SHARING OF IDEAS!!!

WHY IS ECONOMICS
IMPORTANT?

APPLIED ECONOMICS
A Framework in Understanding
Economic Decisions Using
Economic Analysis

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• Analysis of benefits and costs in decision making.

• In making any decision, an individual is influenced by a number of
motivations. Most of these motivations are based on the benefits that he can
derived from the chosen option or behavior.
• Once the individual pursues his chosen option, he will obtain an additional
level of satisfaction.
• However pursuing any choice implies that there are costs accompanying the
benefits arising from his behavior.
• This cost can be expressed in terms of money, time, resources and other goods
and activities being sacrificed or foregone.

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• Since a decision made is always prospective, what is important

is not the absolute value of benefits and costs but the additional
or marginal benefits and costs. The previous costs and benefits
are no longer relevant in the current decision making process.

• Thus, decision to pursue an option will be based on marginal

benefits and marginal costs.

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• Marginal benefit
• It is the maximum amount a consumer is willing to pay for an
additional good or service. It also the additional satisfaction or
utility that a consumer receives when the additional good or
service is purchased.
• The marginal benefit for a consumer tends to decrease as
consumption of the good or service increases.
• Marginal benefit consumption

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• Marginal Cost
• It represents the incremental costs incurred when producing
additional units of a good or service.
• It is calculated by taking the total change in the cost of
producing more goods and dividing that by the change in the
number of goods produced.
• Marginal cost = Cost
Quantity

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• What is “Change in Costs”?

• At each level of production and during each time period, costs of production may
increase or decrease, especially when the need arises to produce more or less
volume of output. If manufacturing additional units requires hiring one or two
additional workers and increases the purchase cost of raw materials, then a
change in the overall production cost will result.
• To determine the change in costs, simply deduct the production costs incurred
during the first output run from the production costs in the next batch when
output has increased.

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• What is “Change in Quantity”?

• It’s inevitable that the volume of output will increase or decrease with varying
levels of production. The quantities involved are usually significant enough to
evaluate changes in cost. An increase or decrease in the volume of goods produced
translates to costs of goods manufactured (COGM).
• To determine the changes in quantity, the number of goods made in the first
production run is deducted from the volume of output made in the following
production run.

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• In economic analysis, the condition for the attainment of

maximum net benefit is set when the marginal benefit is
equal to the marginal cost.
• However, when the marginal benefit is lower than the marginal
cost, the marginal net benefit is negative implying that the
marginal net benefit has a negative contribution on total net
benefits which further implies that total net returns is declining.

APPLIED ECONOMICS
 A framework in understanding economic decisions using economic analysis

• Thus, when the total net benefits are no longer increasing, it

has reached its maximum level. This means that the
difference between marginal benefits and marginal costs is
zero. Thus, when marginal benefits equals marginal costs, the
total of net benefits is at its maximum level.

APPLIED ECONOMICS
 APPLIED ECONOMICS

APPLIED ECONOMICS IN
ADDRESSING ECONOMIC ISSUES
Prepared by:
JESSA-LYN P. GAZZINGAN
 THE BASIC ECONOMIC PROBLEMS CONFRONTING THE
PHILIPPINES
• TCSCYARI – • SCARCITY
• NAPTUPOLOI WRGTOH – • POPULATION GROWTH
• NUEPMELYOMTN – • UNEMPLOYMENT
• FNLITAINO – • INFLATION
• NQEIUTLAYI – • INEQUALITY
• OPYEVRT – • POVERTY
• AEKW RNIUSREUCTFRTU – • WEAK INFRASTRUCTURE
• ANRTULA SDARTISE - • NATURAL DISASTER
• Applied Economics is about utilizing economic theories to explain
economic events, government actions and recommend courses of actions
for business, household, and government.
• Different application we have to use to solve these issues are trade-offs,
opportunity cost, variations in benefit and cost, proper allocation of
resources by answering the three basic economic questions; what, how
and for whom to produce and other alternative way by the government
to solve our economic problems.

