LEARNING PLAN IN APPLIED ECONOMICS

SY 2016-2017
CHAPTER 1 – INTRODUCTION TO APPLIED ECONOMICS
METHODOLOGY
A. BACKGROUND INFORMATION
1. Present current news items on poverty, unemployment, traffic congestion, and
other socioeconomic issues confronting Philippine society.
2. Present some of the highlights of the current Medium-Term Philippine
Development Plan.

B. MOTIVATION
1. Ask the students why these contemporary issues reported in the news are
considered socioeconomic problems.
2. Ask the students why the government is pursuing the goals specified under
the Medium-Term Philippine Development Plan.
3. Discuss how these problems and development goals may affect individuals
and society at large.
4. Elicit possible answers from the students why these problems occur and the
difficulties in pursuing these development goals.
5. Summarize the motivational discussion by focusing on the issue of lack of
resources.

C. DEVELOPING THE LESSON

1. Start the lesson by asking students on their concept of economics.
2. Synthesize their answers with the idea that economics is about resources.
a. Economics is a study dealing with material survival, stability, and
development.
b. This goal of material survival, stability, and growth can only be achieved
through the use of resources or wealth.
c. Ask students how resources are connected with the goals of material
survival, stability, and development.
3. Introduce the three strands of approaching economics:
a. Economics is about wealth. Economics is the science of wealth-getting and
wealth-using.
b. Economics is about making choices. Economics is the science of making
choices. Emphasize that there are opportunity costs in making choices.
c. Economics is about allocation. Economics is a social science that deals with
the allocation of scarce resources to meet the increasing human wants.
 d. Ask the students to give concrete examples of each of the strand of
economics.
4. Using the perspective that economics is about allocation, discuss the five
elements of the economics: social science, resources, human wants, scarcity,
and allocation.
a. Divide the class into five groups. Each group is assigned to make a
presentation of an element of economics.
5. In the process of allocation and answering the economics problems of
production and distribution, there are three major systems developed in the
past and currently used: market system, command system, and traditional
system.
a. Discuss the allocation tool used in each system:
 Price in the market system
 Power in command system
 Culture in traditional system
b. How does each system of allocation answer the basic economic questions?
c. Discuss the strengths and limitations of each system as a tool of allocation.
d. Ask the students the specific situation when each system becomes a
powerful tool of allocation in contemporary situations.
6. Discuss why economics is an applied science. Give examples of situations
when the tools of economics can be applied.
a. From the examples cited in the book, the teacher asks the students how
economics can be applied in their lives.
7. Discuss the analysis of marginal benefit and marginal cost as framework of
applied economics in understanding basic economic issues and problems of
the country.
a. Define marginal benefit (MB) and marginal cost (MC)
b. What is the significance of using marginal instead of absolute measures?
c. Explain why net marginal benefit is maximized when marginal benefit is
equal to marginal cost.
 MB > MC  Net MB positive Total Net Benefit Increasing
 MB < MC  Net MB negative  Total Net Benefit Decreasing
 MB = MC  Net MB zero  Total Net Benefit Maximum
d. Problem of improper allocation (overconsumption, underconsumption,
overproduction, and underproduction) occurs when marginal benefit is not
equal to marginal cost.
8. Contemporary economic issues can be analyzed in terms of the divergence of
marginal benefits and marginal costs.
 a. These divergences are due to the nonrecognition of benefits and costs by
those sectors affected (spatial dimension) and the duration when these
benefits are reaped and costs incurred (temporal dimension).
b. These divergences are also due to the valuation of benefits and costs by
those sectors affected (spatial dimension) and the duration when these
benefits are reaped and costs incurred (temporal dimension).
9. Select any socioeconomic problem. Analyze the problem in terms of the
marginal benefit and marginal cost framework. The textbook has analyzed
several contemporary social, economic, and business problems in terms of this
framework.
a. Is the problem due to the nonrecognition of benefits or cost?
 It the nonrecognition made by the sectors affected (spatial dimension)?
 For example, when a firm considers only the private cost of garbage
disposal and does not recognize its social costs as it affects others, this
can lead to excessive production of waste or pollution.
 Is the nonrecognition due to the duration of benefits or costs (temporal
dimension)?
 Example, when an individual considers only the present benefits of
basic education and does not recognize its future benefits, this can
lead to low school participation.
b. Is the problem due to the differences in the valuation of benefits or costs?
 Is the difference in valuation caused by the sectors affected (spatial
dimension)?
 For example, when a firm selling a substandard commodity
recognizes the private and social costs, this may encourage of the firm
to produce more. This can lead to the proliferation of the sale of
substandard products and services.
 Is the difference in valuation due to the duration of the benefits or costs
(temporal dimension)?
 Example, when a private firm recognizes the present and future
benefits of its investment in human resource development of its
personnel but has a low valuation of the future benefits and costs, this
can lead to lower investment in human capital. Since the firm does
not appreciate the overall benefits of their investment.
10. Given the marginal benefit and marginal costs framework in understanding
the business and socioeconomic problems, ask the students on alternative
solutions that they want to propose
a. Since the problem arises from the divergence between marginal benefit and
marginal cost what solutions can be proposed to close the gap?
  Closing the gap has some economic implications as well as implications
for government action.
 If private firms do not see the social costs or have low valuation of social
costs of their action in disposing their wastes the government can
impose a pollution tax to close the gap between MB and MC.
 If poor families do not recognize or have low valuation of the future
benefits of sending their children to school and considers only the
present costs the government can subsidize the education of their
children and absorb the opportunity cost. Pantawid ng Pamilyang
Pilipino Program (4Ps) is an example of this closing the gap between MB
and MC.

