Quarter 1 Week 1

Applied Economics
LYNN ANTHONETH ANI -BACQUIAL
Activity 1:
Directions. Picture Analysis
By examining pictures, complete the sentence
by choosing the letter that corresponds to the
correct answer.
Pictures are examples of ___________?

A. Resources B. Commodities
Pictures are examples of ___________?

A. Resources B. Commodities
Resources and Commodities
ECONOMIC RESOURCES
◦ are the factors used in producing good or providing services.
Examples: labor , land, assets, capital

COMMODITY
◦is an economic goods and are most often used as inputs
in the production of other goods and services
Examples: root crops, marine products, poultry meat, water in
bottles, etc.
Pictures are examples of human______?

A. wants B. needs
Pictures are examples of human______?

A. wants B. needs
Human Needs and Wants

Needs
are something that you must
have in order to live.
 Human Needs and Wants

Wants
are something that you wish to
have to add comfort to your life.
Scarcity
◦It refers to the limitation of resources
◦It is coupled with the fact that human wants and needs
are unlimited

Scarcity means limitedness while shortage are

products and services which are not available in the
required quantity.
Economics
◦ Refers to the effective management of scarce resources to
satisfy unlimited human wants and needs.
◦ Economic Resources also known as factors of production, are
the resources used to produced goods and services.
Land, Labor, and Capital.
Economic Resources
Land
oconstitutes natural resources such as oil, water or metal. The natural environment as
a whole is also classified under ‘land’.
Labor
orefers to human effort and talent.
Capital
oresources are resources that contribute to the production process of other
goods. It refers to man-made equipment like machinery, buildings, or
computers.
How Economics differ from other
discipline like Biology and Chemistry?
Economics studies human behavior just like
psychology and sociology.
It studies society and how people behave and
influence the world around them.

That’s why economics is a Social Science.

Does Economics theory and concepts
can be applied in real-world situation?
YES! Since Economics studies human behavior how
people behave, its analysis requires the application of
certain economic concepts and tools to understand
various economic issues and problems.

And that is Applied Economics.

Branches of Economics
➢Macroeconomics

➢Microeconomics
MACROECONOMICS
A branch of economics that is concerned
with the overall performance of the
entire economy.
▪Focus on the overall flow of the goods
and resources
▪Expansion of productive capacity
▪Growth of national income
MICROECONOMICS
A branch of economics that is concerned
with the behavior of individual entities
such as the consumers, the producers and
the resource owner.
▪Studies the decision and choices of
individual
▪Focus on level of production, employment
and income
MICROECONOMICS
is concerned with the behavior of individual entities such as
the consumers, the producers and the resource owner.

MACROECONOMICS
is concerned with the overall performance of the entire
economy.
Since SCARCITY of resources is the central study of
economics, it is necessary to allocate this resources properly.

What are the basic economic

problems of society?
❑What to produce and how much
❑How to produce
❑For whom to produce

How these questions can be answered?

How the basic economic
problems can be answered?
Answer:

It depends upon the nature of the

economic system of that country.
ECONOMIC SYSTEM

➢Traditional Economy
➢Command Economy
➢Market Economy
 ECONOMIC SYSTEM
A. Traditional Economy
B. Command Economy
C. Market Economy
Barter
System
 ECONOMIC SYSTEM
Traditional Economy
Decisions are based on traditions and
practices passed from generations to
generations.

➢Primitive and backward civilizations

(tribes)
➢practice of barter in trading system
 ECONOMIC SYSTEM

A. Traditional Economy
B. Command Economy
C. Market Economy
 ECONOMIC SYSTEM
Command Economy
This is the authoritative system wherein
decision-making is centralized in the
government or a planning committee.
➢dictatorial
➢socialist
➢communist nation
 ECONOMIC SYSTEM

A. Traditional Economy
B. Command Economy
C. Market Economy

x
Open competition
Ease of starting a business innovation
 ECONOMIC SYSTEM
Market Economy
It is the most democratic form of
government. Decisions on what good to
produce are determined are based on
demand and supply and prices depends
on people preferences and willing to
pay in the market.
Why do we study ECONOMICS?
A. It will help the students to understand why
there is a need to budget and allocate the use
of whatever resources are available.
B. To make rational decisions in spending money,
saving part of it and even investing some of it.
C. both A and B.
Studying Economics help us
also to…
Studying Economics help us
also to…
Take a look on how the economy
operates and decode 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.
Microeconomics
▪It studies the behavior of individual market
participants such as consumers, producers, and resource
owners, as well as corporations.
▪It is more concerned with the flow of commodities from
the business to the consumer, as well as the movement
of resources from the resource owner to the business.
▪It also deals with the process of determining the price
of commodities, commonly known as Price Theory.
▪It examines individual economic activity, industries,
and their interaction.
Elasticity
The ratio of change in the percentage of one
variable to another variable is determined by
elasticity.
A measure of a variable’s sensitivity to a change
in another variable, most commonly referring to
demand as affected by other factors.
For example:
demand elasticity of income, demand elasticity of
price, demand elasticity of supply, and so on.
Theory of Production:
It entails the conversion of inputs into
outputs in a cost effective manner. Packaging,
shipping, storage, and manufacturing are only a
few examples.
Cost of Production:
This theory evaluates the object
price based on the cost of resources.
Monopoly
In this theory, the dominance of a
single entity in a certain field is
investigated.

a market structure that consists of

only one seller or producer.
Oligopoly
It refers to the market domination of
tiny businesses.

a state of limited competition, in

which a market is shared by a small
number of producers or sellers.
a type of market structure that
exists within an economy
Macroeconomics
is a branch of economics that studies the whole
economy and the issues that affect it.
Unemployment, inflation, economic growth, and
monetary and fiscal policy are the main focal
areas. Macroeconomics is concerned with the
nature of economic growth, as well as the
extension of productive capacity and national
income.
Growth
It investigates the
elements that contribute
to economic growth, such
as an increase in a
country's output per
capita through time
Business Cycle:
It argues for the central bank and
the government to collaborate in
formulating monetary and fiscal
policies to track output throughout
the business cycle.
Unemployment
The unemployment rate
is used to calculate
it. It is caused by a
number of variables,
including pay
increases, a shortage
of job openings, and so
forth
Inflation and Deflation:
Inflation refers to an
increase in a
commodity's price,
whereas deflation
refers to a reduction
in a commodity's price.
These indicators are
useful for assessing
the state of a
country's economy.
Economics as an
Applied Science
▪as opposed to economic theory, is the study of
economics in real world settings. It is the
application of economic ideas and theories to real-
world circumstances with the goal of predicting the
results.
▪is the study of how theories work in the real
world. At either the macroeconomic or microeconomic
levels, the discipline can be applied.
▪Microeconomics examines economics at the individual
consumer company level, whereas macroeconomics
examines the entire economy.
What is Econometrics?
Econometrics – is the application of
statistical and mathematical theories to
economics for the purpose of
⚫ Testing hypotheses
⚫ Forecasting future trends
 The results of econometric are compared
and contrasted against real-life examples.
Let’s analyze the flow.