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Introduction to
Applied Economics
Mr. Jacob D . Vi l las
Teacher

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Economics as a
Social Science

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Whattoisedit
Click social science?
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• The study of society and how

people collectively behave and
influence the world around us.

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Economics
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• studies human behavior

• studies how individuals, governments,
firms and nations make choices in
allocating scarce resources to satisfy
man’s unlimited wants.

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Economics
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• comes from the Greek words OIKOS

meaning household and NOMUS meaning
system of management.
• OIKONOMIA or OIKONOMUS means the
management of the household

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Macroeconomics and
Microeconomics

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Macroeconomics
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• a division of economics that deals with the

overall performance of national and
international economies.
• studies the aggregates of the economic
system.
• inquires into the nature of economic
growth, the expansion of productive
capacity and the growth of national
income.
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Microeconomics
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• concerned with behavior of individual units

of the economic system such as the
consumer, producer, and households as
resource owners.
• studies how goods flow from the business
firm to the consumer and how resources
move from the business owner to the
business firm.

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Scarcity

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Scarcity
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• the condition of resource insufficiency to

satisfy all the needs and wants of a
population.
• the basic and central economic problem
confronting every person and society.
• it is the heart of the study of economic and
the reason why you are studying it now.
• NOTE: If scarcity does not exist, there is
no need for us to economize. 1010
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Factors of Production

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Factors
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• C – Capital refers to man-made goods

used to produce other goods and services.
• E – Entrepreneur is the businessman
• L – Land refers to natural resources.
• L – Labor refers to the human effort
exerted in production.

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Basic Economic Questions

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BasictoEconomic
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• What to produce?
1. • Refers to what goods and services will be produced.

• How to produce?
• Refers to the production method how goods and
2. services will be produced

• For whom to produce?

3. • Refers to the market for the goods and services.

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Economic Systems

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Traditional
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• Decisions are based on traditions and

practices upheld over the years and
passed on from generation to generation.
• Methods are stagnant and are, therefore,
not progressive.
• Traditional societies exist in primitive and
backward civilizations.

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Command
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• Authoritative system wherein decision-

making is centralized in the government or
a planning committee.
• Decisions are imposed on people who
have no say on what goods to produce.
• Present in dictatorships and socialist
states.

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Market
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• Most democratic economic system.

• Based on the workings of demand and
supply, decisions are made on what goods
and services to produce.

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Mixed
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• Combination of the three basic types of

economic systems.
• An economic system cannot exist in its
pure fore form, what normally happens is
that it adopts a mixture of the three
systems with the dominance of one.

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Positive vs. Normative

Economics

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Positive
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• Analyzes the cause-effect and

interrelationship among factors and events.
• A study of what is actually happening in
the economy.

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Normative
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• Passes judgment on economic decisions

by their outcome, determining if they
conform to some desired standard of what
is economically good or sound.
• The study of what should be.

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GNP vs. GDP

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GNP to
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• Gross National Product

- Gawa Ng Pinoy
• Gross Domestic Product
- Gawa Dito Pinas

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