D. SYNTHESIS
1. We started with the realization that we live in an environment of limited
resources.
2. These limited resources must be properly used to give us the highest level of
satisfaction, welfare, and net benefit.
3. Economics gives us three major mechanisms or systems of allocating resources.
4. The tools of applied economics can be used in understanding socioeconomic
and business problems.
5. The tools of applied economics can be used in proposing alternative solutions
to socioeconomic and business problems.
 LEARNING PLAN IN APPLIED ECONOMICS
CHAPTER 2 – APPLICATION OF SUPPLY AND DEMAND ANALYSIS
METHODOLOGY
A. BACKGROUND INFORMATION
1. Present news articles drawn from newspapers and from the internet on prices
of basic commodities.
2. Ask the students to gather prices of basic commodities like sugar, rice, cooking
oil, and port in a public market or supermarket near their homes.

B. MOTIVATION
1. Ask the students to present the prices of basic commodities from news articles
and those gathered from public markets and supermarkets.
2. Compare these prices if there are marked differences.
3. Ask the students the reasons why there are slight differences in the prices.
4. Ask the students what will happen to the prices of these commodities during
Christmas season or after a typhoon or a natural calamity?
5. Their answers will now be the basis for developing the lessons on the
application of demand and supply analysis.

C. DEVELOPING THE LESSON

1. Ask the students what is their concept of price.
a. Price is the monetary value of a unit of commodity.
b. From the point of view of consumers, price is payment for the purchase of
a commodity whose value reflects the satisfaction or utility derived from
the consumption of a good or service.
c. From the point of view of producers, price is revenue earned for a
commodity sold whose value reflects the cost of producing a unit of good
or service.
2. Introduce the concept of a demand curve.
a. Ask the students what are the factors that may affect their demand for a
particular good.
b. A demand curve is a graph that shows the amount of commodity that
consumers are willing and able to buy at alternative prices at a given point
in time other things held constant.
 c. Ask the students if there are many factors affecting demand and why is the
demand curve a relationship between price of the commodity and the
quantity demanded.
 Demand curve summarizes the behavior of consumers in buying a
commodity since the other factors are assumed to be unchanging or
constant.
d. Differentiate two changes in the demand:
 Change in quantity demand: Caused by the change in the price of the
commodity. It is shown by a movement along the demand curve. Refer
to graph 2.2 in the book.
 Ask the students the reasons behind the indirect or negative
relationship between price and quantity demand.
 Change in demand: Caused by a change in the other factors affecting
demand. It is shown a shift in demand. Refer to graph 2.3 in the book.
 Ask students the reason for the shift to the left or shift to the right of
a demand curve.
 Ask students the difference between increase in quantity demand and
increase in demand.
3. Introduce the concept of supply curve.
a. Ask the students what are the factors that may motivate producers to sell
in the market.
b. A supply curve is a graph that shows the amount of commodity that
producers are willing and able to sell at alternative prices at a given point
in time others thing held constant.
c. Ask the students if there are many other factors that can affect producers to
supply in the market and why is the supply curve a relationship between
price of the commodity and the quantity supply.
d. Supply curve summarizes the motivations of producers in selling a
commodity since the other factors are held constant.
e. Differentiate two types of changes in supply.
 Change in quantity supply: Caused by the price of the commodity. It is
shown by the movement along the supply curve. Refer to graph 2.5 in
the book.
 What are the reasons behind the positive relationship between price
of the commodity and the quantity supply?
 Change in supply: Caused by the other factors affecting supply. It is
shown by the shift in the supply curve. Refer to graph 2.6 in the book.
 Ask the students examples of a shift in the supply curve to the left
and shift in the supply curve to the right.
  Ask the students the difference between change in quantity supply and
change in supply.
4. Introduce the concept of equilibrium price.
a. The equilibrium price is the price that consumers are willing to pay which
is equal to the price producers are willing to sell for the same amount of
commodity bought and sold.
b. Thus, there is agreement among buyers and sellers on the price and the
amount bought and sold.
c. This agreement among buyers and sellers is shown in the intersection of the
demand and supply curves. Refer to graph 2.7 in the book.
d. Since there is agreement between consumers and producers on the price
and quantity, there is no pressure for the equilibrium price to change.
5. Introduce the concept of disequilibrium.
a. Disequilibrium is a situation when consumers are not in agreement with
producers on the quantity to be bought and sold at a given price.
b. If the consumers are willing to buy more than the producers are willing to
sell at a given price this disequilibrium condition leads to an excess demand
or shortage.
 In the market system, a shortage can be eliminated by increasing the
price.
c. If consumers are willing to buy less than the producers are willing to sell at
a given price this disequilibrium situation leads to an excess supply or
surplus.
 In the market system, a surplus can be eliminated by decreasing the
price.
