GOOD MORNING

CLASS
ECONOMICS AS AN APPLIED
SCIENCE
LESSON 1.2.
Learning Objectives:
At the end of this lesson, the students should be able to;

Identify the basic problems of the Philippine

economy.
Analyze basic economic problems and
propose solutions to the problems using the
principles of applied economics.
 Economics as an Applied Science.

• Applied Economics is the application of economic

theory and econometrics in specific settings with the
goal of analyzing potentials outcomes.

• ECONOMIC THEORY- is a model that is used to explain

how economies function.
• ECONOMY- is an area of the production,
distribution and trade, as well as consumption of
goods and services .
• ECONOMETRICS- It is an application of statistical
methods of economic data in order to give
empirical content to economic relationships.
• It is typically characterized by the application of
the core, referring to economic theory and
econometrics, as means of dealing with practical
issues in fields that include demographic
economics, labor economics, business
economics, agricultural economics, monetary
economics, economic history and many more.
• John Neville Keynes is attributed as the first to use the
phrase “applied economics” to designate the application
of economic theory to the interpretation and explanation
of particular economic phenomena.
• Economics as an applied science involves the application
of economic theories and principles to real-world issues
and problems. It seeks to understand how individuals,
businesses, and governments make decisions regarding
the allocation of resources, production, distribution, and
consumption of goods and services.
 • We should be able to improve human welfare
among Filipinos by the investigation and analysis
of economic problems in the real world.

• 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.
 APPLIED ECONOMICS IN RELATION TO PHILIPPINE
ECONOMIC PROBLEMS.

• A solid understanding of economic principles and how

they are applied in real-life situations can serve as
significant tools to help address the country’s economic
problem.
• For example, understanding the existence of scarcity can help
Economics students analyze how to maximize the use available
resources in order to overcome scarcity.
•Knowledge of economic theories such as
Law of Supply and Demand can help in
analyzing why prices are high and what
the government can do to help bring
down prices.
 The Philippines’ Basic Economic Problems

• The Philippine economy has grown significantly during

President Benigno Simeon Aquino’s administration.
With a growth rate of the country’ Gross Domestic
Product of 6.8% in 2012, improving to 7.2% in 2013,
and slowing down to 6.1% in 2014.
• These rates are an improvement of past rates preceding
President Aquino’s term.
 The Philippines’ Basic Economic Problems

• The Philippine economy has grown significantly during

President Benigno Simeon Aquino’s administration.
With a growth rate of the country’ Gross Domestic
Product of 6.8% in 2012, improving to 7.2% in 2013,
and slowing down to 6.1% in 2014.
• These rates are an improvement of past rates preceding
President Aquino’s term.
 It is also higher than its Asian neighbors such as
Malaysia, Thailand, South Korea, Hongkong, India, and
Indonesia (CIA World Factbook 2013).

• Despite this admirable growth, people, especially

the poor, have been complaining of non-inclusive
growth. Millions of Filipinos are claiming they
experience hunger or they still live below the
poverty level.
• Unemployment is still a main problem of the
Philippine economy despite improvements reported
by the National Statistic Office.

• Unemployment in the Philippines decreased to 6.4%

in the 2nd quarter of 2015 from 7.0% in the previous
year. Philippines’ unemployment rate average is 8.85%
from 1994 until 2015, reaching an all time high of
13.90% in the 1st quarter of 2000 and a record low of
6.0% in the 4th quarter of 2014.
• In July 2015, the Labor Force Survey (LFS) released by
the Philippine Statistic Authority (PSA) showed the
country’s unemployment rate at 6.4% or an estimated
2.68 million individuals.

