Senior High School

Applied Economics
Quarter 1 – Module 1:
Introduction to Applied Economics

LOCALLY MADE LEARNING MODULES

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Applied Economics – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 1: Introduction to Applied Economics
First Edition, 2020

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Applied Economics
Quarter 1 – Module 1:
Introduction to Applied
Economics
Introductory Message
For the facilitator:

Welcome to the Applied Economics – Grade 12 Alternative Delivery Mode (ADM)

Module on Introduction to Applied Economics!

This module was collaboratively designed, developed and reviewed by educators

both from public and private institutions to assist you, the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration
their needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

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For the learner:

Welcome to the Applied Economics Alternative Delivery Mode (ADM) Module on

Introduction to Applied Economics!

The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a
learner is capable and empowered to successfully achieve the relevant
competencies and skills at your own pace and time. Your academic success lies in
your own hands!

This module was designed to provide you with fun and meaningful opportunities
for guided and independent learning at your own pace and time. You will be
enabled to process the contents of the learning resource while being an active
learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of

the lesson. This aims to help you discover
and understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or

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 skill into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of
the lesson learned. This also tends retention
of learned concepts.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in

developing this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

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 What I Need to Know

This module was designed and written with you in mind. It is here to help
you master the nature of Applied Economics. The scope of this module permits it to
be used in many different learning situations. The language used recognizes the
diverse vocabulary level of students. The lessons are arranged to follow the
standard sequence of the course. But the order in which you read them can be
changed to correspond with the textbook you are now using.

The module is divided into two lessons, namely:

 Lesson 1 – Introduction to Economics
 Lesson 2 – Economics as an Applied Science
 Lesson 3 – Basic Principles of Demand and Supply
 Lesson 4 – Demand and Supply in Relation to the Prices of Basic
Commodities

After going through this module, you are expected to:

1. Differentiate between economics as a social science and as an applied
science;
2. Make decision based on how man can satisfy most of his want given
limited resources
3. Differentiate macroeconomics and microeconomics;
4. Describe and state the importance of economic resources;

1. Differentiate gross national product and gross domestic product and their
different approaches in solving
5. Identify the basic problems of Philippine economy;
6. Analyze basic economic problems and propose solutions to the problems
using the principles of applied economics; and
2. Describe the various economic systems.
7. Explain the law of supply and demands and illustrate how equilibrium
price and quantity are determined;
3. Discuss and explain the factors that affect demand and supply;
8. Reason effectively how a change in demand or supply or both can affect
equilibrium price and equilibrium quantity;
4. Apply the principles of demand and supply to illustrate how prices of
commodities are determined;

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 What I Know

Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.

1. What is the condition where there are insufficient resources to satisfy all the
needs and wants of a population?
a. Supply b. Demand c. Scarcity d. Abundance

2. Gold and mineral deposits are classified as to what economic resources?

a. Land b. Labor c. Capital d. Investment

3. Owners of land receive payments known as:

a. Wage b. Rent c. Interest d. Debt

4. Which of the following is NOT a social science

a. Economics b. Sociology c. Psychology d. Physics

5. The following are features of a traditional economic system EXCEPT:

a. Economic decision is controlled by a single person
b. Goods and services are based on traditions, customs, and beliefs
c. Countries are often rural and farm-based
d. Typically have lower standard of living than other economies

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Lesson
Introduction to Applied
1 Economics
Knowledge in basic economics and how to apply its principles can help the
students turn into useful and productive citizens of the country. Applied
Economics will also prepare the students for a world of entrepreneurship, where
one puts up his/her own business instead of seeking employment. The student will
be guided on how to prepare for starting a business, analyzing opportunities,
assessing the requirements, measuring his/her own interests and capacity to
assume risk, and preparing a feasibility study for his/her own intended project.

What’s In

Recall call your last grade school days. How much do you receive for your
daily pocket money in going to school and how good you are in managing those
little amounts to make it through the day. What items do you usually buy? Make a
budget table on your daily school expense then think or decide if your daily baon is
enough or not.

Daily Baon Amount: _₱___________

Items Amount
Morning snacks ₱
Lunch
Afternoon snacks
School supplies
Load

TOTAL ₱

Based on your own budget table above, how do you describe your daily
school amount provisions “baon”? Check the box.

Excess Enough Short

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 Notes to the Teacher
Activities are designed at the end of the lesson to help the
students visualize the concepts and put them into practice. The
student will go through a range or series of economic knowledge,
from the Gross National Product, to the Demand and Supply, and
Market Equilibrium.

What’s New

Everybody goes through a day faced with constraints or limitations:

motorists complain of high gasoline prices, times when people suffer due to
shortage of chicken in the market, or insufficient allowance for a student who
needs to buy books and school supplies. People always complain about not having
enough – not enough food on the table, not enough money to pay one’s debt, or not
enough income to meet all the family’s needs. This, in effect, is the existence of
what we call scarcity. Scarcity is the reason why we have to practice economics.
The COVID 19 pandemic has brought us into the realization of what truly
scarcity is. A large number of individuals were laid off from their jobs which greatly
affect their income and limits their purchasing power. Major and small business
shut off which forces owners to depend on their limited resources. This is why
applied economics plays an important role in giving knowledge to individuals in
understanding the utility of scarce resources.

