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From the Greek words Oikos meaning

household and nomos meaning management
= household management
APPLIED ECONOMICS
ECONOMICS

The wise production and use of wealth to meet

the demands or needs of the people

1. Fajardo 3. Sicat

Economics – is the proper allocation and Economics – is a scientific study which

efficient use of available resources for the deals with how individuals and society
maximum satisfaction of human wants may general choices

2. Nordhaus
4. Webster

Economics – is the science of choice. It

studies how people choose to use scarce Economics – branch of knowledge that
resources to produce various commodities deals with production, distribution and
consumption of goods and services

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5. Bernardo Villegas
“A social science that studies and
seeks to allocate scarce human and
non-human resources among
alternatives in order to satisfy unlimited
human wants and desires.”
6. Gerardo Sicat
“A scientific study which deals with
how individuals and society make
choices.”
Concerns of Economics
 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.
 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.
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Common Words among definitions…
 Scarcity- a situation wherein the amount of
something available is insufficient to satisfy
the desire for it.
 Resources- The labor, capital, land and
natural resources and entrepreneurship
that are used to produce goods and
services.
 Unlimited – without limits, infinite
 Wants –desires
Concerns of Economics
 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.
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Essence of Learning Economics Essence of Learning Economics

 To understand the world better
Applying the tools of economics can help you
understand global and cataclysmic events such as
wars, famines, epidemics, and depressions.
Economics has the power to help us understand
these phenomena because they result from the
choices we make under the condition of scarcity.
 To gain self-confidence and become wise decision
makers
Mastery of economics will help you to understand how
things work in your society thereby “feeling
equipped”.
 To achieve social change and contribute to
National Development
Economics can help us understand the origins of
serious social problems such as: unemployment,
hunger, poverty, disease, child abuse, drug
addiction, violent crime. It will also explain why
previous efforts to solve these problems have
failed, and help us to design new, more
effective solutions.

Essence of Learning Economics

 To help prepare for other careers Is Economics a science?
Economics has long been a popular college major Explain why if “yes” or why not if “no”
for individuals who are intending to work in
business. But it has also been popular among
those planning careers in politics, international
relations, law, medicines, engineering, etc. This is
for good reason because practitioners in each
of these fields often find themselves confronting
economic issues.

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ECONOMICS as SCIENCE
 Is a science because it is an organized body
of truth, coordinated, arranged and
systematized with reference to certain
general laws and principles.
(Observation, Formulation of theories,
Gathering of data, Experimentation,
Conclusion, Generalization)
ECONOMICS as
SOCIAL SCIENCE
• Economics deals with the study of
human’s life and how he lives with other.
• It’s subject matter are people or societies
and their behavior, unpredictable in nature.
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ECONOMICS as SCIENCE
 Economic analysis seeks to explain
economic events using some kind of logic
based on a set of systematic relations.
ECONOMICS as SOCIAL
SCIENCE
It 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.
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ECONOMICS as APPLIED ECONOMICS

APPLIED SCIENCE • The origin and meaning is believed to have started 200
years ago in the writings of two economists:
• the study of economics in relation to real world
situations. It is the application of economic principles JEAN-BAPTISTE SAY JOHN STUART MILL
and theories to real situations, and trying to predict
(1767-1832) (1806-1873)
what the outcomes might be.

• the study of observing how theories work in practice.

APPLIED ECONOMICS What is Econometrics?

• The term “APPLIED ECONOMICS” is first used by John Econometrics – is the application of statistical
Neville Keynes to designate the application of economic and mathematical theories to economics for
theory and phenomena. the purpose of:

John Neville Keynes

•Testing hypotheses
(1852-1949) •Forecasting future trends

The results of econometric are compared and

contrasted against real life examples.

