Applied Economics

LESSON 1.
Differentiate
Economics As
Social Science
and Applied
Science In
Terms of Nature
And Scope
 OBJECTIVES

After going through this lesson,

you are expected to:
1. define economics as social science
and as an applied science; and
2. differentiate economics as social
science and applied science in terms of
nature and scope.
 WHAT I KNOW

1. It is a condition where there are

insufficient resources to satisfy all
the needs and wants of a
population.
A. shortage
B. scarcity
C. surplus
D. equilibrium
 WHAT I KNOW

2. It refers to the value of the best

forgone alternative.
A. trade-off
B. choice
C. opportunity cost
D. decision making
 WHAT I KNOW

3.It is also known as factors of production, where the

resources are used to produce goods and services.
These resources are, by nature, limited and therefore,
command a payment that becomes the income of the
resource owner.

A. economic resources C. political resources

B. environmental resources D. industrial resources
 WHAT I KNOW

4. It refers to physical and human effort

exerted in production. It covers manual
workers like construction workers,
machine operators, and production
workers, as well as professionals.
A.land
B.labor
C.capital
D.entrepreneurship
 WHAT I KNOW

5. Which of the following does not

belong to the group?
A. land
B. labor
C. capital
D. credit
 WHAT I KNOW

6. It involves the use of scarce

resource to satisfy the unlimited
needs and wants of human
A. Economics
B. Social Science
C. Applied Economics
D. economic model
 WHAT I KNOW

7. It refers to the study of society and

how people behave and influence the
world around them.
A. Economics
B. Social Science
C. Applied Economics
D. economic model
 WHAT I KNOW

8. A situation in which humans have

to choose between two things that
cannot be had at the same time is
called _________________.
A. opportunity cost
B. exchange
C. trade off
D. trading
 WHAT I KNOW

9. It refers to natural resources or sometimes

called “free gifts of nature”.
A. land C. capital
B. labor D. entrepreneurship
 WHAT I KNOW

10. All societies are faced with basic

questions in the economy that have to be
answered in order to cope with
constraints and limitations.
A. true B. false
 Maybe we are not
aware but everything
we do involves
Economics- the art of
decision making.
 Economics

Understanding how society allocates its

scarce resources
Almost always, human activities involve
economics
ECONOMICS
FROM
DIFFERENT
PERSPECTIVES
1. Fajardo

Economics – is the proper allocation and

efficient use of available resources
for the maximum satisfaction of human
wants

2. Nordhaus

Economics – is the science of choice. It

studies how people choose to use scarce
resources to produce various commodities
3. Sicat

Economics – is a scientific study which

deals with how individuals and society
may general choices

2. Webster

Economics – branch of knowledge that

deals with production, distribution and
consumption of goods and services
ECONOMICS IN A
PROCESS

Unlimited Make
Scarcity
wants Choices
Economic activities
Earning money
Buying goods and services
Depositing and withdrawing
money in bank
 LIST DOWN 10
NEEDS AND WANTS
 RANK THEM FORM 1
AS LOWEST AND 10
AS THE HIGHEST
 Economics from
“ Oikanomia”
Household
Management
As a consumer,
are you satisfied
with what you
have at the
present?
Applied
Science
Social
Science

Economi
cs
ECONOMICS as SOCIAL
SCIENCE
studies how individuals make
choices in allocating scarce
resources to satisfy their
unlimited wants.
ECONOMICS as APPLIED
SCIENCE

is the application of economic

theory and econometrics in
specific settings with the goal of
analyzing potential outcomes.
 Diagram
Behavior Economic
model
Scarcity
Equation

Social Applied
Science Science
Economic
Theory
Decision Making
(Opportunity cost
and Trade Off)

Economic Resources
(land, labor, capital Theories
and Econometrics
entrepreneurship)

Another tool used by economist is econometrics which is the application of

statistical and mathematical theories for the purpose of testing hypothesis and
predicting future outcome.
Talk to the person who prepares the household
budget and make a list of all the basic expenses for
one month and answer the following questions:
1. What is your reaction regarding the outcome
of the interview?
2. How can you help your family improve your
standard of living?
EXPENSES AMOUNT