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 What is It

Economics, as a study, is the social science that involves the use of scarce
resources to satisfy unlimited wants. Part of human behavior is the tendency of
man to have as many goods and services as he/she can. However, his/her ability to
buy goods and services is limited by his income and purchasing power. It is
therefore in this context that man has to practice economics.

Scarcity is a condition where there are insufficient resources to satisfy all

the needs and wants of a population. Scarcity may be relative or absolute.

Relative scarcity is when a good is scarce compared to its demand. It

occurs not because the goods is scarce itself and is difficult to obtain but because
of the circumstances that surround the availability of the good. For example,
bananas are abundant in the Philippines and are being grown in a lot of regions
around the country. But when a typhoon destroys banana plants and the farmer
has no bananas to harvest, then bananas become relatively scarce.

On the other hand, absolute scarcity is when supply is limited. Oil is

absolutely scarce in the country since we have no oil wells from which we can
source our petroleum needs. These are goods and services in which we are
dependent from other exporting countries.
Economic Resources

Economic resources, also known as factors of production, are resources

used to produce goods and services. These resources are by nature, limited and
therefore, command a payment that becomes the income of the resource owner.

LAND
Soil and natural resources that are found in
nature and are not man-made. Owners of lands
receive a payment known as rent

LABOR
Physical and human effort exerted in production. it
covers manual workers like construction workers, machine
operators, and producution workers, as well as
professionals like nurses, lawyers, and doctors. The term
also includes jeepney drivers, farmers, and fishermen. The
income received by labors is referred to as wage.

CAPITAL
Man-made resources used in the production of goods
and services which include machineries and equipment.
The owner of capital earns an income called interest.

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Economics as a Social Science

Economics is a different science from biology and chemistry as these are

physical in nature. Economics is a social science because it studies human behavior
just like psychology and sociology. A social science is, broadly speaking, the study
of society and how people behave and influence the world around them. As a social
science, economics studies how individuals make choices in allocating scarce
resources to satisfy their unlimited wants.

Macroeconomics and Microeconomics

There are two branches of economics. These are the macroeconomics and
microeconomics.

Macroeconomics is a division of economics that is concerned with the overall

performance of the entire economy. It studies the economic system as a whole
rather than the individual economic units that make up the economy. It focuses on
the overall flow of goods and resources and studies the causes of change in the
total flow of money, the entire movement of goods and services, and the general
employment of resources.

Microeconomics on the other hand, is concerned with the behavior of

individual components such as the consumer, the producer, and the resource
owner. It is more concerned on how goods flow from the business firm to the
consumer and how resources move from resource owner to the business firm.

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 To give more emphasis on the two branches of economics, a comparison
table below is provided to better understand the distinction of one to the other.

For further learnings, explore the following sources online

https://www.economicshelp.org/blog/6796/economics/difference-between-
microeconomics-and-macroeconomics/
or watch https://www.youtube.com/watch?v=wvwgIiP4gjY
Basic Economic Problem
All societies are faced with basic questions in the economy that have to be
answered in order to cope with constraints and limitations. These are:

Society must decide what goods and services

to produce in the economy. Having decided
1. What to produce on the nature of goods that will be produced,
the quantity of these goods should also be
and how much? decided on

The production method that will be used to

produce the goods and services. This refers to the
2. How to produce? resource mix and technology that will be applied
in production.

3. For whom to All about the market for the goods. For whom
will be the goods and services produced? The
produce? young or old, the male or female market, the
low-income or the high-income groups, etc.

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 How these questions are answered depends on the nature of the economic
system in place. The economic system is the means by which society answers the
basic problem.

Economic Systems

The economic system is the means through which society determines the
answers to the basic economic problems mentioned. A country may be under any
of the following types or even a combination of three economic systems:

Traditional Economy
*Goods and services are based on
traditions, customs, and beliefs
*Countries that use this type of economic
system are often rural and farm-based
*Examples of this economy are Northern
Canada, fueled by the local agriculture of
the area
*Disadvantage, they typically have
people lower standard of living than
other economies which does not follow
traditional
economy

Command Economy
*Economy in which Mixed
production, investment, prices, Market Economy
and income are determined
*Decisions and the pricing of
centraly by a government
goods and services are guided by
*Example of this type of
what consumer needs or want and
government are former Soviet
what get sold
Union, China, North Korea, and
*Examples of this type of
Cuba
economy are Hong Kong,
*Advantages, economic resources
Singapore, Australia, and the
quickly, powerfully, and on a
United States
large scale
*Advantages, there is a wider
*Disadvantage, economies often
variety of stuff being made
produce too much of one
*Disadvantages, no incentive to
thing and not enough of
work harder
another

Additional sources online on economic resources

https://corporatefinanceinstitute.com/resources/knowledge/economics/economic-system/
#:~:text=An%20economic%20system%20is%20a,of%20production%2C%20including%20capital%2C
%20labor

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 What’s more?

