Applied Economics
BASIC ECONOMIC PROBLEMS: Confronting
the Development of the Philippines in the 21 st
Century
1. Poverty and Unequal Distribution of
Income
 Poverty – is a restricting condition
experienced by millions of families
that prevents them in attaining the 3.
minimum level of consumption for
subsistence living.
TWO CATEGORIES OF POVERTY
a. Absolute Poverty – lack of income
to buy the basic food and
necessities for subsistence living.
o Poverty Threshold – 4.
income needed to purchase
these minimum nutritional
requirements and other
basic necessities for daily
survival. 5.
o Poverty Incidence –  Food Self-Sufficiency (FSS) – is
proportion of households in
the country with family
income.
b. Relative Poverty – refers to the
structure on how the national 6.
income is being distributed among
households in an economy.
o Lorenz Curve – shows the
share of the various
household groups (ranked
from the poorest to the
richest) on the total national
income.
o Gini Coefficient – is a
measure of income
inequality from the Lorenz
Curve.
2. Demographic Changes and its Economic 7.
Implications
 Overpopulation – is the state
whereby the human population
rises to an extent exceeding the
carrying capacity of the ecological
setting.
 it puts a burden on the government
to provide the social services such
as education, health, and housing.
a. Internal Migration – voluntary
migration of people within their own
country.
b. External Migration – moving to a
different state, country, or continent.
Low Investment in Human Resource
Development
 Knowledge capital is formed
through heavy investments in
higher education, science and
technology, and research and
development.
Weak Infrastructure
 Physical Infrastructure –
facilitates and expands transactions
that likewise fuel economic
growth.
Pursuing Food Security
defined as the ability of a
household or region to maintain its
own food requirements.
 rice and corn
Slow Adoption of Modern Technology
 Technology – is the manner of
processing raw materials or
intermediate inputs into
transformed outputs through the
use of factor inputs.
a. Labor-intensive technology –
a technology that is biased in
the use of labor.
b. Capital-intensive technology
– refers to use of more capital
relative to labor in the
production process.
Environmental Sustainability and the
Country’s Development Thrust
 Sustainability – means meeting
our own needs without
compromising the ability of future
generations to meet their own
needs.
o Overfishing
 Applied Economics
o Forest degradation