APPLIED

ECONOMI
CS
 LET US RECAP
THE PREVIOUS
LESSON
1. Why is Economics
regarded as Social
Science?
2. Why is Economics
regarded as Applied
Science?
 MOST • Examine the utility
ESSENTIAL and application of
LEARNING applied economics to
COMPETENCY solve economic issues
and problems
4 PICS
1WOR
D
L A
____N D
_ _ABOR
L ___
CAPITA
______
L
FOLLOW- • What did you notice
about the
UP pictures/words?
QUESTION • Are they related to
S: Economics? How?
ECONOMIC
RESOURCES
INTRODUCTION
• The matter of scarcity is a central
economic problem in all
countries without exception. This
issue arises since all resources
are limited and have different
uses. The economic dilemma
would most likely not exist if
resources were unlimited.
 ECONOMIC
RESOURCES
•Economic resources, also
called factors of
production, are the
resources used to produce
goods and services.
 Land
FIVE
Labor
ECONOMI
C Capital
RESOURC Entrepreneur
ES Foreign rate
 LAND
• Soil and natural resources that
are found in nature and are not
man-made.
• These resources consist of gifts of
nature which include:
• Soil
• Rivers
• Lakes, oceans
• Forests
• Mountains
• Mineral resources
 • Physical and human effort

LABO exerted in production.

• Also called “human
resources” or all human

R
efforts, be it mental or
physical, that help to
produce satisfying goods
and services.
• EXAMPLE (next page)
 LABOR
It covers manual workers like, Construction workers, Machine
operators, and Production workers

As well as professionals like, Nurses, Lawyers, and Doctors

The terms also include: Jeepney drivers, Farmers, and Fishermen

CAPITAL
• Man-made resources used
in the production of goods
and services like:
• Machinery
• Equipment
• Two (2) economic
definitions of capital:
Two economic
definitions of capital:
A. Capital - can represent the monetary
resources use to purchase natural
resources.
• Example: Companies use capital to buy
land and other goods
B. Capital - represents the major
physical assets individuals and
companies use when producing goods
and services
• Example: Buildings, vehicles, equipment
ENTREPRENEURS
-Someone who uses his/her
initiative, talent and
resourcefulness to create
economic goods and services.

-Organizers and coordinators of

other factors of production: land,
labor, and capital.
 -refers to the dollar and dollar
reserves that the economy has.
FOREIGN -foreign exchange is part of
economic resources because we
EXCHANG need foreign currency for
international trading and
E buying materials from other
countries.
-International medium - dollar
 END OF
DISCUSSIO
N
APPLIED
ECONOMI
CS
 LET’S 1. What is Economic
Resources?
HAVE A 2. What are the
RECAP! Economic Resources?
 HOW WILL
YOU
SATISFY ME?
 HOW WILL
YOU
SATISFY ME?
 HOW WILL
YOU
SATISFY ME?
FOLLOW-UP
QUESTIONS:
• Did you have a hard time
satisfying the characters
in the pictures? How?
• What were your basis in
satisfying them?
Basic Problems of
an Economy
 INTRODUCTION
• Scarcity is the central problem
which gives rise to four basic
economic problems, and in this
lesson, we will look at these basic
problems in detail.
• The central economic problem of
scarcity of resources is broken
down into four basic problems of
an economy
The Basic (3) Basic Problems of an Economy

What to How to For whom to

produce? produce? produce?
 • What happens when a society's resources
are limited?
-It chooses which goods and services to
WHAT TO produce.
• While it may appear simple, society must
PRODUC choose the type of each and every goods
or service to be produced.
E? • It also establishes the required quantity.
• For example:
-Should we make more sugar or more butter?
 • Society must select between different
methods of producing the item.
• The choice is based on the availability of
various production factors as well as their
HOW TO pricing.
• Typically, a society chooses a method that
PRODUC makes the best use of its resources.

E? • For example:
-A variety of ways can be used to create a product.
For example, a pandesal. It can be made by kneading
the dough using your hands or by using machine.
But using machine demands more capital asset that
using hands.
 • Ask this: can a civilization satisfy all human
desires? The answer…
-Definitely not.
FOR • As a result, it must determine who

WHOM receives what proportion of the overall

production of goods and services
TO generated.
• In other words, society determines how
PRODUCE goods and services are distributed among
its members.
? • For example:
-Sanitary Pads are for women, Razor is mostly
for men, Diapers are for babies (and sometimes
for adult)
Opportunity Cost and
the Economic Problem
• The concept of opportunity
cost can be used to highlight
the economic problem.
• HOW?
 TRADE OFF and
OPPORTUNITY
COST
• TRADE OFF
-It is a situational decision that
involves giving up of one thing in
return for another
• OPPORTUNITY COST
-is the next best alternative
foregone.
• NOTE: In every TRADE OFF there
is an OPPORTUNITY COST
APPLIED
ECONOMI
CS
 LET’S HAVE A
RECAP!
1. What are the 3 economic
questions/problems?
Explain each
2. How can we highlight the
basic economic problem?
 NOW THE
QUESTION IS…
How are these questions be
solved?
THE ANSWER…
It depends on the nature of the economic
system in place. The economic system is the
means by which society answers the basic
economic problems. (Next page)
• The economic system is
the mechanism through
which society determines
the solutions to the
aforementioned basic
economic issues.
ECONOMIC SYSTEM
•It is a means by which
societies or governments
create, organize and
distribute available
resources, services, and
goods.
 TRADITIONAL
FOUR ECONOMY
ECONOM COMMAND ECONOMY

IC MARKET ECONOMY
SYSTEMS MIXED ECONOMY
Traditional Economy
• Economy is shaped largely by custom or religion.
• Traditional economies rely on agriculture and
hunting, gathering, or a combination of these
activities. Instead than using money, they use
barter.
• Emerging markets and developing countries are home
to the majority of traditional economies.
 Command Economy
• This is a centralized decision-making system in which
the government or a planning committee makes
decisions.
• One person or a group of officials decide WHAT
products are needed. HOW are they produce and FOR
WHOM.
• This economics applies to authoritarian and communist
countries alike.
 Market Economy
• This is the most democratic economic system available.
• NO government involvement in economic decisions. Private
firms account for all production.
• Consumers decide WHAT should be produced. They do this
through the purchases they make.
• Businesses determine HOW the products will be produced.
• The people who has more money are the one WHO buys the
product.
 Mixed Economy
• A mixed economy is a system that blends market,
command, and traditional economic elements.
• It is by combining traditional, state-run, and private
enterprises.
• Need government intervention – create laws
protecting property rights and enforcing contracts
• Most economies in the world today are mixed.
Reflection Time!
• 1. Cite one (1) situation
where you may have given
up an opportunity in your
life over another
opportunity. State the
reason why you gave up
such choice and choose
the other.
 END OF
DISCUSSI
ON