APPLIED

APPLIED ECONOMICS

CHAPTER 1 INTRODUCTION TO
APPLIED ECONOMICS
Lesson 1.1
Objectives:
Please read page 1 of your book

Terms to Remember on page 1

Read for 5 minutes

A condition where there are insufficient resources to satisfy all the needs and
wants of a population.

SCARCITY

ECONOMICS
A social science that involves the use of scarce resources to satisfy
unlimited wants.
RELATIVE SCARCITY ABSOLUTE SCARCITY
A GOOD IS SCARCE SUPPLY IS LIMITED
COMPARED TO ITS
DEMAND
SCARCITY
 f s
e - of
r a d
T
-Factors of
production

-Resources Rent
used to Wage
produce
Interest
goods and
services

-By nature
are limited
 Economics as a Social Science
-human behavior
-study the society
-how people behave
-how people influence the world
around them
-how individual make choices
Branches of Economics
Why Economics is Important?

-To understand the value of

budgeting and proper
allocation of available resources
-Understand how the economy
Operates
-Make a better choice/decision
Scientific Approach in the Empirical Testing
of an Economic Theory
- Ideal rate of - Actually happening
population growth. Like:
-inflation rate
- Most effective Tax -Number of employed
System -GDP
-Overview of what is
- Policy Formulation happening in the economy
that is possibly far from
what is ideal.
 Measuring the Economy
How the growth of the economy is actually measured?

Production

The interplay of resources and outputs tells how well the economy has performed.
 Approaches to GNP Measurement
GNP or Gross National Product- is the market value of
final products, both sold and unsold, produced by the
resources of the economy in a given period.

Market Value- determined by supply and demand while

the economy’s resources are those belonging to Filipino
citizens and corporations.
 1. GNP/GDP: Expenditure Approach

Final Products are products that reached the highest levels of processing.
Example: Flour to Bread, Lumber or Wood to Furniture

These final products are used in different ways:

1. Household and Individual Consumption (C)
2. Government Expenditure ( G)
3. Exports ( X)
4. Investment (I) When products are stocked it is considered as final product.
5. Import ( M ) excluded in the computation

GNP= C+I+G + (X-M)

GDP- the market value of final products produced
within the country.

GNP – Net Factor Income Approach = GDP

Net Factor Income Approach

NFIA = Income of OFWs – Income Foreigner Working in the Country

When the income of OFWs is higher than the foreigner workers, there is a positive result, but
when the foreign workers’ income is higher than that of OFWs, there is a negative result.

Net Inflow = Inflow-Outflow to –Net Inflow = -Inflow to Outflow

 2. GNP/GDP : INCOME/VALUE ADDED APPROACH APPROACH

Product : Bread

Wheat + Flour + Dough + Bread

All products and their values are the contributions of these essential ( basic ) factors of
production.
 Lesson 1.2
Economics as an Applied Science
Applied Economics is the application of economic theory
and econometrics in specific settings with the goal of
analyzing potential outcomes.
Economic Theory and Econometrics are used as a means
of dealing with practical issues in fields that include:
-demographic economics, labor economics, business
economics, agricultural economics, development
economics, education economics, health economics,
monetary economics, economic history, and many others.
Applied Economics- First used by John Neville Keynes
- designate the application of economic theory to the
interpretation and explanation of particular economic phenomena.

In studying Applied Economics:

• Human welfare among Filipinos may improve

• Applying economic theory in our lives means trying to address actual
economic issues and be able to do something about it.
• The concept of scarcity and choice should encourage us as individuals to help
in our own way to provide solutions to the country’s economic problems.
The Philippines’ Basic Economic
Problems:
1.Unemployment
2.Poverty
3.Rapid Population Growth
4.Teenage Pregnancy
5.COVID-19 Related Issues
 Activities
1. Watch the documentary about the life of Lee Kuan Yew by clicking the link below and answer the questions.
Write your answer on page 16 of your book.
https://www.youtube.com/watch?v=JAvNqAvG7bk Lee Kuan Yew (1923-2015) –
Documentary by Peter Tong ( This activity is for those students who did not attend the online
discussion, if you are present proceed to Activity 2)

Questions:
2. Describe Singapore before Lee Kuan Yew became their leader. ( 3 sentences only)
3. Give 5 economic policies and transformations Lee Kuan Yew made in Singapore?
4. Discuss the relationship between good leadership and good citizenship. (3 sentences only)
5. What do you think is lacking in the Philippines to make it like Singapore? (3 sentences only)

2. Discussion Questions in short answer only. ( write your answer on page 16 of your book)