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ABM- Applied Economics 12 Q1 W2 Mod2

Economics (University of Cagayan Valley)

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Republic of the Philippines

Department of Education National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center, Arroceros Forest Park
Antonio J. Villegas St. Ermita, Manila

Applied Economics

Basic Economic Problems

and How Applied Economics
Solves Economic Problems

? ?

Quarter 1 Week 2 Module 2

Learning Competency:
Utility and application of Applied
Economics to solve economic issues and problems

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HOW TO USE THIS MODULE?

Before starting the module, I want you to set aside other task/s that
may disturb you while enjoying the lessons. Read the simple instructions
below to successfully enjoy the objectives of this kit. Have fun!
1. Follow carefully all the contents and instructions indicated in every
page of this module.
2. Write on your notebook the concepts about the lessons. Writing
enhances learning that is important to develop and keep in mind.
3. Perform all the provided activities in the module.
4. Let your facilitator/guardian assess your answers using the
answer key card.
5. Analyze conceptually the post-test and apply what you have learned.
6. Enjoy studying!

PARTS OF THE MODULE

 Expectations - These are what you will be able to know
after completing the lessons in the module.
 Pre-test - This will measure your prior knowledge and the
concepts to be mastered throughout the lesson.
 Looking Back to your Lesson - This section will measure what
learning and skills did you understand from the previous
lesson.
 Brief Introduction- This section will give you an overview of
the lesson.
 Activities - This is a set of activities you will perform with a
partner.
 Remember - This section summarizes the concepts and
applications of the lessons.
 Check your Understanding - It will verify how you learned
from the lesson.
 Post-test - This will measure how much you have learned from
the entire module

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LESSON Utility and Application of Applied Economics to

2 Solve Economic Issues and Problems

EXPECTATIONS

Specifically, this module will help you to:


 identify the basic economic problems

illustrate how applied economics can be used to solve economic
problems

 construct framework to solve the economic problem

solve problems on economic activities
Let us start your journey in learning
more on the resources of production and
PRE-TEST possible issues on the production of goods and
services. Are you excited to answer the Pre-
test? Smile and Enjoy!

Part I. Identification: Direction: Please read and analyse the questions

carefully. 1) What do you think were the resources used to produce the
products (dresses)? 2) What were the issues/problems in the production
of the products?

Resources In the Issues/Problems in the

Production (dress) Production
1

4
https://int.search.myway.com/search/AJimage.j
html

Part II. Matching Type: Match Set A or the central economic

issues and problems to Set B or the description of economic issues.

SET A SET B
____1. What to produce A. the legalities of the production

____2. How to produce B. the nature of goods to produce

____3. Whom to produce C. the allocation of the

among members of the society
____4. What provision in the D. the methods of production

production of products

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Great, you finished answering

the questions. You may request
LOOKING BACK TO YOUR LESSON your facilitator to check your work.
Congratulations and keep on
learning!

Last topic, we discussed the nature and scope of economics; the two fields of
the study which include micro and macroeconomics. We also discussed the
kinds of goods and the economic resources to produce the goods. Let’s check
your retention of our past lesson.

Part I Multiple Choice.

Directions: Kindly choose the letter of the correct answer. Encircle your answer.

1. The physical effort of the manpower to produce the basic needs of the
consumers, describes which factor of production?
a) Land
b) Capital
c) Labor
d) Entrepreneur
2. The initiative and creativity to produce something new describes which factor
of production?

a) Land
b) Capital
c) Labor
d) Entrepreneur

3. The equipment of the coffee shop to produce cups of coffee, are what kind of
goods or products?
a) Consumer goods
b) Either consumer goods or capital goods
c) Capital goods
d) Economic goods

4. Which best of the following best describes economics as a social and an applied
science?
a) The study of products we need to survive
b) The study of how customers make choices when there is unlimited
supply of resources
c) The study of human personalities
d) The study of how buyers make choices when there is limited supply

5. The following are examples of customers’ basic needs.

a) Water and shelter
b) Iced tea
c) Laptop and cellular phones
d) Expensive bags

Part II. Matching Type

Direction: Please match the resources with the statements.

