APPLIED ECONOMICS MODULE 1

Name:______Lesly Kate N. Abellanida______________________

Date:___September 3, 2020_____

Grade & Section:

12-Dalton____

(No. of Target Days = 12 days)

INTRODUCTION TO ECONOMICS

APPLIED SCIENCE

Applied science ​is a discipline that used to apply existing scientific knowledge
based

on scientific researches and also to developing a practical application of science - such

as

technology, methodology, inventions.

• The main concern of applied science is about scientific knowledge and how to practice
it

into the real world. This can be a scientific and practical contribution to
people.

• Applied science's necessity is triggered by research question which become the

problem to

be solved. It usually produces practical steps, practical decisions,

as tools to answer the existing

problem.

• It helps stakeholders to develop the systems to be

better.
• Applied science related to economic aspects.

SOCIAL SCIENCE

Social science is a study of human behavior, relationship with other human in

terms of

emotions, psychologic, the impact of belief to environment based on scientific

research.

• Social science usually uses many tools to get information, to measure, to evaluate,
even

to control human behavior.

• Social Experiment-It is one of many tools that can be used in social science in order to
get

information about people's reaction to some conditions which are the hypothesis of the
study.

• Social science research is triggered by curiosity about the current event of social life. It
may

be not something wrong or a problem. But it may help us to understand about human
behavior,

how to treat people, how to live socially

healthy.

The similarities between Applied Science and Social

Science:

1. Based on scientific research

2. Have contribution to civilizations

3. Necessary to human life

4. Root of science
5. Been done with a scientific methodology

The differences between Applied Science and Social

Science:

1. Purpose

1. Applied science: solving problem

2. Social science: theory proven

2. Trigger

1. Applied science: problem to be solved or needs to be

developed

2. Social science: curiosity

3. Object

1. Applied science: system

2. Social science: people

4. Methodology

1. Applied science: both quantitative and qualitative

2. Social science: qualitative

5. Output

1. Applied science: technology, invention

2. Social science: qualified hypothesis or behavioral

theory

Reference:

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Scarcity ​– is the reason why we study

Economics​.

- It is the insufficiency of resources to meet the wants of consumers and

insufficiency

of resources for producers that hamper enough production of goods and

services.
Economics ​– as a study, is the 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. It is therefore in this context that man has to practice
economics.

Scarcity ​is a condition where there are insufficient resources to satisfy all the
needs

and wants of a population. Scarcity may be relative or

absolute.

• ​Relative Scarcity ​– when a good is scarce compared to its

demand.

Example: Coconuts are abundant in the Philippines since the plant easily grows in the
soil and

climate. However, coconuts become scarce when the supply is not sufficient to meet the
people

needs.

Relative Scarcity occurs not because the good is scarce per se and is difficult to obtain
but

because of the circumstances that surround the availability of the

good.

Example: Bananas are abundant in the Philippines and being grown in a lot of regions
around

the country. But when a typhoon destroys banana plants and the farmer has no
bananas to

harvest, then bananas become relatively

scarce.

• ​Absolute Scarcity ​– Is when supply is

limited.

Example: Oil is absolutely scarce in the country since we have no oil wells from which
we can

source our petroleum needs, so we rely heavily on imports from oil-producing countries
like

Iran and other Middle Eastern

countries.

Example: Cherries are absolutely scarce in our country since we do not have the right
climate

to grow them and we have to rely on imports for supply of cherries. This explains why
cherries

are very expensive in the

Philippines.

• ​Opportunity cost ​- refers to the value of the best forgone

alternative.
When land is devoted exclusively to the cultivation of rice, we give up an output of
bananas or

mangoes that we could have planted on that land area. A producer who decides to
transform
all his leather into shoes, gives up the chance to produce bags with that leather. A
school teacher

who could have worked in a bank, gives up the salary that she would have earned as a
bank

employee. A manager who quits his job in order to take up a master’s degree, gives up
his

salary as a manager. That salary is his ​opportunity cost, ​without scarcity, a person
does not

need to make choices since he/she can have everything he/she

wants.

