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A UNDERSTANDING APPLIED ECONOMICS
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E Objectives:
Learning
By R
the end of the session the students will be able to:
 define applied economics,
1.
 identify basic applied economic concepts, and;
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 recognize the importance of applied economics in our daily lives.
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Lesson Targets:
O
Lesson targets are skills and knowledge you want to be able to accomplish at the end of the session.
Nthe lesson targets carefully and keep them as we go through in today’s session.
Read
1.
 I can grasp the meaning of applied economics.
1 I can explore the basic economic terms and concepts.
 I can comprehend the importance of applied economics in our daily lives.

DISCUSSION
Concept Notes:

ECONOMICS is a social science as it uses scientific method to build theories that can help explain
the behavior of people or organizations. It deals with the study of production, consumption,
distribution, and exchange of goods and services for the satisfaction of human needs and wants.

Furthermore, it is concerned with the efficient use of limited resources to achieve maximum
satisfaction of economic wants.

The term ECONOMICS comes from the Ancient Greek words…

Oikos (house) and Nomos (management) which means ‘Household Management’.

APPLIED ECONOMICS is the study of economics in relation to real world situations, as opposed
to the theory of economics. It is the application of economic principles and theories to real situations,
and trying to predict what the outcomes might be. In other words, it is the study of observing how
theories work in practice.

BASIC ECONOMIC TERMS AND CONCEPTS

 Economist
It is someone who studies economic theory and applies it to the real world.

 Microeconomics
It is the study of a single factor of an economy – such as individuals, households, businesses,
and industries – rather than the economy as a whole.

 Macroeconomics
It is the study of an entire economy or one of its principal sectors.

 Consumers
They are the ones who buy goods or services for personal use rather than for resale or use in
production or manufacturing.

 Producer
It is a person, group, or business that makes goods and provides services to satisfy consumers’
needs and wants.

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  Resources are also called the factors or inputs of production.
Economic resources are the goods or services available to individuals and businesses used to
produce valuable consumer products. The classic economic resources include the following:

 Land is natural resources that can be used for production.

 Labor input consists of the physical and intellectual services provided by human
beings.
 The resource called "capital" consists of the machinery and equipment used to
produce output. Note that the use of the term "capital" differs from the everyday use of
this term. Stocks, bonds, and other financial assets are not capital under this definition
of the term.

Entrepreneurial ability refers to the ability to organize production and bear risks.

 Scarcity
It is a condition where there are insufficient resources to satisfy all the needs and wants of a
population which forces people to make decisions about how to allocate resources in the most
efficient way.

 Needs and Wants

Needs pertain to the essentials of life such as food, clothing and shelter while Wants are the
desires of non – essential items.

 Choice
It refers to the decision made with the presence of scarcity to maximize satisfaction.

 Opportunity Cost
It refers to the value of the best forgone alternative.

NOTE:

 Applied economics is the use of the insights gained from economic theory and research to
make better decisions and solve real – world problems.

 Applied economics is a popular tool in business planning and for public policy analysis and
evaluation.

 Individuals can also benefit from applying economic thinking and insights to personal and
financial decisions.

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