Activity 1.1
Do you remember our lesson in economic resources? To give you better
familiarity on those resources, here’s a short task for you to do. Look outside your
surroundings or community and list down those economic resources you find
valuable or capable to produce income in terms of the following:

LAND LABOR CAPITAL

__________________ __________________ __________________

__________________ __________________ __________________

__________________ __________________ __________________

__________________ __________________ __________________

__________________ __________________ __________________

Activity 1.2
By learning the basic of economics already, we’re sure you’d like to share
with us some of your insights on the significance of studying economics. Please
complete the statements below with your own thoughts.

Economics will help the students

Why do we
understand why .
need to study
…………………………………………………………………
Economics?
…………………………………………………………………
………………………………………………….

Economics will teach you

about.
………………………………………………
………………………………………………
………………………………………………

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 What I Have Learned
Recall and fill in the blanks with the right terms:
 The reason why people have to practice economics is ____________
 Economic resources are by nature __________ and therefore command a
payment that becomes the __________ of the resource owner.
 Economics is a social science as it studies how individuals make choices in
allocating scarce resources to satisfy their ______________ __________.
 _________________ focuses on the overall flow of money, the aggregate
movement of goods and services, and the general employment of resources
while _________________ is more concerned on how goods flow from the
business firm to the consumer and how resources move from the resource
owner to the business firm.
 All societies are faced with the economic questions basically on what goods
or services to product and how much, how to produce, and for whom to
produce?
 A country may be under any of the types or even a combination of the three
economic systems namely _____________, ____________, and ______________.

What I Can Do

Suppose you were the one assigned by your parents to purchase a one week
supply for household consumption for your family with 5 members. The amount
you received for a whole week expense is only ₱2, 2000.00. What will be your
budget plan to cover all daily necessity needs of your family for the entire week?
Complete the one week budget table for your family with your propose amount for
each item. If the given budget for you isn’t enough, suggest an ideal amount for
that item and make a new budget list. Ask your parents/guardians for more
accurate costings.

Items Amount (in one week) Suggested Amount

Rice
Meats
Fish
Vegetables
Condiments (Salt,
Vinegar, etc.)
Snacks
Coffee, Creamer, & Sugar
Hygiene Stuffs (Soap,
Shampoo, etc.)
Others
TOTAL ₱ 2, 200.00 ₱

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 Assessment

I. Describe the type of economic system characterized in each of the

following sentences.

______________ 1. Prices are based in demand and supply.

______________ 2. The government decides on what goods should be produced.
______________ 3. Ancient methods are used in deciding what goods to produce.
______________ 4. People enjoy freedom of choice in arriving at decisions on what
to buy.
______________ 5. People have no freedom of choice in arriving at decision on
what to buy.
______________ 6. Economy is stagnant, making use of practices in the olden
times.
______________ 7. Economy is backward because no new technology or
production methods are introduced.
______________ 8. It is the most democratic form of economic system.
______________ 9. People’s preferences are reflected in the practices they are
willing to pay in the market.
______________ 10. It exists in primitive and backward civilizations.

II. Identify which resource is referred to by the following words inside the
cloud. Classify them according to economic resources.

Entertainers Minerals Business owners

Marine resources Teachers Technology
Engineers Production equipment Forests
Call center agents

Land Labor Capital

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III. Essential Questions
 In the light of the existence of the COVID 19 pandemic, how does
knowledge in economics plays an important role to an individual?

Additional Activities

Make a research on ASEAN icon Lee Kuan Yew (1923 – 2015).

Learn about how he transformed Singapore into the most
prosperous nation in Southeast Asia. Explore his legacy in
running his country as a leader and discover how knowledge in
economics took its way in resolving problems of a country.
Make an easy based on what have you read and researched.

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 ANSWER KEY

Assessment What I Know What I Have

Test I 1. C Learned
2. A
1. Market 1. Scarcity
3. B
2. Command 2. Limited, income
4. D
3. Traditional 5. A 3. Unlimited wants
4. Market 4. Macroeconomics,
5. Command Microeconomics
6. Traditional 5. Traditional,
7. Traditional Command,
8. Market Market Economy
9. Market
10.Traditional

Assessment
Test II.
Land
Minerals
Marine Resources
Forest
Labor
Entertainers
Teachers
Engineers
Call center agents
Capital
Business owners
Technology
Production
equipment

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References

Book
Villasis, George A. & Dinio, Rosemary P.(2017). Applied Economics. 1 st Ed.
(pp. 1 – 27). Rex Publishing. Sampaloc, Philippines

Online

https://www.investopedia.com/ask/answers/032515/what-are-best-measurements-
economic-growth.asp

https://www.khanacademy.org/economics-finance-domain/macroeconomics/macro-
economic-indicators-and-the-business-cycle/macro-the-circular-flow-and-gdp/a/
measuring-the-size-of-the-economy-gross-domestic-product-cnx

https://rhk111sblogspot.wordpress.com/2016/01/03/why-is-the-philippines-poorer-
than-its-neighbors/

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