• Another significant socio-economic problem in the

country is poverty. As reported by the National
Statistics Coordination Board, in 2016, poverty
incidence of the population registered at 26.4%,
26.5% in 2009, 25.2% in 2012, and 28.8% in the first
semester of 2014.
• The booming population growth in the Philippines is
another basic economic problem that can be
connected to the issue of scarcity. When population
become too big, economic resources may no longer
be enough to support the growing population.
• According to the 2010 census, the Philippine
population stood at 92.3 million. As of 2014, it has
reached more than 100 million-growing by 2% from
the previous year and one of the highest in Asia.
• The population of the Philippines represents 1.37%
of the world’s total population. This is apparently
the reason why schoolrooms are not enough for
our children who are of school age.
BASIC ECONOMIC PROBLEMS OF THE
COUNTRY
• UNEMPLOYMENT
• POVERTY

• POOR QUALITY OF INFRASTRUCTURE

• INCOME INEQUALITY
 BASIC ECONOMIC PROBLEMS OF THE COUNTRY
• UNEMPLOYMENT

COMMON CAUSES
• The number of people entering the job market has been
greeter than the job created.
• The rural-urban migration increase due to employment
opportunities
• May of the unemployed individuals are college.
 RURAL TO URBAN MIGRATION

• Few services • Access to services

• Lack of job opportunities
• Unhappy life
• Poor transport links
• Natural disaster
• Shortage of foods
• Better job opportunities
• More entertainment facilities
• Better transport links
• Improve living condition
• Hope for better way of life
 WHAT CAN BE DONE TO SOLVE
UNEMPLOYMENT?
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.
4. Proper coordination between government and the private
sector to solve the problem of job mismatch.
5. Provision of more investment opportunities to encourage local
and international investment.
 POVERTY
• Increase in population.
• Increase in the cost of living.
• Unemployment.
• Income inequality.
 WHAT CAN BE DONE TO SOLVE THE
POVERTY PROBLEM.
• Reduce unemployment.

• Appropriate policy on labor income.

• Provision of unemployment benefits for those who

will be unemployed due to natural or man made
calamities.
Ex. Typhoon, Bombing of Terrorist, Earthquake.
 • Increase social services like education, healthcare
and food subsides for sustainable poverty
reduction.

Self-
Subsistence Sustainable
existing

• Appropriate policy on labor income.

POOR QUALITY OF INFRASTRUCTURE
91st OUT OF 144
COUNTRIES POOR
INFRASTRUCTURE
QUALITY

LOST ABOUT $250 BILLION

ECONOMIC GROWTH.
 WHAT CAN BE DONE TO IMPROVE THE QUALITY OF
INFRASTRUCTURE
1. The government shall implement fiscal reform program.
2. Continue reforming in key sectors-particularly power, roads
and water- to improve cost recovery, competition, and
institutional credibility and to sharply reduce corruption.
3. Improving central oversight of the planning and
coordination of investment.
4. Focus on investment through public-private partnerships to
achieve faster delivery of service.
 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 exist
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 Taxes
 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 transfer and subsidize food programs
for the urban and rural poor
3. Direct government policies to keep the price of basic
commodities low.
4. Raise minimum wage.

5. Encourage profit sharing.

 The country’s problems vary
with times and circumstances.
It is now a challenge for the
students to observe and
identify what these problems
are.
INDIVIDUAL
ACTIVITY
• Directions:
• 1. Read each scenario carefully and consider the economic factors
at play.
• 2. Analyze the choices available to you and the potential outcomes
of each decision.
• 3. Make your decision by selecting the option that you believe aligns
best with economic theory and your goals.
• 4. After selecting your choice, you will see the consequences of that
decision and learn from the results.
• 5. Reflect on the outcome and consider how you could apply
economic principles to make more informed decisions in the future.
• Scenario 1:
• You are a small business owner facing a labor shortage due to
increased competition for skilled workers. To attract and
retain employees, you have the option to:
A) Increase wages and benefits
B) Reduce working hours
C) Implement automation technology
D) Outsource some tasks to lower-cost providers
• Defend your answer.
• Scenario 2:
• You are a government policymaker tasked with reducing
income inequality in your country. Your options include:
A) Implementing a progressive tax system
B) Increasing minimum wage
C) Providing subsidies for low-income households
D) Offering free education and healthcare for all citizens
• Explain your answer.
• Scenario 3:
• You are a consumer deciding whether to purchase a luxury
item or save the money for a rainy day. Consider the
opportunity cost of each choice and select the option that
aligns best with your long-term financial goals.