Example:

[Link] be a business proprietor that withdraws Php 10,000 from his savings account
so he

can buy materials to be used in his business. He gives up the interest the savings would
have

earned but his goal is to earn more money that would be generated by the
business.

[Link] opportunity cost of watching a movie in a cinema is the value of other things that
you

could have bought with that money such as pint of ice cream, a combo meal in fast food
chain,

or a simple t-shirt to be used to your date with your

crush.

ECONOMIC RESOURCES
-​Also known as factors of production, are the sources used to create goods and
services. These

are by nature, limited and therefore, command a payment that becomes the income of
the

owner.

1. ​Land ​– found in nature and are not man made. Owners of lands receives payment
known as

rent.

2. ​Labor ​– Is the amount of physical, mental, and social effort used to produce goods
and

services in an economy that comes up with an income received by the labors called as
wage.

3. ​Capital ​– Man-made resources used in the production of goods and services, like

machineries and equipment. The owner’s and stakeholder’s capital earns an income
called as

interest.

ECONOMICS AS A SOCIAL SCIENCE

It is a social science due to it studies human behavior just like psychology and

sociology. A social science is the study of society and how people behave and influence
the

world around them. As a social science, economics studies how individuals make
choices in

allocating scare resources to satisfy the unlimited

wants.
MACRECONOMICS VS MICROENOMICS

There are 2 branches of

economics.
Macroeconomics

It is the division of economics that is concerned with the overall performance of

the

entire economy. It is about nature of economic growth, the expansion production

capacity and

the growth of national income.

Microeconomics

It is concerned with the behavior of individual entities such as the consumer,

producer

and the resource owner. Concerned on how goods flow from business firm to the
consumer

and how resources move from the resource owner to the business
firm.

It is also concerned with the process of setting prices of goods (​PRICE

THEORY​).

BASIC ECONOMIC PROBLEMS IN THE SOCIETY

1. What to produce and how much?

The society must decide what goods and services should be produced. (nature of
goods

to produced and quantity of

those.)

2. How to produce?

Refers to the resource mix and technology that will be applied in the
production.

3. For whom to produce?

For whom will be the goods and services be produced? The young or old, male or
female

market, the low-income or the high-income

groups?

ECONOMIC SYSTEMS

1. Traditional Economy.

Decisions are based on traditions and practices upheld over the years and
passed on

from generation to generation. Methods are stagnant and therefore not progressive.
Traditional

society exist in primitive and backward

civilizations.

2. Command Economy

This is the authoritative system wherein decision making is centralized in the

government or planning committee. Decisions are imposed on the people who do not
have a

say in what goods are to be produced. This economy holds true in dictatorial, socialist
and

communist nations.
3. Market Economy

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. People’s
preferences are

reflected in the prices they are willing to pay in the market and are therefore the basis of
the

producers’ decisions what goods to

produce.

Why Economics is Important?

To see how important, the economic is, try to see a newspaper or a front page
news

from social medias. Watch the news on TV and for sure economic news always
presents

important issues.

Economics will help you to understand why there is a need for everybody,
including

the government, to budget and properly allocate the use of whatever limited resources
are

available. It will help us to understand how to make more rational decisions on spending

money, saving part of it and even investing some of

it.

On the national level, economics will enable the students to take a look on how
the

economy operates and to decide for themselves if the government officials and leaders
are

effective in trying to shape up the economy and formulate policies for the good of the
nation.

What is GNP?

Gross National Product (GNP) ​Is the market value of final products, both sold
and

unsold, produced by the resources of the economy in a given period. Market value is

determined by demand and supply while the economy resources are those belonging to
Filipino

citizens and corporations.

GNP/GDP: Expenditure Approach

One way to account GNP and classify its components is by end-use expenditure.
Products are final when they have reached the highest levels of processing in the
economy for

different uses in the given period. They are household and individual consumption (C),
and

government expenditure on goods and services including labor (G) and exports (X).
Products,

regardless of production stages, are also considered final when basically stocked
(unused) as

capital goods and inventories of raw materials and intermediate products, classified as

investments (I), they are tock of values for future use and therefore, have their import

components (M) are excluded since import products are produced in other
economies.

