APPLIED ECONOMICS

Governor Pack Road, Baguio City, Philippines

2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 1- ECON Subject Teacher:

ECONOMICS: HISTORY, IMPORTANCE AND BRANCH

Learning Objectives:
At the end of the module, the students must be able to:
a. explain the definition and origin of economics;
b. discuss the importance of studying economics;
c. explain the different branches and approaches to economics.

Economics defined …
American Greek word „oikonomia‟ or „oikonomos‟ which means
Heritage management of a household: Oikos (house) + nomos
dictionary (managing)
A social science that deals with the efficient allocation
of scarce resources to satisfy man‟s unlimited wants
and needs

 Why Study Economics?

1. Helps understand marketplace and the economic system.
2. To understand the signals from the marketplace, the nature of the cost of the
products, and the process of making decisions –especially those with quantified
values.
3. To better understand how the world and its people function and behave.
4. Allows full participation in the policies of running the economy (e.g. election
and legislative processes)
5. Learning economics can be fun, once appreciated and understood.

 Why major in Economics?

1. Get better preparation for vocations in which knowledge in economics is
vital (e.g. law, politics, social sciences, business, government, etc.)
2. Have the option to be in academic, business, government and non-
government institutions
– a flexibility many other major do not have
3. Get better and better pay than most graduates due to the technical
competencies they develop (i.e. calculations, analysis, interpretation,
and abstract and critical thinking, establishing relationships, among
events, research, project proposals and feasibility studies, etc.), many of
which are either lacking or not really developed in other courses

 Career Opportunities for Economists

A. Academe – academicians (teachers), professional researchers, project
coordinators, extension service providers, university planners, administrators

B. Business – those involved in marketing, management, finance, financial

management, research and development, analysts, statisticians,
entrepreneurs, advisers, planners, public relations officers, corporate „think
tanks‟

C. Social Science Fields – liberal arts people, historians, political scientists, social
scientists, lobbyists, journalists, policy makers, lawyers

D. Government- statisticians, researchers, city and economic planners, policy

makers, political and government advisers, budget and management
assistants and officers, Congress and senate staff, economic advisers,
interpreters, political analysts, industrial analysts

Applied Economics Page 1 of 4

 APPLIED ECONOMICS
Governor Pack Road, Baguio City, Philippines
2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 1- ECON Subject Teacher:

E. Non-government organizations – micro- financers, project proponents,

feasibility study consultants, researchers, project administrators, project
evaluators, labor and political group advisers

F. Freelance – independent researchers, professional consultants, freelance

writers, campaign managers, ghostwriters, independent businessmen.

ADAM SMITH, the first ECONOMIST

– Father of Economics, an English professor who served as the chief of Bureau of
Customs, England
- Conceived a lot of rules, using the French phrase laissez-faire, for free enterprise
and the word entrepreneur for the skill necessary to bring the factors of production in
coherent whole
- Put forth the idea of the invisible hand in which individual, in the pursuit of his/her
commercial activity for his own personal use, contributes in some way to the common
good, and the well- being of the society

How then is economics studied?

Economics uses a STANDARD METHOD ANALYSIS that is based on the

blend of scientific method and policy analysis.
SCIENTIFIC METHOD
- The process by which scientists, collectively and over time, to
construct an accurate representation of the world
- Attempts to influence the prejudice or bias in the experiment when

Define
Define the evaluation Identifiy all Choose the
Problem* criteria** Alternatives*** best policy****

testing a hypothesis or theory

*Observation and description of a phenomenon/group of phenomenon

**Formulation of a hypothesis to explain the phenomena

***Use of the hypothesis to predict the existence of other phenomena, or to predict

quantitatively the results of new observations

****Performance of experimental tests of the prediction by several independent

experimenters and properly performed experiments. If it may be supported, it can be
regarded as a theory or law of nature.

