APPLIED ECONOMICS

Jasthine Mikee L. Manito, LPT

Teacher
Basic Economic Problems and LESSON 2
How Applied Economics Solves
Economic Problems
 Identify the basic economic problems
1

Illustrate how applied economics can

be used to solve economic problems
2

Lesson objectives: Construct framework to solve the

economic problem
3

Solve problems on economic

activities
4
 In the article of Guru, S.
THE FOUR (2020) Basic Central
Problems Faced by an
BASIC Economy, there are basic
problems common to all
ECONOMIC economies. In terms of
production, common to all
PROBLEMS countries is the problem on
scarcity. This arises because
the resources are limited and
have alternative uses. This
problem gives rise to four
basic problems of an
economy.
 WHAT TO PRODUCE?
If there is scarcity of goods in a society, the
firms have to make wise decision on what
goods/service should be produced and
determine the quantity to produced.

The society must decide the type and quantity

of good/service to be produced to meet the
immediate needs of the society.

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 HOW TO PRODUCE?
The production of goods or services needs
effective methods and processes.

For example, you can produce PPEs using sewing machines;

sardines using aqua resources like fish and land resources like
tomatoes.
The production requires more labor and capital
investment.

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 FOR WHOM TO PRODUCE?

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 What provision/laws should be
made for economic growth?

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 APPLIED
ECONOMICS ON
BASIC ISSUES
AND PROBLEMS
• Applied Economics seeks to solve the problems on scarcity. This
happens when human wants for goods and services exceed the
available supply.
• In a modern economy, it is evident that a division of labor
happens when people earn income by specializing in what they
produce. They will use that income to purchase the products they
need or want every day (BC Campus 2020).
 • Also, in the division of labor, it allows workers and firms to produce
more. This is because:
a) agents focus on areas of advantage due to natural factors and skill
levels;
b) the agents learn and invent;
c) the agents take advantage of economies of scale.

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 • Division and specialization of labor only work when
individuals can purchase what they do not produce in
markets.
• Applied economics then helps you understand the basic
problems facing the world today. It helps you become a well-
rounded thinker.
• And most importantly, it prepares you to be a good citizen.

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 Quiz!
Multiple Choice (with critical thinking analysis)

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Problem 1
• You read about a traveling situation in which some airline passengers seem to
get a “fast pass” through security and move effortlessly through the boarding
process, while other passengers are waiting in long lines. In this example, the
travelers who are moving quickly through the boarding process are probably:
A. VIP passengers waiting longer more in an inconvenient lines
B. Passengers who value time and convenience and are willing to pay additional fees
for the privileges and other services
C. Loyal passengers whom they knew beforehand in which line to go to avoid delays
and inconveniences
D. Government officials who are seated in the executive area
 Problem 2
• Scarcity of resources in your locality (Manila) is evident. Only available are
fabrics, electric sewing machines and skilled workers. The government said,
you are only allowed to work from home to be safe and free from infection
of viruses. Which items most likely you need to produce?
A. PPEs
B. Canned goods
C. Sacks of rice
D. Sewing machines

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 Problem 3
• Manila is ranked 2nd in the most cases of COVID patients in Metro
Manila. The city needs urgent services of the medical frontliners in curing
the increasing number of patients. There is scarcity in the raw materials
for production. To whom would you produce first the available resources?
A. Soldiers
B. Police Officers
C. Medical Frontlines
D. Your family

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 Problem 4
• There is an urgent need of PPEs by the medical frontliners in the City of
Manila due increasing number of COVID patients every day. Which is not
true of producing the products (PPEs)?
A. Import from China
B. TESDA students and skilled workers may produce the PPEs
C. Manufacturers/suppliers may supply the PPEs
D. Export PPEs to Japan as gross national products

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 Problem 5
• The ABM Manufacturing Company decides to produce more on liquid soap
than bar soap to supply the growing demands in the market. It solves issues
on:
A. Whom to produce
B. How to produce
C. How much incentive
D. What to produce

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Thank you!