Examine the Utility and

Application of Applied
Economics to Solve Economic
Issues and Problems
POVERTY
OVERPOPULATION
UNEMPOYMENT
Who among us has not experience any problems? How
did we deal with them? Are there solutions with these
problems? Yes! They can be solved using different
approaches. Just like humans, our country also faces
different problems in terms of social, technological,
environmental, economic, and etc. In this lesson, we will
focus on economic problems and how Applied Economics
can be used to solve these problems.
Problem No. 1 POVERTY AND UNEQUAL
DISTRIBUTION OF INCOME
POVERTY - It is the inability of a
person to sustain its basic needs.
• Categories:
1. Absolute Poverty
2. Relative Poverty
ABSOLUTE POVERTY
• is the lack of income to buy the basic food and
necessities for subsistence living.
• How can we measure absolute poverty?
1. Poverty threshold is the income needed to purchase
these minimum nutritional requirements and other basic
necessities for daily survival
2. poverty incidence, is the proportion of households in the
country with family income lower than the poverty
threshold or poverty line.
RELATIVE POVERTY
• refers to the structure on how the
national income is being distributed
among households in an economy.
• How can we measure relative poverty?
1. Lorenz curve – shows the share of the various household
groups (ranked from poorest o richest) on the national
income
2. the Gini coefficient.- measure of income inequality
derived from Lorenz curve
MAJOR CAUSES OF POVERTY
• According to ASIAN
DEVELOPMENT BANK
1.low economic growth
2.a weak agricultural sector
3.increased population rates
4.a high volume of inequality
EFFECTS OF POVERTY
1.inability to afford housing
2.Malnutrition
3.child labor
4.Crimes
5.many others.
Recommendation/Solution:
• Absolute Poverty
1. Short-Term - providing free meals, housing and adequate clothing
2. Long-Term- economists suggested to provide resources including
credit, skills, and entrepreneurial training and cash transfer.
• Relative Poverty
1. progressive taxation, income transfers and other programs that
improve the income of the poor families.
• For example, the government gives 20% discounts to senior
citizens when they purchase goods and avail services. Financial
assistance to students studying in State Colleges and Universities
and the like fall also under this example. Lastly, it is the
implementation of the TRAIN Law.
 “IPINANGANAK KA NG
MAHIRAP, MAMAMATAY KA
NG MAHIRAP”

AGREE OR DISAGREE?
Problem No. 2: POPULATION
• PSA (2015) the total population of the
Philippines is 100,981,437 with an annual
population growth rate of 1.72 % (2010-
2015)
• The Philippines is now considered the
thirteenth (13th) most populous country in
the world.
• ADVANTAGE
1. Additional consumers in the
market
2. Additional labor force that
can be source of
productivity, creativity and
entrepreneurship
3. Additional Overseas Filipino
Workers in other countries
with deficiency in labor
services
• DISADVANTAGE
1. If the economy is not growing
as fast as the growth of the
labor force, the problem of
unemployment may ensure
2. Scarcity in land and capital
3. It’s a burden on the part of the
government to provide social
services including education,
health and housing.
Recommendation/Solution:
Reproductive Health Bill into Law or also
known as “ The Responsible Parenthood
and Reproductive Health Act of 2012
(Republic Act No. 10354)”. The
law guarantees universal access to methods of
family planning like contraception, fertility
control, sexual education, and maternal care.
Problem No. 3: LOW INVESTMENT IN
HUMAN RESOURCE DEVELOPMENT
• PSA report (January 2020), the total labor force of the
Philippines is 72,997,000
• Economists say that big number of labor force has a positive
contribution on economic growth, but quality of human
resources has greater impact. What does it mean to have
high quality of human resources?
• Knowledge capital is formed through investments in higher
education, science and technology and research and
development.
Recommendation/Solution:
Other countries already surpassed the
Philippines because they have invested in
knowledge capital like: scientist, technologist
and engineers who develop products and
innovate processes to make it more efficient
and competitive in the production and
distribution of goods and services.
Problem No. 4: WEAK INFRASTRUCTURE
Infrastructures plays a vital role in the
economic development of the country. Roads,
bridges, railways, electricity and other
networks in transportation and communication
serves as link to other sectors of the economy.
It provides services to people and various
industries as well.
ADVANTAGES OF STRONG
INFRASTRUCTURE
a well-developed energy infrastructure can be
relied in supplying cheap electric power to
households, businesses and other sectors.
Cheap energy lowered the cost of creating
goods thus generate more income in the
company and also contributed in the economic
expansion.
DISADVANTAGES OF WEAK
INFRASTRUCTURE
impacted negatively the economic growth of a country
especially the low-income countries like the Philippines. For
example, the transportation system of the Philippines does not
have efficient mass transit system in the Manila. As a
consequence, we have a serious traffic problem. Some of the
effects are low productivity of employees, delayed in
deliveries, missed business opportunities/investments and huge
energy consumption.
Recommendation/Solution:
To improve the infrastructures in the
Philippines, the government borrows from
external donors to fund our several highway
projects (MNTC and NLEX) from Japanese,
US and European Union government as well
as the World Bank and other international
agencies.
Problem No. 5: SLOW ADOPTION OF
MODERN TECHNOLOGY
One of the problems the Philippines is facing is the slow
adoption of modern technology in agriculture. Many of
Filipino farmers are still using traditional farming
techniques than employing a more advanced method of
cultivating their lands. Technology is inevitable, and most
of the countries in the world are already using technology
for production and distribution of goods.
Recommendation/Solution:
With the adoption of modern technology,
the agriculture, industries and services
sectors are able to realize their growth
potential through investing in modern
equipment and technology.
UNEMPLOYMENT

