APPLIED

ECONOMICS
Prepared by
ROSS ALDEN A. BIGTAS
Anislag National High School SHS
Applied Economics
K to 12 basic education curriculum senior high school
Accountancy, Business, and Management (ABM)
specialized subject
Grade: 12
No. of hours/semester: 80 hours/semester

The course deals with the basic principles of applied economics, and
its application to contemporary economic issues facing the Filipino
entrepreneur such as prices of commodities, minimum wage, rent and
taxes. It convers an analysis of industries for identification of
potential business opportunities. The main output of the course is the
preparation of socioeconomic impact study of a business venture.
UNIT 1
Introduction and Basic Concepts
• What is economics
• Economic system: economics and scarcity
• The basic economic problems
• The Philippine socioeconomic development in the
21st century
• Dealing with the problem of scarcity
What is Economics
The lesson discusses the basic concepts of economics and
underscores its applicability in daily life.
Learning outcomes:
The students are able to:
 Define economics
 Explain the concept of economics
 Explain how applied economics can be used to solve
economic problems.
What is Economics
Economics as a social science emphasizes that economics is
about making choices.
We make all kinds of choices every day. We ask: how much
should I spend? What is the best route to school or work?
What are the pros and cons of finishing college versus taking
a job now? Should I get married, have children, and if so,
when? Which candidate should I vote for when they all claim
they can improve the economy? What if my personal or
religious principles conflict with what people tell me, in in my
best economic interest?
What is Economics
Economics is not just about money. It is about weighing different
choices or alternatives. Some of those important choices involve
money, but most do not. Most of our daily or life choices have
nothing to do with money, yet they are still the subject of
economics. For example, your decisions about whether you should
spend an hour a week volunteering for a worthy charity or send a
little money via your cell phone or whether you should take a job
so you can help support your siblings or parents or save for your
future, are all economic decisions. In many cases, money is merely
a helpful too or just a veil, standing in for a partial way to
evaluate some of the goals you really care about and how you
make choices about those goals.
What is Economics
Economics is formally defined as follows:
• “The science which studies human behavior as a relationship
between ends and scarce means which have alternative uses”
(Stiegler, 1985).
• “Study of those societies use scarce resources to produce
valuable commodities and distribute them among different
people” (Samuelson and Nordhaus, 1995).
• “Economics is the study of given ends and scarce means”
(Lionel Robbins).
What is Economics
Economics seeks to understand how individuals interact
within the social structure to address key questions about the
production and exchange of goods and services. It probes
deeply on the individual needs and desires in order to forecast
the availability or lack of goods and services. Second, it seeks
to assess if there are incentives for these individuals to
participate in the production of these goods. It also questions
how production is organized such that maximum possible
quantities are made available given existing resources and
production technology.
What is Economics
Production is about the conversion of scarce resources into
desired goods and services. These resources are often referred
to as the factors of production – a short list that includes:
• Land (acreage and raw materials)
• Labor (unskilled, semi skilled, and professional)
• Capital (machines, factories, transportation equipment, and
infrastructure)
• Entrepreneurship (organizing the other factors of
production and risk-taking)
What is Economics
Accordingly, the combination of the factors of
production will lead to the production of any good or
service.
However, we live in a world of scarce resources.
Scarcity refers to a physical condition where the
quantity desired of a particular resource
exceeds the quantity available in the absence of
rationing system.
What is Economics
Potential candidates for rationing systems include:
Tradition and culture, where the problem of allocation is addressed
via social norms, customs and past history.
Planning and central government, making use of complex
mathematical tables to determine output goals and input requirements.
Voting and political procedures, communication about resource
allocation among individuals through the development of a consensus or
majority rule.
Markets, using a system of prices to act as a means of communication
about the availability of resources and the desire for those resources.
What is Economics
Goods and services refer to:
Final goods and services – products that are directly consumed by
individuals to satisfy needs and wants.