ELECTRICITY 2000

FOOD 5000

TOTAL
SS OR AS
1. It is the study of observing how theories work in
real situations.
2. It reveals the true situation to come up with
actual solutions
3. It studies the behavior of people towards
products and services.
4. It is described as the study of the various modes
and aspects of human interactions in a group.
5. It is a popular tool in business planning and for
assessment, analysis and evaluation of government
policy.
 Economics as a Social Economics as an Applied
Science Science
1 1

2 2

3 3

4 4

5 5

scarcity theories
diagrams economic model
econometrics equations
decision-making economic resources
economic theory behaviour of individuals and of society
Macroeconomics

ECONOMICS

Microeconomics
Macroeconomics
 Dealswith the economic behavior of the
whole economy or its aggregates
(composed of individual units)

AGGREGATE
S

Households
Business Government
Macroeconomics
Discusses the following:
- Gross national product
- Level of employment
- National income
- General level of prices

“EMPLOYMENT AND
INCOME ANALYSIS”
Microeconomics
Deals with the economic
behavior of individual units
such as:

Consumers
Firms
Landowners
Microeconomics
 Discusses the following:

- Price of rice
- Number of workers in a certain firm
- Income of Mr. Fu
- Expenditures of PLDT

“PRICE THEORY”
 Production

Public
Finance
Divisions Distribution
of
Economics

Consumption Exchange
 Divisions of Economics

1. Production – refers to the process of producing or

creating goods needed by the households to satisfy
their needs

Factors of production – inputs

Goods and services – outputs

Factors of Production
Goods
Services
 Divisions of Economics

1. Production – refers to the process of producing or

creating goods needed by the households to satisfy
their needs

Factors of production – inputs

Goods and services –
outputs

2.Distribution – refers to the marketing of goods and

services to different economic outlets

3. Exchange – refers to the process of transferring

goods and services to a person in return for
something
present medium of exchange - money
 Divisions of Economics

4. Consumption – refers to the proper utilization of

economic goods. However, goods and services could
not be utilized unless you pay for it. Hence, consumption
could also be spending money for goods and services

5. Public Finance – pertains to the activities of the

government regarding taxation, borrowings and
expenditures. It deals with the efficient use and fair
distribution of public resources.
DRAW A PRODUCTION OF A GOOD
INPUTS OUTPUT
ECONOMIC
RESOURCES
Factors of production or inputs

Labor Foreign
Land
exchange
Entrepreneurs Capital
1. Land
These resources consist of free gifts of nature
which includes:
- soil
- rivers
- lakes, oceans
- forests
- mountains
- mineral resources
 1. Land

Land is considered an economic resource because it

has a price attached to it.
* we usually pay for it through rent or lease
2. Labor
Also called “human resources”

Labor- refers to all human efforts, be it mental or

physical, that help to produce satisfying goods
and services

In return, he earns an income in forms of wages

and salaries
2. Labor
Labor is a flexible factor of production

- workers can be allocated to different areas of

the economy for producing goods and services
3. Capital
Two economic definitions of capital:

a. Capital – can represent the monetary

resources use to purchase natural resources
Ex: Companies use capital to buy land and
other goods
3. Capital
Two economic definitions of capital:

b. Capital – represents the major physical assets

individuals and companies use when producing
goods and services

Ex: buildings, vehicles, equipments/machines

Income derived from capital is

interest
4. Entrepreneurs
French word which means “enterpriser”

Entrepreneur – organizer and coordinator of

other factors of production: land, labor and
capital.

He uses his initiative, talent and

resourcefulness to create economic goods.
 5. Foreign Exchange
Refers to the dollar and dollar reserves that the
economy has.

Foreign exchange is part of economic resources

because we need foreign currency for international
trading and buying materials from other countries

International medium - dollar

QUIZ
 1 point

LET’S TEST
OURSELVES
!
1. Economics is derived from the Greek word
“oikanomia” meaning:

a. Economic management
b. Household management
c. Social management
 1 point

LET’S TEST
OURSELVES
!
2.Economics is a social science because it
deals with:

a. Human nature
b. Natural resources
c. Experimentation
 1 point

LET’S TEST
OURSELVES
!3. Scarcity of resources means:
a. minimum resources
b. excess resources
c. shortage of resources
d. no resources
 1 point

LET’S TEST
OURSELVES
!4. These are examples of human wants except:
a. smartphone
b. perfume
c. watch
d. clothing
 1 point per item

Identify what type of

economics (Macro or Micro)
discusses the ff:
1. Gross National Product
2. Price of bananas
3. Profits of Bread and Butter
4. Employment