INTRODUCTION
TO APPLIED
ECONOMICS
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OBJECTIVES :
1. Differentiate between economics as a social
science and as an applied science.
2. Value the concept of Economics.
3. Create a Venn diagram that shows the
difference between Economics as a social
sciences and Economics as an applied science.
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ECONOMICS
Economics is one of the branches of social
science that involves the use of scarce resources to
satisfy unlimited wants. Part of human behavior is
the tendency of man to want to have as many
goods and services as he can. However, his ability
to buy goods and services is limited by his income
and purchasing power.
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Alfred Marshall – described economics as a study
of mankind in the ordinary business of life. It
examines part of the individual and social action
that is most closely connected with the attainment
and use of material requisites of well-being.
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Scarcity – is a condition where there are
insufficient resources to satisfy all the needs and
wants of a population.
Two types of Scarcity:
● Relative Scarcity – is when a good scarce
compared to its demand.
● Absolute Scarcity – when supply is limited
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CHOICES AND DECISION MAKING
Because of the presence of scarcity, there is
a need for man to make decisions in choosing
how to maximize the use of scarce resources to
satisfy as many wants as possible.
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Opportunity Cost - refers to the value
of the best foregone alternative. The
concept of opportunity cost holds
true for individuals, businesses and
even a society.
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Economic Resources
Also known as factors of production, are the resources used
to produce goods and services.
1. Land – soil and natural resources that are found in nature
and not man-made.
2. Labor – physical and human effort exerted in production.
3. Capital- man-made resources used in the production of
goods and services, which include machineries and
equipment.
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ECONOMICS AS A SOCIAL SCIENCE
Economics is a social science because it
studies human behavior just like psychology and
sociology. As a social science, economics studies
how individuals make choices in allocating scarce
resources to satisfy their unlimited wants.
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TWO BRANCHES OF ECONOMICS
Macroeconomics is a division of economics that is
concerned with the overall performance of the entire
economy. It studies the economic system as a whole
rather than the individual economic units that make up
the economy. Its about the nature of economic growth,
the expansion of productive capacity, and the growth of
national income.
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Microeconomics is concerned with the
behavior of individual entities such as the
consumer, the producer, and the resource
owner. It studies the decisions and choices of
the individual units and how these decisions
affect the prices of goods in the market.
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BASIC ECONOMIC PROBLEMS OF SOCIETY
1.What to produce and how much – society must decide what
goods and services should be produced in the economy.
2. How to produce – refers to the resource mix and technology
that will be applied in production.
3. For whom to produce- Is about the market for the goods.
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ECONOMIC SYSTEMS
The economic system is the means
through which society determines the
answers to the basic economic problems
mentioned.
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1. Traditional Economy
Decisions are based on traditions and
practices upheld over the years and
passed on from generation to generation.
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2. Command Economy
This is the authoritative system wherein
decision making is centralized in the
government or a planning committee.
Decisions are imposed on the people who do
not have a say in what goods are to be
produced.
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3. Market Economy
This is the most democratic form of
economic system. Based on the workings of
demand and supply, decisions are made on
what goods and services to produce.
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3. Market Economy
This is the most democratic form of
economic system. Based on the workings of
demand and supply, decisions are made on
what goods and services to produce.
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ECONOMICS
AS AN APPLIED
SCIENCE
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Applied Economics is the application of economic
theory and econometrics in specific settings with the goal of
analyzing potential outcomes. It is typically characterized by
the application of the core, referring to economic theory
and econometrics, as a means of dealing with practical
issues in fields that includes demographic economics, labor
economics, business economics, agricultural economics,
development economics, education economics, health
economics, monetary economics, economic history, and
many others.
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John Neville Keynes is attributed to be the first
to use the phrase “applied economics” to
designate the application of economic theory to
the interpretation and explanation of particular
economic phenomena.
Applying economic theory in our lives means
trying to address actual economic issues and be
able to do something about it.
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APPLIED ECONOMICS IN RELATION TO PHILIPPINE
ECONOMIC PROBLEM
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 of economic theories such as the
Law of Supply and demand can help in analyzing why prices are
high and what the government can do to help bring down
prices.
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The Philippines’ Basic Economic
Problems:
● Hunger
● Poverty
● Unemployment
● Population growth
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ASEAN ICON
Lee Kuan Yew (1923 – 2015)
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Lee Kuan Yew (1923 – 2015)
is an economic icon and an example of
how a leader of a previously undeveloped
country can lead to overcome its country’s
basic economic problems and move
toward economic growth.
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He was the prime minister of Singapore from
1959 to 1990. During his long rule, Singapore
became the most prosperous nation in Southeast
Asia. He introduced a five-year plan calling for
urban renewal and construction of new public
housing, greater rights for women, educational
reform and industrialization.
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THANK
YOU