d. Refer to graph 2.8 for an illustration of disequilibrium conditions.
e. Ask the students why there is a pressure to change the price and quantity
when a disequilibrium situation occurs.
6. Discuss changes in equilibrium price and quantity.
a. Shift in demand curve to the right due to an increase in income with no
change in supply curve.
 At the initial equilibrium price, quantity demand is higher (because of
higher income) than quantity supply that leads to a shortage.
 Shortage is eliminated by increasing price.
 An increase in price will discourage consumers to demand more that
partially removes the shortage.
 An increase in price will encourage producers to increase quantity
supply that will partially remove the shortage.
 Thus, the shortage is removed by increasing price that reduces quantity
demand and increases quantity supply. Refer to graph 2.9 in the book.
 b. Shift in the demand curve to the left due to change in preferences with no
change in supply curve.
 Trace the impact of a price decrease on the quantity demand and
quantity supply. Refer to graph 2.10 in the book.
c. Shift in the supply curve to the right due to technological change with no
change in demand curve.
 At the initial equilibrium price, quantity supply is higher (because
technological change) than quantity demand that leads to a surplus.
 Surplus is eliminated by decreasing price.
 A decrease in price will discourage producers to supply more that
partially remove the surplus.
 A decrease in price will encourage consumers to increase quantity
demand that will partially remove the surplus
 Thus, the surplus is removed by decreasing price that reduces quantity
supply and increases quantity demand. Refer to graph 2.11 in the book.
d. Shift in supply curve to the left due to production shortfall with change in
the demand curve
 Trace the impact of a price increase on the quantity demand and
quantity supply. Refer to graph 2.12 in the book.
e. Simultaneous shifts in the demand curve to the right due to increase income
and in supply curve to the right due to bountiful harvest. Proportional
shifts in demand and supply curves.
 Price will remain in the same but quantity sold and bought will increase.
Refer to graph 2.13 in the book.
f. Try other cases of simultaneous shifts in demand curve and supply curve
with proportional and unequal proportions.
 Trace the impact on price and quantity.
7. Introduce the applications of demand and supply analysis.
a. Ask the students on their concept of price ceiling.
 A price ceiling is the maximum price set by the government that a
commodity can be sold. Usually the price ceiling is lower than the
equilibrium price. With the ceiling price the mechanism of the market
system is prevented since the pressure to increase price to address the
surplus is not allowed by the government regulation.
 Ask the students the reasons why the government imposes price ceiling
on basic commodities.
 Refer to graph 2.15 in the book for an illustration of a price ceiling.
b. Ask the students on their concept of a floor price.
 Price floor is a minimum price set by the government for a commodity
to be sold. Usually the floor price is higher than the equilibrium price.
 With the price floor the mechanism of the market system cannot operate
because the pressure to decrease the price to address the shortage is
prevented by regulated floor price.
 The imposition of minimum wage regulation in the labor market is an
example of price floor.
 Ask the students the reasons why floor prices are imposed by the
government.
 Refer to graph 2.16 and graph 2.18 in the book for two illustrations of
the imposition of floor price.
c. Use the demand and supply analysis in the determination of the prices in
the following markets.
 Wage rate in the labor market
 The downward sloping demand curve for labor reflects the
diminishing value of marginal productivity of labor with additional
labor.
 Ask the students why firms will demand more workers if the
wage rate is decreased.
 Refer to graph 2.17 in the book.
 Exchange rate in the foreign exchange market.
 The downward sloping demand curve for foreign exchange reflects
the increased demand for imports as the price of foreign exchange
decreases.
 Ask the students why importers will import more if the exchange
rate or the US dollar is low.
 The upward sloping supply curve for foreign exchange reflects the
willingness of exporters and OFWs to supply more foreign exchange
as the price of foreign exchange increases.
 Ask students why OFWs are encouraged when the exchange rate
or US dollar is high.
 Refer to graph 2.19 in the book.
 Wage rate in the market for overseas workers
 The downward sloping demand curve for overseas labor reflects the
diminishing value of marginal productivity of labor with additional
labor.
 The upward sloping supply curve for labor reflects the increasing
opportunity cost of leisure as exchange rate increases even if foreign
wages are fixed.
 Refer to graph 2.20 in the book.
 Rental rate in the market of land/office space
  The downward sloping demand curve reflects the diminishing value
of marginal productivity of land.
 The supply curve is shown as a vertical line reflecting fixed supply as
price changes.
 Ask the students why the rental rate is solely determined by
demand factors.
 Refer to graph 2.21 in the book.
8. Define market structure.
a. Link market power and market structure.
b. What factors shape the market power of a firm or industry?
c. Describe a monopoly, perfect competition, oligopoly, and monopolistic
competition in terms of the factors that shape market power.
9. Discuss the impact of changes in the factor prices on the operations of the
business enterprise.
a. Rental rate
b. Minimum wage
c. Interest rate
d. Exchange rate