A) Land C) Labour
B) Capital D) Entrepreneurship
1. ________________The idea for a car that runs on a rocky road
2. ________________The crude oil used by ABM Firm to produce gasoline
3. ________________The machine used by Mang Jose, a tailor to stitch PPEs
4. ________________The manpower to build bridges and houses
5._________________Technicians who repair computers

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BRIEF INTRODUCTION

In the article of Forbes Custom (2017), The Philippines: Asia’s New

Economic Powerhouse, the Philippine economy has transformed into one of
Asia’s most dynamic economies on the back of fast-paced Gross Domestic
Product (GDP) growth.(www.forbes.com). For the longest time, it has all the
opportunities to sustain its growth and stability. However, due to the problem
on pandemic, at present, it is suffering from economic depression. The issue of
scarcity on supply due to limited resources, but unlimited wants, is the
ultimate economic problem. Scarcity implies a limited quantity of resources
needed in production.
Guru, S. (2020) mentioned, the main issues on production include the
products to produce; how to produce these products and for whom to produce
the products and how to make the economy grow. Economics, therefore, is
concerned with the allocation of resources to make the most efficient use of
these resources.

The Four Basic Economic Problems

In the article of Guru, S. (2020) Basic Central Problems Faced by an
Economy, there are basic problems common to all economies. In terms of
production, common to all countries is the problem on scarcity. This arises
because the resources are limited and have alternative uses. This problem gives
rise to four basic problems of an economy.

In this topic, we will look into these basic problems of what to produce,
whom to produce, how to produce and what provisions on production for
economic growth. As we said earlier, economics can be a tool to solve these
economic problems. Economists formulate strategic solutions to economize the
problems such as economic growth or the ability to produce goods and
services, reduce expectation or the ability to reduce our wants such as
lessening consumption, and improve the use of resources or the capacity to use
our existing resources wisely. http://www2.harpercollege.edu/mhealy/eco212i/lectures/5es/5es.htm

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Learning Module for Applied Economics

What to Produce?
If there is scarcity of goods in a
society, the firms have to make
wise decision on what
goods/service should be produced
and determine the quantity to
produced. For example, which do
we produce more, masks or
canned goods? But we need
capital goods like machines, or
consumer goods like laptops. The
society must decide the type and
quantity of good/service to be
produced to meet the immediate
needs of the society.
How to Produce?
The production of goods or
services needs effective methods
and processes. For example, you
can produce PPEs using sewing
machines; sardines using aqua
resources like fish and land
resources like tomatoes. The
production requires more labor
and capital investment.

BASIC ECONOMIC
PROBLEMS OF THE
COUNTRY

For whom to Produce? What provision/laws should be

The society would always
consider the immidiate
beneficiary of the goods. For
example when we produce
masks and PPEs we suppose to
produce first these for the
frontliners of COVID Pandemic
fight. A society decides on the
distribution of the goods
and services among the
members of society who need
them the most.
made for economic growth?
A society uses all its resources for
current consumption. If a society
uses all its resources, then its
production capacity will not
increase. The standard of living of
the people and the income of the
workforce remain constant until
the standard of living will decline in
the future. The society must decide
also on the part of the resources to
be saved for future progress

APPLIED ECONOMICS ON BASIC ISSUES AND PROBLEMS

Applied Economics seeks to solve the problems on scarcity. This
happens when human wants for goods and services exceed the available
supply. In a modern economy, it is evident that a division of labor happens
when people earn income by specializing in what they produce. They will use
that income to purchase the products they need or want every day (BC Campus
2020).

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Learning Module for Applied Economics

Also, in the division of labor, it allows workers and firms to produce

more. This is because: a) agents focus on areas of advantage due to natural
factors and skill levels; b) the agents learn and invent; c) the agents take
advantage of economies of
scale. Division and
specialization of labor only
work when individuals can
purchase what they do not
produce in markets.
Applied economics then
helps you understand the
basic problems facing the
world today. It helps you
become a well-rounded thinker. And most importantly, it prepares you to be a
good citizen. (Credit: Nina Hale/Flickr Creative Commons)
https://opentextbc.ca/principlesofeconomics/chapter/1-1-what-is-economics-and-why-is-it-important/

ACTIVITIES

Activity No. 1 Let’s analyse this passage. This will help you understand our
new topic on the basic economic issues and problems in the production of
goods and services. Are you ready? If yes, you may now analyse the situation.

Problem 1 You read about a traveling situation in which some airline

passengers seem to get a “fast pass” through security and move effortlessly
through the boarding process, while other passengers are waiting in long lines.
In this example, the travellers who are moving quickly through the boarding
process are probably:
a) VIP passengers waiting longer more in an inconvenient lines
b) Passengers who value time and convenience and are willing to pay
additional fees for the privileges and other services
c) Loyal passengers whom they knew beforehand in which line to go to
avoid delays and inconveniences
d) Government officials who are seated in the executive area

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Learning Module for Applied Economics

Activity 2. Multiple Choice (with critical thinking analysis)

Direction: Please encircle the correct answer.

