APPLIED

ECONOMICS
MS. LAILA L. MARZALADO
SHS Teacher II
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BASIC ECONOMIC PROBLEMS
AND HOW APPLIED ECONOMICS
SOLVES ECONOMIC PROBLEMS
Quarter 3 – Week 2

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BASIC ECONOMIC PROBLEMS AND HOW APPLIED ECONOMICS
SOLVES ECONOMIC PROBLEMS

Learning Competency:
▰ Examine the utility and application of applied
economics to solve economic issues and
problems

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BASIC ECONOMIC PROBLEMS OF THE COUNTRY

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.

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BASIC ECONOMIC PROBLEMS OF THE COUNTRY

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BASIC ECONOMIC PROBLEMS OF THE COUNTRY

▰ What to Produce?
▰ How to Produce?
▰ For whom to Produce?
▰ What provision/laws should be made for
economic growth?

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 BASIC ECONOMIC PROBLEMS OF THE COUNTRY

What to Produce?
▰ If there is scarcity of goods in a society, the
firms have to make wise decision on what
good/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/service to
be produced to meet the immediate needs of
the society. 8
 BASIC ECONOMIC PROBLEMS OF THE COUNTRY

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.
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 BASIC ECONOMIC PROBLEMS OF THE COUNTRY

For Whom to Produce?

▰ The society would always consider the
immediate 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.
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 BASIC ECONOMIC PROBLEMS OF THE COUNTRY

What provision/laws should be 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 the
progress 11
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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APPLIED ECONOMICS ON BASIC ISSUES AND
PROBLEMS

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.
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 APPLIED ECONOMICS ON BASIC ISSUES AND
PROBLEMS

Remember the following

 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.

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 APPLIED ECONOMICS ON BASIC ISSUES AND
PROBLEMS

Remember the following

 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. 15
BASIC ECONOMIC PROBLEMS
AND HOW APPLIED ECONOMICS
SOLVES ECONOMIC PROBLEMS
Quarter 3 – Week 2
ASSIGNMENT #1 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.
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ASSIGNMENT #2

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.
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ASSIGNMENT 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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