COMMON CAUSES
• The number of people entering the job market has been
greater than the number of jobs created.
• The rural-urban migration increases due to
employment opportunities.
• May of the unemployed individuals are college
graduates.
RURAL TO URBAN MIGRATION
WHAT CAN BE DONE TO SOLVE
UNEMPLOYMENT PROBLEM?
1. Appropriate economic policies for labor-intensive
industries.
2. Improve the educational system of the country
especially in the rural areas
3. Minimize rural-urban migration by improving the
economic environment in rural areas.
WHAT CAN BE DONE TO SOLVE
UNEMPLOYMENT PROBLEM?
4.Proper coordination between government and the
private sector to solve the problem of job mismatch.
5. Slowing population growth. Philippine growth must
increase faster than the population. Limit the size of
families.
6. Provision of more investment opportunities to
encourage local and international investment.
 INCOME INEQUALITY
• Income is the money that an
individual earned from
work or business received
from investments.
• Income inequality – refers
to the gap in income that
exists between the rich
and the poor
MAJOR CAUSES OF INCOME
INEQUALITY
1. Political culture
“ palakasan” “utang na loob”
Ex. Voting for the wrong person during
election

2. Indirect taxes – poor people shoulder this

taxes like the Value Added Tax – 12%
INCOME INEQUALITY
3. Income Taxes

A little more than minimum wage – 32%

Minimum Wage – No Tax
TA
X
WHAT CAN BE DONE TO SOLVE THE
PROBLEM OF INCOME INEQUALITY
1. Policies to enforce progressive rates of direct
taxation on high wage earners and wealthy
individuals.
2. Direct money transfers and subsidize food programs for
the urban and rural poor
 SOLUTIONS TO INCOME INEQUALITY
3.Direct government policies to
keep the price of basic
commodities low

4. Raise minimum wage

5. Encourage profit sharing

Philippine economy was badly hurt by the pandemic
Covid-19. Entrepreneurs were forced to close down
temporarily their businesses to control the spreading of
the virus. As a result, ordinary people lose their sources
of income and purchasing power. In order to ease the
current situation, the Congress enacted in a special
session and grants the President additional powers to
manage the crisis. This is Republic Act No. 11469 known
as “Bayanihan to Heal as One Act.” The law gives the
President the authority to divert and use the P275 billion
or 62% of the approved P438 billion budget for 2020.As
an economist, can the decision to use the 62% of the
approved budget solve the problem? Write your
answer in a 1 whole sheet of paper.