D. SYNTHESIS
1. Every commodity has a price. The price is the monetary value of a unit of a
commodity. For consumers it reflects the value of satisfaction on the good
consumed. To the producers the price reflects the costs of producing a unit of
commodity.
2. This price is determined by the interaction of supply and demand. Equilibrium
price is the agreed price consumers are willing to purchase and producers are
willing to sell the same quantity of the commodity.
3. Thus, changes in the price is influenced by change in the factors affecting
demand and supply.
4. Disequilibrium is a condition when consumers and producers are not in
agreement on the quantity to be bought and quantity to be sold at a given price.
5. The analysis of demand and supply can be applied in the determination of
prices of various markets and changes in factors affecting demand and supply.
6. The price of the commodity is also influenced by the market power of the
factors in the market.
 LEARNING PLAN IN APPLIED ECONOMICS
CHAPTER 3 – INDUSTRY AND ENVIRONMENTAL ANALYSIS: BUSINESS
OPPORTUNITIES IDENTIFICATION
METHODOLOGY
A. BACKGROUND INFORMATION
1. Present current news items on the different economic sectors of the Philippines.
2. Present current policies that intend to help out firms especially Medium, Small,
and Micro Enterprises (MSMEs).
3. Present the thrust on entrepreneurship in business curriculum in the country.