1. Scarcity of resources in your locality (Manila) is evident. Only available
are fabrics, electric sewing machines and skilled workers. The government said,
you are only allowed to work from home to be safe and free from infection of
viruses. Which items most likely you need to produce?

a) PPEs
b) Canned goods
c) Sacks of rice
d) Sewing machines

2. Manila is ranked 2nd in the most cases of COVID patients in Metro

Manila. The city needs urgent services of the medical frontliners in curing the
increasing number of patients. There is scarcity in the raw materials for
production. To whom would you produce first the available resources?
a) Soldiers
b) Police Officers
c) Medical Frontlines
d) Your family

3. There is an urgent need of PPEs by the medical frontliners in the City of

Manila due increasing number of COVID patients every day. Which is not true
of producing the products (PPEs)?

a. Import from China

b. TESDA students and skilled workers may produce the PPEs
c. Manufacturers/suppliers may supply the PPEs
d. Export PPEs to Japan as gross national products

4. The ABM Manufacturing Company decides to produce more on liquid soap

than bar soap to supply the growing demands in the market. It solves issues
on:

a. Whom to produce
b. How to produce
c. How much incentive
d. What to produce

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Learning Module for Applied Economics

Activity 3 Directions: You may collaborate and communicate with your friends
and family members in doing the tasks. Currently, we are dealing with scarcity
on units of bicycles. Below is a framework showing the solution on how to deal
with economic issues on meeting the products.

Question: As an agent of the economy, how will you deal with this scarcity?
Choices are given below. Place them in their proper columns as to economic
growth; and improve the use of available resources and reduce expectations.

http://www2.harpercollege.edu/mhealy/eco212i/lectures/5es/5es.htm

Answer a) b) c)

__________________ _____________________ __________________

_________________ _____________________ __________________
__________________ _____________________ __________________
__________________ _____________________ __________________
__________________ _____________________ __________________

ability to produce goods and services; reduce our wants or lessening

consumption; use our existing resources wisely; don't waste limited resources;
productive efficiency; allocates efficiency; full employment and equity of
resources; and reducing wants

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Learning Module for Applied Economics

REMEMBER

 Economics can be a tool to solve economic problems on the

production of goods and services.

 Production is the process by which resources are transformed into
useful forms.

 Resources are things provided by nature that can be used directly
or indirectly to satisfy human needs.

 The basic economic problems on production includes: what to
produce, whom to produce, how to produce and what provisions on
production for economic growth.

 Strategic options/decisions to economize the problems include:
economic growth – ability to produce goods and services; reduce
expectation- reduce our wants - lessening consumption; improve
the use of resources - use our existing resources wisely; don't
waste the limited resources; productive efficiency; allocate
efficiency; full employment and equity of resources; and reduce
expectations – reducing wants.

CHECK YOUR UNDERSTANDING

Fill in the Blanks.

Directions: Please read and answer the following sentences

 Among nations, these are the common economic problems on production

of goods and services: a)__________________; b)_______________________;

c) ________________; d) __________________.
 Economics can be a tool to solve the fundamental problem in economics
which is _________________ in the production of goods and services.

 The strategic solutions/decisions/options to economizing problems
include a)________________; b)___________________; and c)_______________.

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Learning Module for Applied Economics

POST-TEST

Part I TRUE or FALSE

Directions: Please write TRUE if the statement is correct and FALSE if the
statement is incorrect.

1. _______________Scarcity in goods and services happens if the resources in

the production are inadequate or scarce.

2. _______________Customers must choose among several alternatives if

scarcity exists.

3. ________________ Income inequality is the gap in income that exists

between the rich and the poor customers willing to buy
the same products.

4. ________________Shortage of goods and services is an economic problem;

and shortages are always constant

5. _________________The Build Build Build Program by the government aims

to help improve the infrastructure projects and other
programs of the country.

Part II Multiple Choice. Choose the letter of the correct answer.