GNP = C + I + G (X-M)
Below there is a table where it presents the Philippine GNP statistics whose
components

are classified by expenditure

accounts.

• Capital Formation is Investment (I) by both private sector and government that
consists of

fixed capital and inventory

changes.

• Fixed Capital includes capital goods (buildings, machineries, equipment) while

inventory

changes are stocks (unused) for future use from all stages produced in that
year.

• Net Factor Income from abroad is net export of factor services equal to Factor
Income from

abroad less the factor payments of other

countries.

• Factor payments are for the direct services of resources like remittances of our
OFW’s for

labor export.

• Profit remittances to the home counties of multinational companies like Nestle and
Procter

and Gamble (P&G) represent our payments for importing their capital and

entrepreneurship.
• Payments for non-factor services as part of trade balance (X-M) are for services
using all

resources of production. Profit brought home by a Filipino construction firm for

construction services in Saudi Arabia is an expel of non-factor service export

receipt.
Reference: ​Dinio, R. P., & Villasis, G. A. (2017). ​Applied Economics. ​Manila,
Philippines:

Rex Book Store.

What is GDP?

Gross Domestic Product, GDP is defined as the market value of final products
produced

within the country. The resources in the economy include capital and entrepreneurship

belonging to other countries brought to the domestic economy by foreign businesses.

GDP is

net of GNP after deducting Net Factor Income from abroad or by deducting factor
income from

abroad and adding back Factor Payments to other countries. In other words, negative
sign to

Net Factor Income from abroad changes the sign of Factor Income from abroad and
adding

back Factor Payments to other countries from negative to positive. The table shows that
Household Consumption is the biggest GDP expenditures having 74% followed by
Capital

Formation having 19% led by the construction industry. In other words, our economy
mostly

produces consumer goods and buildings and other construction structures. The
dominance of

household consumption reflects households’ propensity to consume more and save

less. On the

other hand, construction is both private investments by rich and public capital spending
by

government largely financed by

borrowings.
Net Flow = Inflow-Outflow to -Net Flow= -Inflow+
Outflow

GNP/GDP: Income Approach

Another way to account GNP and classify its components is by resource uses
and

contributions that make up the production stages. As basic factors of production,

resources

such as land, labor, capital and entrepreneurship has added value to products (e.g.
leather) as

processed into higher forms like shoes. If all payments for resources contributions (rent,
wage,

interest, and profit) went to resource owners, GNP would simply be the sum of all factor

payments from raw materials to final product stage. In the figure below, the value of,
say, the

final product (Php 700) is equal to the intermediate product (Php 300) plus the factor

contributions (Php 400) that transformed the latter into its final form. Following the arrow

directions, the value of the intermediate product (Php 300) is from the factor
contributions at

the intermediate stage (Php 200) and the raw material stage (Php 100) and the
intermediate

product (Php 200) through the value added by the factor contributions. The same logic
applies

to the final product whose material purchase is a product of factor contributions from the
lower

stages. In conclusion, all products and their values are the contributions of these
essential or

basic factors of production.

Value Added Flow
The table below presents the Philippine GNP statistics whose components are
classified
by factor contribution of the economy’s producing sectors. The biggest contributor of
GNP is
the Service Sector 48% serving all industries. Next is the import-dependent Industrial
Sector
44% providing industrial input across sectors. The smallest sector is Agriculture, Fishery
and
Forestry combined 8%, needing import complements to provide for the food
requirements of
the population. Net factor Income from the rest of the world’s factor income apart from
the
factor contributions of the sectors. It includes the OFW remittances and transfer
payments from
abroad.

Raw Material Purchase ​(Php 100) Intermediate

​ Product ​Purchase (Php 300)

Value of Raw Material ​(e.g. animal hide, Php 100)

++

Resource ​Contributions/Income

Resource ​Contributions/Income (Php

​ 100)
(Php 200)
= ​= =

Resource ​Contributions/Income (Php

​ 400)

Value of Intermediate ​Material (e.g. leather, Php 300)

Value of Final Product ​(e.g. shoes, Php 700)

Reference: ​Dinio, R. P., & Villasis, G. A. (2017). ​Applied Economics. ​Manila,
Philippines:

Rex Book Store.

