12
Applied
Economics
Quarter 1 – Module 1
Economics: Its Nature
and Scope
Applied Economics – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 1: Economics: Its Nature and Scope
First Edition, 2021
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Published by the Department of Education
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Undersecretary: Diosdado M. San Antonio
Development Team of the Module
Writers: Rhyan R. Eronico
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Editor: Arcadio J. Malmis PhD
Management Team: Bianito A. Dagatan EdD, CESO V
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EPS, Mathematics
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Lesson 1: Basic Terms in Economics
Learning Competency: Differentiate economics as social science and applied
science in terms of nature and scope.
At the end of the lesson, you are expected to:
 define the basic terms in economics; and
 differentiate economics as social and applied science.
What is it?
Economics
- is a science which studies human behavior as a relationship between ends
and scarce means which have alternative uses.
Scarcity
- refers to the basic economic problem, the gap between limited – that is, scarceresources and theoretically limitless wants.
o This situation requires people to make decisions about how to allocate
resources efficiently, in order to satisfy basic needs and as many
additional wants at possible.
Needs
- are based on physiological, personal, or socio-economic requirements
necessary for you to function and alive.
o Example: Transportation is a need for the modern, urban person
because of work, food, and other necessities of daily life are too far from
where he lives.
Wants
- are a means to fulfilling our needs.
o You may be able bike to work, use public transportation, or drive your
own vehicle. While any of the choices will work, you want a car to fulfil
your need for transportation.
In order to meet the needs of its people, every society must answer three basic
economic questions:
•
What should we produce?
•
How should we produce?
•
For whom should we produce it?
Factors of Production
- is an economic term that describes the inputs that are used in the production
of goods and services in order to make an economic profit.
- It includes: land, labor, capital and entrepreneur.
o
Land represents all natural resources, such as timber and gold,
used in the production of good.
o
Labor includes all of the work that laborers and workers perform at
all levels of an organization, except for entrepreneur since they take an
idea and attempts to make an economic profit from it by combining all
other factors of production.
o
Capital is made up of all of the tools and machinery used to produce
a good or service.
What’s more?
Directions: Match the words in column A with column B. Write the letter of your answer
on your answer sheet.
A
1. Economics
2. Wants
3. Needs
4. Scarcity
5. Land
6. Labor
7. Capital
8. Entrepreneur
B
A. Tools and machinery used to produce a good or service
B. Represents all natural resources used in the production
of good
C. Individual who takes attempts to make an economic profit
D. Necessary for you to function and alive
E. Includes all of the work that laborers and workers perform
F. Means to fulfil our needs
G. The gap between limited resources and limitless wants
H. Studies human behavior as a relationship between ends
and scarce means
Lesson 2: Economics as Social and Applied Science
What is it
Social Science
 A group of academic disciplines that examine society and how people interact
and develop as a culture. The term social science refers to any subjects that
deals with human behavior.
Economics as a Social Science
 Economics deals with one aspect of human behavior, viz., how men deal with
problems of scarcity. Samuelson says that economics is “the queen of the social
sciences”.
 Economics deals with human beings living in a society. It deals with the
analysis on how members of a society interact with one another on the creation
or utilization of wealth.
 Economics deals with the activities of people. It has been described as the
allocation of resources to meet human wants.
Economics as an Applied Science
 Applying the economics theories and practices makes it an applied science.
 The application of economics to the status of the economy of a country, household
or company helps eliminate all attempts to dress up a situation so that it will
seem better or worse than it really is.
Applied Economics
 the study of economics in relation to the real world situations, as opposed to
the theory of economics
 the application of economics principles and theories to real situations, and
trying to predict what the outcomes might be
 can involve the use of econometrics and case studies
 is the study of observing how theories work in practice. - It may be practiced
at:
o
macroeconomics (the whole, aggregate economy)
o
microeconomics (analyzing individual consumers and companies)
levels.
 As one of the two sets of fields of economics (the other set being the core), it is
typically characterized by the application of the core, i.e.
o
Economic theory and econometrics, to address practical issues in a
range of fields including demographic economics, labor economics,
business economics, industrial organization, agricultural economics,
development economics, education economics, health economics,
monetary economics, public economics, and economic history.
o
The process often involve a reduction in the level of abstraction of
this core theory.
o
There are a variety of approaches including not only empirical
estimation using econometrics, input-output analysis or simulations but
also case studies, historical analogy and so-called common sense or the
“vernacular”.
o
This range of approach is indicative of what Roger Backhouse and
Jeff Biddle argue is the ambiguous nature of the concept of applied
economics.
 is believed to have started being used nearly 200 years ago, in the writings of
French economist and businessman Jean-Baptiste Say (1767-1832) and British
political economist, philosopher and civil servant John Stuart Mill (1806-1873).
What’s more?
Exercise 1
Directions: Write TRUE if the statement is correct and FALSE if it is wrong.
1. Economics is a social science because it deals with human behavior.
2. Applied economics is the application of economics theories and principles.
3. Economics as an applied science deals with the analysis on how members of a society
interact with one another on the creation or utilization of wealth.
4. Applying the economics theories and practices makes economics as an applied
science.
Exercise 2
Directions: Answer the given question.
1. Differentiate economics as a social science and applied science.
Assessment
Directions: Read each item carefully and write the letter of your choice on your answer
sheet.
1. It is a science which studies human behavior as a relationship between ends and
scarce means.
A. Chemistry
B. Economics
C. Physics
D. Sociology
2. These are based on physiological, personal, or socio-economic requirements
necessary for you to function and alive.
A. Economy
B. Needs
C. Resources
D. Wants
3. The following are examples of basic human needs except ______________.
A. Clothing
B. Food
C. Money
D. Shelter
4. It is made up of all of the tools and machineries used to produce a good or service.
A. Labor
B. Land
C. Capital
D. Entrepreneur
5. It includes all of the work that laborers and workers perform at all levels of an
organization.
A. Labor
B. Land
C. Capital
D. Entrepreneur
6. A group of academic disciplines that examine society and how people interact and
develop as a culture.
A. Allied Science
C. Physical Science
B. Applied Science
D. Social Science
7. Applying the economics theories and practices makes it a/an ______________.
A. Allied Science
C. Physical Science
B. Applied Science
D. Social Science
8. The study of economics as a whole economy.
A. Bi-economics
C. Microeconomics
B. Macroeconomics
D. Poly-economics
9. The study of economics as an individual economy.
A. Bi-economics
B. Macroeconomics
C. Microeconomics
D. Poly-economics
10. Who said that economics is “the queen of the social sciences”?
A. Backhouse
B. Jean-Baptiste
C. Maslow
D. Samuelson
You are braver than you believe, and stronger than you seem, and smarter than you
think. - Christopher Robin
APPLIED ECONOMICS
Answer Sheet
Name: ________________________________________________________________________
Grade & Section: ________________
Score: _______
Quarter 1 – Module 1
Lesson 1
What’s more?
1.
2.
3.
4.
5.
6.
7.
8.
Lesson 2
What’s more?
Exercise 1
1.
2.
3.
4.
Exercise 2
Assessment
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
References
Efren S. Basilla, J. (2017). Applied Economics. Manila: Future Builder Publications, Inc.
Tereso S. Tullao Jr., P. (2016). Applied Economics for a Progressive Philippines. Quezon
City: Phoenix Publishing House, Inc.