B. MOTIVATION
1. Ask the students what are the reasons why the development of MSMEs is being
pushed by the government.
2. Ask the students why courses on entrepreneurship are being offered in colleges
and universities.
3. Ask the students if they are interested in starting their own business in the
future.
4. Elicit from the students their apprehensions in starting a business.
5. The teacher can summarize their answers and start the discussion on various
perspectives in identifying business opportunities.

C. DEVELOPING THE LESSON

1. Give an overview of the different perspectives on industry analysis for
identification of business opportunities.
a. The goal of identifying a business opportunity is based on its viability.
b. One indicator of business viability is profitability.
c. There are several perspectives in analyzing the profitability of business
enterprises.
2. Using Figure 3.1 in the book discuss the perspective of profit maximization.
a. Ask the students why profitability is an important consideration in
choosing a business venture.
b. Define what is profit.
 Ask the students how is profit enhanced?
 Increasing price and sales
 Decreasing cost
c. How the following factors may enhance the profitability of a firm:
 Market concentration
 Barriers to entry
 Product differentiation
  Limited information
d. Discuss how the above factors apply in the profitability of various market
structures:
 Monopoly
 Oligopoly
 Monopolistic competition
 Perfect competition
e. Discuss the limitation of profit maximization perspective since it focuses on
competition among firms within the industry.
3. From the discussion on the limitation of profit maximization present a more
comprehensive analysis of market competition through the discussion of
Porter’s Five Competitive Forces.
a. Using Figure 3.2 in the book, divide the class into five groups and assign
each group a competitive force.
b. Ask each group to present how their respective force impact on business
profitability:
 Competitive force coming from the competition of firms within the
industry
 Competitive force coming from the bargaining power of buyers
 Competitive force coming from the bargaining power of suppliers
 Competitive force coming from the threat of potential rivals
 Competitive force coming from the threat of a substitute good
c. Discuss the limitation of Porter’s Five Competitive Forces by citing the
absence of other factors that may have indirect impact on the firm as they
deal with actual competitors, customers, suppliers, potential competitors in
production, and potential competitors in commodity.
4. Introduce environmental scanning as an alternative perspective on evaluating
business viability and profitability. It is a more comprehensive framework
since it includes both direct and indirect impacts coming from various
environments where the firm and industry is situated.
a. Using Figure 3.3 in the book divide the class into six groups and assign each
group a factor that affect a business or industry.
b. Each group should make a presentation on how their respective factor in
environmental scanning impact on business profitability:
 Changes in the national and global economies
 Government policies and regulations
 Technological changes
 Demographic changes
 Social changes
 Changes in natural environment
 5. As a perspective that integrates all of these perspectives the analysis of
strengths, weaknesses, opportunities, and threats (SWOT) may be useful in the
evaluation of business profitability and viability.
a. Using Figure 3.4 in the book divide the class in to four groups for each of
the elements in a SWOT Analysis.
b. Each group will make a presentation on the detailed components of the
elements assigned to them.
 Strengths
 Internal features of firms that directly contribute to profitability
 Weaknesses
 Internal features of firms that directly diminish profitability
 Opportunities
 External factors that directly or indirectly enhance the profitability of
a firm
 Threats
 External factors that directly or indirectly mitigate the profitability of
a firm
6. After covering the various perspectives on evaluating business profitability
and viability these perspectives may be applied in selecting business
opportunities.
a. Discuss the three major economic sectors of the Philippines in terms of their
economic contributions in GDP and employment.
 Agriculture
 Industry
 Services
b. Discuss selected industries in these sectors.
c. Identify some potential business opportunities in the three economic
sectors by showing a simple SWOT analysis.
 Divide the class in to three groups for each of the major economic sectors
of the country
 Ask each group to choose a specific industry in their assigned economic
sector
 Each group should discuss the elements of SWOT analysis and show
how they impact on the profitability of the industry or business that they
have been chosen.

