Applied Economics Chapter 1 – Introduction to Applied Economics 1. Revisiting Economics as a social science 2. Economics as an applied science 3. Basic economic problems and the Philippine socioeconomic development in the 21st century Definition of Economics • Etymological meaning – the word economics comes from a Greek word oikonomia, meaning “management of the household.” • The problem of managing the household stems from two basic facts: 1. The limited resources available to the household 2. The unlimited needs of the members of the household Economics “ “ …the study of how wealth* is created and distributed**. * “anything of value,” including products produced and sold by business ** “who gets what” Economics - the science of the production, distribution, and consumption of goods and services. Economics as a science What is Science? • a systematically organized body of knowledge on a particular subject. • knowledge about the natural world that is based on facts learned through experiments and observation. • "knowledge attained through study or practice," or. "knowledge covering general truths.” Why is Economics considered as science? • Economics is a social science because it is a study of human behaviour. Human behaviour cannot be explained by physical law. • Economics is a social science that assesses the relationship between the consumption and production of goods and services in an environment of finite resources. Economics as a social science • Its principal figure of interest is man and the society in which he lives. • As a social science, economics is a systematized body of proved or demonstrated explanation about observable phenomena regarding the way man and society satisfy human needs. Importance of the Science of Economics • The science of economics is necessary because it deals with a basic and continuing problem that confronts man and society, which is scarcity. • The study of economics affords us an opportunity to better understand certain social phenomena that surround and affect us in our daily lives. Applied Economics – Definition and Meaning • Applied economics is the study of economics in world situations as opposed to the theory of economics. • It is the application of economic principles and theories to real situations, and trying to predict the outcomes. The basic economic problem (The Primordial Problem) Otherwise known as the two facts of earthly existence that bring about economic problems: • Scarcity is our limited resources but unlimited wants. • The problem of scarcity is that our wants are always beyond what we can produce with our resources. What are the basic economic problems confronting the Philippines? • • • • • • • • • • • • Corruption Poverty Terrorism Expensive commodities Scarcity an shortage of goods & services Low wages Unemployment Political Unrest Education Negative mentality Illegal drugs Unbalance export and import What are the basic economic problems confronting the Philippines? (cont.) • • • • • • Lack of employment opportunities Health Care Heavy Traffic Trash Flooding every time there is rain High crime rates Top 5 Economic Problem • • • • • Poverty Corruption Health Care Unemployment Lack of Education Solutions to the economic problems of the Philippines • Right now, there are no foreseeable solutions to the economic problems. There are too many unstable in the government. How applied economics can be used to solve economic problems? • First, what is the specific economic problem that needs solving? • Applied economics focuses on real-world activity. It uses tool that can be learned by anyone who can read, write, and do simple mathematics.
