LESSON 3: Applied

Economics in
Relation to the
Philippine Economic
Problems
Learning Competency: Explain how applied economics can
be used to solve economic problems, ABM_AE12-Ia-d-3
How economists face economic problems?

The scientific approach is necessary in solving economic problems. It consists of steps such as

Step 4
4)recommending the best
Step 3 possible solution based on
the verified causes.
(3)gathering data to prove the truthfulness of the
Step 2 causes of the problem and then

Step 1 (2) proposing an explanation about why the problem occurred;

(1)observing the economic problem that

interests you;
How economists face economic problems
 To be as objective as possible, economists make use of POSITIVE
ANALYSIS. A positive statement can be tested and validated. For
instance, the statement “the joblessness rate is 5.0%” is an
affirmative statement because it can be tested by collecting data.
 In contrast, a NORMATIVE STATEMENT cannot be corroborated.
For instance, the statement “an unemployed worker should
receive financial assistance in order to survive” is a matter of
opinion. Financial assistance may be beneficial to the
unemployed but it might turn out as a way of pampering them
which would make them want to stay lazy and unemployed.
Neither opinion is correct or not because of opposing standpoints
based on values, traditions and beliefs.
√ Applied Economics makes use of the scientific
approach to explain how the economy and the world
works.
√ Economists try to avoid letting personal beliefs and
values influence the outcome of their analysis by being
objective.
√ To be as objective as possible, economists make
use of positive analysis which can be believed of as a
depiction of “what is and can be tested.
Using your own idea and
understanding of the lessons
contained in this first module,
explain the importance of
studying Applied Economics.
Answer:
_______________________________
QUIZ
___________________________________
_____________________
ASSESSMENT Write the letter of your answer.
1. What do you call the condition in which our wants are greater than
our limited resources?
A. Economics C. Scarcity B. Opportunity Cost D. Trade-off

2. What do you call things that you gave up when you make a choice?
A. Choice C. problem B. opportunity cost D. Trade-off

3. What do you call the application of economic principles and

theories to realworld situations?
A. Applied Economics C. Macroeconomics B. Economics
D. Microeconomics
ASSESSMENT Write the letter of your answer.
4. Which of the following is not a factor of production?
A. Capital B. Labor C. Tax D. Land
5. What is supply?
A. It is a choice that you gave up B. It is the totality of our needs
C. It is the amount of goods for sale D. It refers to the economy

6. Which of the following classifications does not fall under

underemployment?
A. Highly skilled but working in low paying jobs
B. Part-time workers who would prefer to be full time.
C.Without work and currently available for work
D. Workers who are highly skilled but working in low skill
jobs
ASSESSMENT Write the letter of your answer.
7. When does underemployment occur?
A. It is when a person does have work
B. It is when a person does not have work
C. It when a person does not work for a job that fits his/her skills.
D. It is when a person works for a job that fits his/her skills.

8. Which of the following works best for our country?

A. Decrease in the employment rate
B. Decrease in the underemployment rate
C. Increase in the underemployment rate
D. Increase in the unemployment rate
ASSESSMENT Write the letter of your answer.
9. What is most likely to happen when the population continues to rise?
A. Employment rate will go up
B. Poverty rate will decrease
C. Resources will become scarce
D. Unemployment rate will go down

10. According to Philippine Statistics Authority (PSA) what is the

minimum age that a Filipino must have in order to be classified as an
unemployed person?
A. 13 years old B. 14 years old C. 15 years old D. 18 years old
ASSESSMENT Write the letter of your answer.
11. What kind of approach is used by economists to explain how the
economy works?
A. Collaborative C. positive B. experimental D. scientific

12.What are you experiencing when your wants are greater than your
resources?
A. Poverty C. trade-off B. Scarcity D. unemployment

13.What is the reason why we are studying economics?

A. Poverty C. trade-off B. Scarcity D. unemployment
ASSESSMENT Write the letter of your answer.
14.What type of analysis are economists concerned with in order to
become objective?
A. careful C. normative B. negative D. positive

15.Which major characteristic of economists enable them to make

sound decisions in solving economic problems?
A. objective C. subjective B. prompt D. trustworthy
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