ECONOMICS AS APPLIED SCIENCE

Applied Economics is the application of economic and econometrics in specified

settings with goal of analyzing potential outcomes. It is typically characterized by the

application of the core, referring to economic theory and econometrics, as means of

dealing

with practical issues in the fields that include demographic economics, labor economics,
business economics, agricultural economics, development economics, education
economics,

health economics, monetary economics, economic history, and many

others.

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.
The concept of scarcity and choice should encourage us as individuals to help in
our

country way to provide solutions to the country’s economic

problems.

APPLIED ECONOMICS IN RELATION TO THE PHILIPPINE ECONOMIC

PROBLEMS

Understanding the existence of scarcity can help Economics students to analyze

how to

maximize the use of available resources in order to overcome scarcity. Knowledge 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.

The Philippines’ Basic Economic

Problems

The Philippine economic has grown significantly during President Benigno

Simeon C.
Aquino’s administration. With a growth rate of the country’s Gross Domestic Product of
6.8%

in 2012, improving to 7.2% in 2013 and slowing down to 6.1% in 2014, these rates is an

improvement of past rates preceding President Aquino’s term. It is also higher than its
Asian

neighbors such as Malaysia, Thailand, South Korea, Hong Kong, India and Indonesia

according to CIA World Factbook 2013.

Despite the admirable growth, people, especially the poor have been
complaining of

non-exclusive growth. Millions of Filipinos are claiming they experience hunger or they
still

live below the poverty level.

Activity & Quiz 1

Name:______ Lesly Kate N.

Abellanida__________________________ Date:__September
3, 2020___________

Grade and
Section:__12-Dalton___________________
_

Score:____________

Activity 1 ​Classify the following topics. Write ​MICRO ​if it falls under Microeconomics;

else
MACRO, ​if it falls under Macroeconomics.

____MACRO__1. The Inflation rate in the Philippines in the last quarter of

2019 was 5.8%.

__MACRO____2. A Php 340 billion deficit in the Philippines budget is expected in

the year 2015.
_MICRO_____3. Prices of Toyota vehicles are predicted to the go up
in December.

_MACRO_____4. Garlic prices in the past months have risen because producers
hoarded their supplies

in their bodegas.

_MICRO_____5. Unemployment rate has dropped because of the increase in the

number of OFWs.

_MICRO_____6. In the past few years, Coca-Cola was named as the fastest selling
product in the

market.

_MACRO_____7. Rental land could not be increased by landowners because of the

Rent Control Law.

_MACRO_____8. Prices of apples and grapes tend to increase during the

Christmas season.

_MACRO_____9. The Philippine economy grew at the rate of

5.8% in 2013.

_MICRO_____10. Philippine congress passed the Value Added Tax Law to strengthen
the Philippine

Tax System.

Activity 2

Describe the type of economic system characterized in each of the following

sentences.

_Market Economy________1. Prices are based on

demand and supply.

_Command Economy________2. The government decides on what

goods should be produced.

_Traditional Economy________3. Ancient methods are used in

deciding what goods to produce.
_Command Economy________4. People enjoy freedom of choice in arriving at
decisions on what to buy.

_Traditional Economy________5. People have no freedom of choice in arriving at

decisions on what to buy.

_Traditional Economy________6. Economy is stagnant, making use of

practices in the olden times.

_Traditional Economy________7. Economy is backward because no new technology or

production methods are

introduced.

_Market Economy________8. It is the most democratic form

of economic system.
_Market Economy________9. People’s preferences are reflected in the prices they are
willing to pay in the

market.

_Traditional Economy________10. It exists in primitive and

backward civilizations.

Quiz 1 ​Identify which resource is referred to by the following

words.
_Labor___1. Entertainers

_Land____2. Minerals

_Land___ 3. Forests

_Labor___4. Marine resources

_Labor___5. Teachers

_Labor___6. Technology

_Capital__7. Production equipment

_Labor___8. Engineers
_Labor___ 9. Call center
agents

_Labor__10. Business proprietor