APPLIED ECONOMICS
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

POVERTY
• Poverty is a restricting condition
experienced by millions of families
that prevents them in attaining the
minimum level of consumption for
subsistence living.
• The Philippines has a fairly high poverty rate
with more than 16% of the population
living below the poverty line.
• About 17.6 million Filipinos struggle to 
afford basic necessities. 
• From 2015 to 2020, the rate of poverty declined
from 21.6% to 16.6%. Philippine President
Rodrigo Duterte aims to reduce the rate of
poverty to 14% by 2022.
• Through its strategy, AmBisyon 2040, the
Philippine government plans to eradicate extreme
poverty by 2040.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

DEMOGRAPHIC CHANGES OR POPULATION

GROWTH
• The current population of the Philippines is 111,412,516 as of
Tuesday, October 5, 2021, based on Worldometer elaboration of
the latest United Nations data.
• The Philippines 2020 population is estimated
at 109,581,078 people at mid year according to UN data.
• The Philippines population is equivalent to 1.41% of the 
total world population .
• The Philippines ranks number 13 in the list of 
countries by population.
• 47.5 % of the population is urban (52,008,603 people in 2020)
• The median age in the Philippines is 25.7 years.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

UNEMPLOYMENT

• Underemployment occurs when a job does not use an

employee’s full capabilities. This may include not giving them
enough hours, such as having them work part-time hours
when they wish to work full time. The employee might also be
overqualified for the position and unable to use their
experience or skills in their job. Underemployed employees
may work several jobs to make enough money for their living
expenses.
• Unemployment is when a person is actively looking for a job
but experiences an extended period without getting hired.
These people desire a job but struggle because of a lack of jobs
in their industry, not having enough qualifications for open
positions or having too much competition with others who are
unemployed.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

UNEMPLOYMENT
• The PSA reported on Tuesday, March 30, that the unemployment rate rose to 8.8% in
February, higher than the 8.7% last January, reflecting the scars in the labor market brought
about by the coronavirus pandemic.
• The figure in the labor force survey (LFS) is equivalent to 4.2 million jobless Filipinos in
February, higher than the 4 million unemployed in January.
• Meanwhile, the underemployment rate or the percentage of the population with jobs but are
looking for more work stood at 18.2%, equivalent to 7.9 million individuals. This is higher than
the 16% in January, which had translated to 6.6 million people.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

UNEMPLOYMENT
• Underemployment shooting up indicates that people are likely struggling to cope with rising
prices. 
• Meanwhile, the labor force participation rate, which reflects the percentage of the population
working or actively looking for work, was at 63.5% in February, higher than January's 60.5%.
• The labor force – individuals who are either employed or unemployed – reached 47.3 million in
February, from 45.2 million in January.
• February's employment rate stood at 91.2%, equivalent to 43.2 million Filipinos with jobs. This
is slightly lower than January's 91.3%.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

LOW INVESTMENT IN HUMAN RESOURCE DEVELOPMENT

• Although the size of the labor force can have positive contributions on
economic growth, the QUALITY OF HUMAN RESOURCES has greater
growth impact.
• Skills training and investment in education can shape human capital of a
nation.
• Modern economies pursue the development of knowledge capital in pushing
their economies forward.
• Knowledge capital is formed through heavy investments in higher education,
science and technology, and research and development.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

WEAK INFRASTRUCTURE
• Physical infrastructure facilitates and expands
transactions that likewise fuel economic
growth.
• We need roads, bridges and other networks in
transportation and communication because
these grids link economic sectors tightly.
• The inadequate infrastructure of the country
has debilitating effects on the individuals,
households, business firms and the economy.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

PURSUING FOOD SECURITY

• With more than 100 million people to feed,
the concern of the government is to ensure
food security for all.
• This goal has been interpreted, however, as
food self-sufficiency in the light of the huge
amount of arable land devoted to the
production of food grains- rice and corn.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

PURSUING FOOD SECURITY

• The development of agriculture is not meant to
make us self-sufficient in the production of food
grains alone but primarily in increasing the
productivity of the sector.
• Thus, food security implies that the country and
its people should have enough income to purchase
food grains at the cheapest price anywhere in the
world.
BASIC ECONOMIC PROBLEMS CONFRONTING THE DEVELOPMENT OF THE PHILIPPINES IN THE 21st
CENTURY

SLOW ADOPTION OF MODERN

TECHNOLOGY
• The development of industrial sector should
also be pursued to push the rapid
development of the Philippine economy.
• Technology is the manner of processing raw
materials or intermediate inputs into
transformed outputs through the use of factor
inputs.