1. The fundamental economic problem that must be solved efficiently
a) Scarcity of resources
b) Health system
c) Surplus of demands
d) Export policies

2. Economists point out that scarcity must be addressed to protect the

a) The poor but not the rich
b) Both the poor and the rich
c) Neither the poor nor the rich
d) The poor but never the rich

3. What two factors contribute to scarcity in the production of goods and

services?
a) Unlimited resources and limited wants
b) Unlimited resources and wants
c) Unlimited wants and limited resources
d) Limited resources and wants

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4. If there is scarcity in public transportation, what should the learners do?
a) Home based learning is an alternative choice for access to education
b) Stop learning while waiting for transportation shortage to be solved
c) The government must import units of car from neighbor countries
d) All choices are applicable

5. The economists describe the amount of resources in an economy as:

a) Always constant
b) Can never decrease or increase
c) Unlimited at any moment in time
d) Limited at any moment in time

REFLECTIVE LEARNING SHEET

Every society must make choices

about which essential should be allocated
with the available but limited resources
for production. In most cases, where
there is scarcity in the production of
necessities, or where there are no enough
funds to accomplish everything for the
satisfaction of everyone, the society has to
make better choices.
Today, we have to adjust to the
new normal way of living. There is
scarcity in the production of goods and
services for everyone’s needs and wants.
Everything in this world has limitations.
Rich and poor, all individuals…”ceteres
paribus….” “all else are equal”…..
Regardless of your economic
status, which is more important to you,
health or unlimited supply for your
wants?

_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

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Learning Module for Applied Economics

Name______________________________Year/Section_______________Date___
Teacher____________________________School_____________________________

Worksheet (Additional Activity)

Let us assess your creativity and love for nature.

Directions: Please read carefully. Despite the limited resources and

scarcity of products for our consumption, today, we still want to achieve

maximum satisfaction. We make use as few resources as possible, allocate our
resources where they are best suited, and use the appropriate technology or
materials and produce the right goods and services.

Given the resources below, please select the most efficient products that could
be produced to maximize production and help the economy.

Raw material Finished Product/Services Choice

1. Steel: casino tokens or public cars? ______________________

2. Crude oil: gasoline or kerosene? ______________________
3. Cars: small cars or SUVs ? ______________________
4. Flour: cakes or breads? ______________________
5. Cloth scraps: doormats or washable masks ______________________
6. Fruits: canned juices or fresh fruits? ______________________
7. Vegetables: fresh or frozen vegetables? ____________________________
8. Coconut oil: cooking oil or expensive lotion? _______________________
9. Sources of air: electric fans or units of aircon? _______________________
10. Imports: PPEs or clothes from Korea? __________________________

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ANSWER KEY

PRETEST:
Part
1. Land
2. Labor
Part II
1. B
2. D

LOOKING BACK TO YOUR LESSON:

Part I
1. C
2. D
3. C
Part II
1. D
2. A
3. B

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Learning Module for Applied Economics

E-SITES

To further explore the concept learned today and if it possible to connect the internet, you may visit the
following links:
https://www.slideshare.net/HannahCullen/lesson-3-basic-economic-problems
https://www.yourarticlelibrary.com/economics/4-basic-central-problems- faced-by-an-economy-
explained/36608

REFERENCES

The Economic Problem: Scarcity and Choice Retrieved on June 08 2020 from
www.cob.jmu.edu.com
Enriquez, H. C. (2020). Basic Economic Problems of the Country. Retrieved on June 01 2020 from
https://www.slideshare.net/HannahCullen/lesson-3-basic-economic-problems
Guru, S. (2020) 4 Basic Central Problems Faced by an Economy Retrieved on June 10 2020 from
https://www.yourarticlelibrary.com/economics/4-basic-central-problems-faced-by-an-economy-
explained/36608
Pettinger, T. (2019). Examples of Economic Problems retrieved on June 02 2020 from
https://www.economicshelp.org/blog/15276/economics/examples-of-economic-problems
Pretty, N. (2020). Basic terms in Economics. Retrieved on June o1 2020 from
https://www.slideshare.net/nikspretty/basic-terms-in-economic
Websites:
https://d3tl80hy6t5toy.cloudfront.net/wp
content/uploads/sites/4/2012/09/06052018/Six-M.png
https://europeanwesternbalkans.com/2018/02/27/poor-public-infrastructure-region-among-causes-
stagnation/
https://www.toppr.com/guides/business-economics/introduction-to-business-economics/basic-problems-
of-an-economy
http://www2.harpercollege.edu/mhealy/eco212i/lectures/5es/5es.htm
https://courses.lumenlearning.com/wm-microeconomics/chapter/understanding-economics-and-scarcity/
https://brainly.com/question/4139259
https://www.slideshare.net/opaprb/ch02-8429839
https://opentextbc.ca/principlesofeconomics/chapter/1-1-what-is-economics-and-why-is-it-important/

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