Intermediate or capital goods – goods used to produce other goods.
In the case of final goods, needs represent those goods and services
required for human survival. Needs are determined by nature,
climate and region, and are often finite. Wants and desires refer to
everything else. Human wants are determined by society and the
culture in which an individual lives. These wants are unlimited and
represent the source of the problem facing all economic systems.
What is Economics
Economics is not just about the production of goods
and services. Equally important is developing an
understanding about how wants and needs are
communicated to the economic system, how to involve
individuals in the production process and provide
incentives for these individuals to specialize in areas
of production where their talents are best used and
then exchange goods with others.
What is Economics
Economics can be distinguished into two main branches:
Microeconomics deal with the behavior of individual components as an
economic agent such as household, consumer, worker, firm, and
individual owner of production (producer). It also refers to the study of
choices of individuals, like how someone decides on the budget.
Macroeconomics deals with the behavior of the economy as a whole
with the view to understand the interaction between economic
aggregates such as employment, inflation, and national income/ gross
domestic product (GNP). It also deals with the study of governments,
industries, central banking, and the boom and bust of the business cycle.
What is Economics
To study and explain economic behavior, it is important to consider the
normative and positive economics as methodologies.
According to Milton Friedman, normative economics has something to
do with “what ought to be”. Hence, it involves ethics and value
judgment. Normative economics cannot be settled by a mere appeal to
facts. However, this does not mean that they are unimportant.
Normative economics is concerned with what values judgment are
needed by the economy and reasons for such judgments.
Positive economics, on the other hand has something to do with “what
is”. It describes facts and data in the economy. It gives policy
recommendations to positive economics.
What is Economics
Therefore, if we want to know the percentage of 2016
graduates of Philippine colleges and universities or the
rate of unemployment, we are talking of positive
economics of it has available factual evidence and
data. However, if we want to know if today’s budget
deficit can be reduced by raising vat by 12%, we are
talking normative economics. This case needs a moral
judgment or decision and not merely through economic
science.
Economics and Scarcity
The lesson examines the significance of the following: the problems
of economics, different economic systems, law of scarcity and
production possibility.
Learning outcomes:
The students are able to:
Recognize and analyze common economic issues which relate
to individual markets and aggregate economy
Explain the economic events in the market and the total
economy
Be equipped with some tools and methods of economic
analysis.
Economics and Scarcity
Economic system refers to a set of economic
institutions that dominate a given economy with the
main objective of solving economic problems. They are
categorized as follows:
1. Traditional economy
2. Command economy
3. Free market economy
4. Mixed market economy
Economics and Scarcity
1. Traditional economy
Economic decisions are made with great influence from the past because it is
copying/duplicating the decisions made by previous generations. It is a system
whose past experiences, which were handed down from generation to generation ,
are used as bases for economic decisions.
2. Command economy
Economic system that society uses in allocating the scarce resources wherein the
factors of production and distribution are owned and managed by the state
because the decision in answering the basic economic problems are planned,
done , and dictated by the government. The decision are made from the top
authority and whatever decisions are made are relayed to the majority of the
people. Hence, it is a system in which, people do not have political and economic
freedom.
Economics and scarcity
3. Free market economy
It refers to an individual consumer and business interaction to solve
economic problems. The price of commodity dictates what good and
services will be produced, for whom and how it will be produced. This
system is also consulting with the majority, which means, that
interaction takes place between buyers and sellers.
4. Mixed market economy
In reality, there is no economy using the purest form of economic
system. Thus, a mixed economy, with elements of the first three
systems mentioned, are present in varied degrees of the so called
mixed market economy. Both private and public institutions
exercise economic control.
The Basic Economic Problems
The lesson discusses basic economic problems and explores the
Philippine socioeconomic development in the recent context.
Learning outcomes:
The students are able to:
 Recognize the economic problems in the Philippines
 Explain the current Philippine socioeconomic
problems
 Identify ways of solving the economic problems being
faced by the country.