Applied
Economics
Introduction- for ABM-12 Rembrandt
10:30-11:30- Oct 2020
True or False: Carefully read each sentence and
determine if the sentence is true or if the sentence is
false.
1. Economics comes from the Greek word oikonomia
which means household chores.
2. Economics is considered a field of social science.
3. Economics is relevant because it is part of everybody’s
life.
4. There are three (3) divisions of Economics, the
microeconomics, the macroeconomics and the home
economics.
5. As a science, Economics is related to other sciences.
Answer the following using five (5)
sentences and above.
1. As an individual, what do you
think is the essence of studying
economics?
2. How do you apply economics in
your household?
Economics as defined
ECONOMICS From the Greek words Oikos
meaning household and nomos meaning
management = household management
The wise production and use of wealth to
meet the demands or needs of the people
Common terms
1. Scarcity- a situation wherein the amount of
something available is insufficient to satisfy the
desire for it
2. Resources-The labor, capital, land and natural
resources and entrepreneurship that are used to
produce goods and services.
3. Unlimited – without limits, infinite
4. Wants –desires
Common terms;
Two branches of economics
4. Macroeconomics- concerned with overall
performance of the entire economy, it studies the
economic system as a whole rather than the
individual economic units that make up the economy.
Macroeconomics- is about the nature
of economic growth, expansion of
Productive capacity and growth of
National income.
5. Microeconomicsa. concerned with the behavior of individual entities
such as the consumer, the producer and the resource
owner,
b. it is more concerned on how goods flow from the
business firm to the consumer and how resources move
form the resource owner to the business firm.
c. also concerned with process of setting prices of goods
known as price theory.
d. studies the decisions and choices of the individual
units, and how these decisions affect the prices of goods
in the market.
ECONOMICS – is a social science that
deals with how people organize
themselves in order to allocate scarce
resources in order to produce goods and
services that will satisfy the unlimited
and multiplying wants and needs of
man.
Economics is concerned with PRODUCTION
Production- is the use of inputs to produce
outputs.
Inputs- are commodities or services that are
used to produce goods and services.
Outputs-are the different goods and services
which come out of production process.
Society have to decide what outputs will be
produced and in what quantity
Economics is concerned with DISTRIBUTION
Distribution- is the allocation of the total product
among members of society. It is related to the
problem of for whom goods and services are to be
produced.
Economics is concerned with CONSUMPTION
Consumption- is the use of a good or service.
Consumption is the ultimate end of economic activity.
WHEN THERE IS NO CONSUMPTION, THERE WILL BE
NO NEED FOR PRODUCTION AND DISTRIBUTION.
Economics deals with PUBLIC FINANCE
Public Finance- is concerned with government
expenditures and revenues.
Economics studies how the government raises
money through taxation and borrowing.
The Four Basic Problems of an Economy
The central economic problem of scarcity of resources
is broken down into four basic problems of an economy..
#1 – What to Produce?
What does a society do when the resources
are limited? It decides which goods/service it
wants to produce. It also determines the
quantity required.
Basic Problems of an Economy –
#2 – How to Produce?
The production of a good is possible by
various methods. This refers to the
resource mix and technology that will be
applied in production.
Basic Problems of an Economy –
#3 – For whom to Produce?
Is about the market for the goods, for whom
will the services and goods be produced? In
other words, society decides on the
distribution of the goods and services among
the members of society.
Basic Problems of an Economy –
#4 – What provision should be made for
economic growth?
Can a society use all its resources for current consumption? Yes, it can.
However, it is not likely to do so. The reason is simple. If a society uses all
its resources for current consumption, then its production capacity
would never increase.
Therefore, the standard of living and the income of a member of the
society will remain constant. Subsequently, in the future, the standard of
living will decline. Hence, society must decide on the part of the
resources that it wants to save for future progress.
Q1. What are the four basic problems of an
economy?
Answer: The four basic problems of an economy,
which arise from the central problem of scarcity of
resources are:
What to produce?
How to produce?
For whom to produce?
What provisions (if any) are to be made for
economic growth?
Q2: How these questions are answered
then? It defends on the nature of the
economic system.
Types of economic systems;
1. Traditional economy- Decisions are based
on traditions and practices upheld over the
years and passed on from generation to
generation.Traditional societies exist in
primitive and backward civilization.
2. Command economy- This is the
authoritative system wherein decisionmaking is centralized in the government
or a planning committee. Decisions are
imposed on the people who do not have a
say in what goods are to be produced.
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 preferences are reflected on the prices
they are willing to pay in the market and
therefore the basis of the producers decisions
on what to produce.
In the Philippines, what type of Economic system do
we have? Explain its process, and give examples.
#1: Individual task
Answer the following using five (5)
sentences and above.
1. As an individual, what do you think
is the essence of studying economics?
2. How do you apply economics in
your household?