Common Mistakes in applying the Scientific Method

1. Mistaking the hypothesis for an explanation, followed by the explanation and
retaining the explanation
2. Ignoring or ruling out data which do not support the hypothesis and
3. Failure to estimate quantitative errors

POLICY ANALYSIS
- An approach to evaluate policies in the public sector
-

Applied Economics Page 2 of 4

 APPLIED ECONOMICS
Governor Pack Road, Baguio City, Philippines
2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 1- ECON Subject Teacher:

Common Pitfalls in Economics:
1. Biases and Preconceptions – the use of personal judgments in the analysis of the
facts
2. Loaded Terminologies- employing long definitions for some concepts and
emotionally loaded terminologies
3. Fallacy of composition –assuming that what is true to the parties is also true for the
whole
4. Post hoc, ergo propter hoc fallacy- presuming that if one event
precedes another, it necessarily is the cause of the latter.
5. “What is true for depression is true for prosperity fallacy” – in using similar theories and
policies in dealing with varying economic situations

Economics is a) to analyze, as objectively as possible, and b) to plan, taking into

account that its purpose is simply to recommend to decision makers.

LIMITATIONS TO ECONOMIC MODELS:

1. The liberal use of assumptions
2. Ceteris Paribus from the Latin word which means, everything stands still
or everything is held constant
- “For models and laws to hold true, it should be influenced from the influence of
other factors. However, in reality , it is very difficult to isolate an event from
another event and try to establish relationship between them”
- Note: The opposite of Ceteris Paribus is Mutatis Mutandis which
approximately translates as "allowing other things to change accordingly"
or "the necessary changes having been made."
3. Short run and long run effects
- Short run means the effect in the immediate future while in the long run,
the continuing effect in the future
4. The use of graphs
- Most often to simplify analyses of the behavior of individuals consumers,
firms, industries and economies but usually limited to the variables
incorporated into the graphs

“Given these limitations of the economic models, it is important to remember

that economics is an attempt to put broad concepts into capsule and
simplify reality into abstract models.
These models have guided many policy makers for several centuries, and
although economics is the oldest known social science today, we cannot
discount that it is still an evolving science.”

APPROACHES TO ECONOMICS
1. Positive Economics
- Answers “what is”
- It is factual, objective and used to describe the occurrence of a
phenomenon
Example:
“An increase in the price of petroleum leads to reduction in sales”

2. Normative Economics
- “What should be or what ought to be
- It is more subjective and more judgmental than positive economics
Example:
“The government should subsidize the price of petroleum to help low- income
people as their safety net provision.”

Applied Economics Page 3 of 4

 APPLIED ECONOMICS
Governor Pack Road, Baguio City, Philippines
2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 1- ECON Subject Teacher:

MAIN BRANCHES OF ECONOMICS
 Macroeconomics
-the study of the relationship of the broad economic sectors making up the
entire national or global economy
-studies aggregate supply and aggregate demand and uses average,
general absolute price levels

 Microeconomics
-studies decision making of individual economic units such as producer or one
household
-studies individual supply and individual demand and uses relative prices

Aspect of Microeconomics Macroeconomics

Study
Units of Individual consumers, producer Aggregate units such as state
the Study workers, traders etc. National or International economy
Activities Optimization and maximization of Long term growth, maintenance of
personal gains and profits high levels of production and
employment
Origin Micro activities emerge on the Problems of long- term growth
demand side of the consumer‟s depend upon the supply of
choices productive resources
Conditions This approach is functional under This approach is functional under
static conditions and small time dynamic conditions and complex
intervals long- run changes
Methods It is concerned with small It deals with complex, dynamic
adjustments, for which the changes inviting the use of
application of a marginal mathematical techniques
method is suitable
Levels Micro adjustments in resource Macro approach attempts to find
allocation are made in response the conditions of long- term
to changes in relative prices of expansions in output as a whole,
goods and services. The assuming relative prices as constant
aggregate level of income or (or significant)
total economic activities is
considered to be constant

The two approaches are complementary and not competitive

References:
1. BAL 330 B6301 2017. Boado, Sherry Amour. Applied Economics. Diwa Learning
Systems Inc.
2. BAL 330 T6355 2017. Nestor Torrefranca, Uriel J. Ancheta . Fastbooks Educational
Supply, Inc.
3. https://www.studymode.com/essays/Macroeconomics-Vs-Microeconomics-
915956.html Retrieved: 5 April 2021.
4. https://www.investopedia.com/ask/answers/033015/what-difference-between-
ceteris-paribus-and-mutatis-mutandis.asp Retrieved: 8 April 2021.

Applied Economics Page 4 of 4