D. SYNTHESIS
1. There are several perspectives that can be used in analyzing the firm’s
profitability and identifying business opportunities.
a. Profit maximization
 b. Porter’s Five Competitive Forces
c. Environmental Scanning
d. SWOT Analysis
2. There are limitations in each perspective.
3. There are three major sectors in the Philippine Economy: Agriculture, Industry,
and Services.
4. There are numerous industries in each economic sector that potential
entrepreneurs can pursue.
5. The perspectives discussed can give insights on what business opportunities
have promise for implementation.
 LEARNING PLAN IN APPLIED ECONOMICS
CHAPTER 4 – SOCIOECONOMIC IMPACT ANALYSIS
METHODOLOGY
A. BACKGROUND INFORMATION
1. Present a simple circular flow of goods, services, and money.
2. Present articles on how San Miguel Corporation or another conglomerate
operates. Highlight the relationships of companies within the conglomerate by
citing the backward and forward linkages among these companies.
3. Present academic studies that uses socioeconomic impact analysis in analyzing
business viability.

B. MOTIVATION
1. Ask the students why car companies, electronics companies, and consumer
durable companies operate good service centers.
2. Ask the students why big corporations have programs on social corporate
responsibility.
3. Ask the students why companies maintain good relationships with their
suppliers.
4. End the discussion with an emphasis that a business company does not operate
in a vacuum. It is dependent on its suppliers and buyers for its viability and
profitability. Thus, there is a need for business to maintain good relationships
with their clients, suppliers, buyers, and community they operate.
5. Also emphasize that profit is important in identifying business opportunities
but there are responsibilities accompanying this profitability.

C. DEVELOPING THE LESSON

1. Show the framework for socioeconomic impact analysis. Refer to Figure 4.1 in
the book.
2. Just like the circular flow of goods and services, the firm sources its
intermediate products from firms within and outside the industry and within
and outside the country.
a. These raw materials are processed or transformed into new products and
services by factor inputs like labor, land, capital, and enterprise.
b. Part of the output of the firm can be disposed as intermediate products to
other firms that will use it as raw materials or intermediate inputs.
c. The other part of the output of the firm is disposed as final products to
consumers, investors, government, and the rest of the world as exports.
3. Divide the class into five groups and assign a group for intermediate inputs
and the other four groups for the factor inputs (labor, capital, land, and
management)
4. Ask the students how the impact of firm will be shaped on how these inputs
are sourced and other features. What strategies would they recommend to
enhance the positive impacts of a business operation.
a. Intermediate inputs
 Internal vs external sources
 Independent supplies vs subsidiary of conglomerate
 Raw vs semi-processed inputs
 Market power of the firm
b. Factor inputs
 Labor services
 Within the community vs outside the community
 Direct employment vs subcontracting
 Minimum wage vs market rate
 Organized vs non-organized
 Human resource development
 Temporal vs spatial working condition
 Funds for capital formation
 Own savings vs capital market
 Foreign borrowing vs foreign direct investment
 Market determined vs regulated rates of return
 Land inputs and space for business operation
 Land intensity of business
 Location of business and opportunity cost of land use
 Managers and technical professionals
 Insiders vs outsiders
 In-house vs outsourced training
5. Elicit tentative answers from students on how the impacts of a firm will share
on disposition of the firm’s output.
a. Outputs as intermediate goods
 Contributions on industrial integration
 Contributions to productivity of other industries
b. Outputs as final goods
 Personal consumption
 Welfare of the consumers in terms of price, choices and quality of the
product
 Investment
 Contribution to industrial integration
  Government consumption
 Exports
6. Introduce the concept of spillover effects of a business firm.
a. Ask the students on their concept of spillover effects or externalities.
b. Ask the students why business operations result in spillover effects.
c. Ask the students examples of positive and negative spillover effects of a
business operation on the following.
d. Divide the class into four groups and assign each group to list of positive
and negative spillover effects on the following:
 Industry where the business operates
 Community where the firm is located
 National economy
 Environment
7. Integrate the content of this chapter in asserting the viability of a business
enterprise.
a. Business viability in not only measured by profitability but also with an
evaluation of its socio-economic impact.

D. SYNTHESIS
1. The socio-economic impact of a firm can be analyzed in terms of its production
and distribution process.
2. The firm has impacts on its suppliers of intermediate and factor inputs.
3. The firm has impacts on the buyers of its output.
4. But the firms have also impact on third parties called spillover effects.
5. Firms have to be conscious about their impacts on various stakeholders as well
on third parties.
6. Aside from profitability proper management of firm’s socio-economic impacts
can lead to an appropriate evaluation business viability.