ghandi: “The World has enough for
everyone’s need, but not enough for
everyone’s grred.”
Scarcity, or limited or insufficient resources is
one of the most basic economic problems that
the world face then, now, and even in the
future.
The basic economic problem – sometimes
called the basic or central economic problem –
emphasizes the point that an economy’s
unlimited resources are insufficient to address
and satisfy all human wants and needs.
Significant Concepts on Scarcity – it is
already a common knowledge that a limited
supply couple with a high demand result to a
lack equilibrium in pricing. This is the
principle of supply and demand that emanates
from the basic economic problem that is
Scarcity of resources or goods.
Illustration of the CONCEPT OF
SCARCITY
Limited/ Unlimited
scarce wants and
resources needs
Roduction
Principle – There is something that you want
to have at present but you may not possess in
the future.
How to Control Supply and Demand – having
control of the supply puts a competitive lever
in one’s control in demand. An example of this
principle is how the De Beers company
purchases huge quantities of diamonds on the
world market, simply for the person of keeping
them scarce so that their exuberant price is
maintained.
Scarcity in many other
Situations/Predicaments/Conditions – in the
absence of scarcity of anything or something,
no desire arises or no valuing can happen to
what is not scarce at all.
One needs to remember that can scarcity is a
non-linear process – which means that
scarcity does not progress or develop smoothly
from one stage to the next in a logical way.
The Retail Sales Principle – ‘Until supplies
last’, ‘Only this week’, ‘Last item!’. Scarcity is
a principle, which is not a stranger to all
retailers who milk it right down to the last
drop. And this is also known as the “Scarcity
effect”.
Banning – banning results as well in scarcity.
Scarcity is the shortage or lack of something.
And banning it one makes things worse.
The Pressure of Competition – the social
dimension or the social nature of scarcity
heightens the principle that we judge ourselves
against others.
Parent-child Relationship – In domestic
settings and environments or contexts, the
scarcity principle can also be operative. In
dividing the affection and attention of parents
to their children, they often try to control
children,
Needs and Wants
A Need is something indispensable...
something you have to have; something cannot
do without… a good example is food.
A Want is dispensable… it is something you
would like to have. It is not absolutely
Reviewer of Applied Economics for Periodical exams

necessary, but it would be a good thing have it. Factors of Production

A very good example to this is music.
The Four Basic Economic Problems of Every
Nations – The central economic problem of
scarcity of resources is broken down into four
basic problems of an economy. So the four
basic economic problems includes:
1. What to Produce?
2. How to Produce?
3. For whom to Produce?
4. What provision should be made for
economic growth?
First-What to Produce? – The decision has to
be made as to what goods and services should
be produced, which is the first basic economic
problem of a nation and includes as well in
what quantities should be produced.
Second-How to Produce? – the second basic
problem is to decide about the techniques or
methods to be used in order to produce that
required good. This problem is primarily
dependent upon the availability of resources
within the economy.
 Land
 Labor
 Entrepreneur
 Capital
Economics Problems of the Philippines
 Unemployment
 Poverty
 Poor Infrastructure
 Heavy Dependence on Remittances
Unemployment – refers to the situation
wherein one person is willing and actively
searching for a job, but couldn’t get one.
Poverty – is the state of being extremely poor.
Poor Infrastructure – refers to the physical
and organizational structure and facilities
needed for the operation of a society or
enterprise.
Heavy Dependence on Remittances –
Filipinos tend to depend “too much” on their
family member who are Overseas Filipino
Workers (OFW)

Third-For whom to Produce? – The third Asean Icon

basic problem to be decided is the allocation of Lee Kuan Yew (1923-2015) – he is a primary
goods among the members of the society. The example of how a leader of a previously
allocation of basic consumer goods or undeveloped country can overcome its
necessities and luxuries comforts and among country’s basic economic problems and move
the household takes place on the basis of toward economic growth.
among the distribution of national income.
He is the longest-serving prime minister in
Fourth-What provision should be made for world history. He left a legacy of how to
economic growth? – this is one of the efficiently run a country
important basic problems of an economy
because having made the three earlier
decisions: the society has to see whether the
resources it owns are being utilized fully or
not.
Resources are limited in two essential ways:
1. Limited in physical quantity, as in the
case of land, which has a finite
quantity
2. Limited is use, as in the case of labor
and machinery, which can only be
used for one purpose at any one time.