Economics as an Applied

Science
LESSON 2
 APPLIED
ECONOMICS
The study of economics in relation to real
life situations.
It is the study of observing how theories
work in practice.
• It is the application of economic principles and theories
to real situations, and trying to predict what the
outcomes might be.
• SIMPLER DEFINITION
Applied economics – is the study of observing how
theories work in practice.
 APPLIED
ECONOMICS
• started to be used nearly 200 years
ago
• Jean-Baptiste Say (1767-1832), and
John Stuart Mill (1806-1873)
 Applying economics to the status of
the economy of a country, household,
or company helps eliminate all
attempts to dress up a situation so
that it will seem better or worse than it
really is.
 APPLIED
ECONOMICS
• the application of economic theory and
econometrics in specific settings
(Market Business News 2016).
EARLY ECONOMIC
THEORIES
 EARLY ECONOMIC THEORIES

Economic theory
– a theory on commercial activities
such as the production and
consumption of goods.
 EARLY ECONOMIC THEORIES

Malthusian • the relationship between

Theory of population growth and
Population resources
• According to Malthus, if left
Growth
Thomas Robert
unchecked, populations can
Malthus outgrow their resources.
• The Malthusian Theory of Population is
a theory of exponential population growth and
arithmetic food supply growth.
Malthus believed that through preventative
checks and positive checks, the population
would be controlled to balance the food
supply with the population level.
 EARLY ECONOMIC THEORIES
• describes the basic principles
Adam Smith
of economics in his book The
and the Wealth of Nations
Wealth of • Economic Ideas of Adam
Nations Smith: Productivity and
Wealth, Invisible Hand,
Adam Smith Laissez-Faire
 Economic Ideas of Adam Smith
Laissez-Faire
Productivity Invisible Hand A doctrine that claims
and Wealth competition, together that an economic
with the free market system should be free
labor becomes more
system, would act as from government
productive as each
an invisible hand that intervention or
worker becomes more
would guide resources moderation, and be
skilled at a single job
to their most driven only by the
productive use market forces.
 MODERN ECONOMIC THEORIES

Consumerism
states that an increasing
consumption of goods is
economically beneficial
 MODERN ECONOMIC THEORIES

Keynesianism
advocates government monetary and
fiscal programs intended to stimulate
business activity and increase
employment
MODERN ECONOMIC THEORIES

Liberalism
advocates free competition and a
self-regulating market.
MODERN ECONOMIC THEORIES

Monetarism
states that variations in
unemployment and that rates of
inflation are usually caused by
changes in the supply of money.
 MODERN ECONOMIC THEORIES

Utilitarianism
used when making social,
economic, or political decisions
for the “betterment of society”.
ECONOMETRICS
 ECONOMET
RICS
the application of statistical and
mathematical theories in economics for
purpose of testing hypotheses and
forecasting future trends.
 Goals of Studying Econometrics (Judge,
2017)

Test a hypothesis
It allows you to conduct applied
econometric studies of your own, which
can be very useful if you are also doing a
dissertation.
 Goals of Studying Econometrics (Judge,
2017)

Critically assess the empirical

work of others
• This can be helpful when discussing the relevant
academic literature in any other module and to be
able to comment on why a particular technique
may or may not be appropriate can often be
impressive.
Any questions and
clarifications?
THANK YOU AND
GOD BLESS! 
 REFERENCE:
Saluba; 2018; Applied Economics for
Senior High School; C & E Publishing,
Inc.; 839 EDSA, South Triangle, Quezon
City (pages 2-6, 9-12)