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What is Econometrics? DIVISION OF ECONOMICS

Example: ECONOMICS
Real life application of Income

econometrics would be to study the Spending

MICROECONOMICS
hypothesis that as a person’s
income increases, spending Specific
Deals with the economic
increases. behavior of the individual
units such as consumers,
firms, the owners of factors
of productions
MACROECONOMICS
General
Deals with the economic
behavior of the whole
economy or its aggregate
such as government,
business, unemployment,
inflation and the like.
Refers to management of
income, expenditures,
wealth or resources of a
nation.

Microeconomics
1. Household Economics – most common use of
economics is for the family. At this level, anyone
who knows the economic principles will be able to
improve the running of the household.
Macroeconomics
1. National Economics – Economic factors of
problems affecting the whole nation. Deals with
the management of income, expenditures, wealth
or resources of a nation.

2. Business Economics – when a person or group of
persons begins to work, they come under the
system of business economics in their workplace.
In this type, you deal with the rent, salary, profits
and others.
2. International Economics – The highest stage of
economic activities involving the business of one
country with other countries like trade, tourism,
exchange rates.

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ECONOMIC SYSTEM
Set of economic institutions that dominate
a given economy with the main objective
of solving the economic problems.
CATEGORY OF ECONOMIC SYSTEM
• COMMAND ECONOMY
– Economic system in which people do not
have political and economic freedom.
– Decisions in answering the basic economic
problems are planned, done, and dictated
by the government.
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CATEGORY OF ECONOMIC SYSTEM
• TRADITIONAL ECONOMY
– Economic system whose past
experiences, which were handed
down from generation to generation,
are used as bases for economic
decisions.
CATEGORY OF ECONOMIC SYSTEM
• FREE MARKET ECONOMY
– Laissez-faire
– Economic system wherein individual
consumer and businesses interact to solve
the economic problems.
– Interaction takes place between buyers
and sellers in determining the price of a
particular good/commodity.
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CATEGORY OF ECONOMIC SYSTEM CATEGORY OF ECONOMIC SYSTEM

• FREE MARKET ECONOMY
– Consumer Sovereignty is the idea that
consumers ultimately dictate what will
be produced (or not produced) by
choosing what to purchase (and
what not to purchase.)
• FREE MARKET ECONOMY
– Free Enterprise: individual producers
must figure out how to plan, organize,
and coordinate the production of
products and services.
– The basic coordinating mechanism is
Price.

CATEGORY OF ECONOMIC SYSTEM

ECONOMIC PROBLEMS:
• MIXED MARKET ECONOMY
– Economic system with the combination of
Scarcity & Choice
the three systems. Both private and public
institutions exercise economic control.

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Basic Concepts… Basic Concepts…

Economic Problem – the problem of having unlimited Natural Resources – the resources from nature that are
wants, but limited resources to satisfy them used in production, including land, raw materials, and
Needs – the essentials of life, such as food and shelter natural process
Wants – desires for non-essential items
Capital Resources – the processed materials,
Scarcity – the limited nature of resources, which
equipment, and buildings used in production; also
underlies the basic economic problem
known as capital
Economic Resources – basic items that are used in all
types of production, including natural, capital, and
Human Resources – the efforts of people involved in
human resources
production, including labor and entrepreneurship

Three Basic Question Three Basic Question

• What to produce and how much
– Goods and services
• How to produce
– resource mix and technology
• For whom to produce
– consumers

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RESOURCES
Resources are the factors of production
that are the inputs into the process of
production; goods and services of value
to households are the outputs of the
process of production.
Scarcity and Choice
Constrained choice and scarcity are the
basic concepts that apply to every
society.
Opportunity cost is that which we give
up or forgo, when we make a decision
or a choice.
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RESOURCES
Production is the process that transforms
scarce resources into useful goods and
services.
Factors of Production:
• Land
• Labor
• Capital- thing that are themselves
produced and then used to produce
other goods and services.
Output..
• Capital goods are goods used to
produce other goods and services.
• Consumer goods are goods
produced for present consumption.
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Investment SEMANTIC WEB MAP

• the process of using the resources to
produce new capital. Write words associated with
• Capital is the accumulation of “Economic Problem” at the
previous investment. board.

iCARTOONs
From the words written in the
semantic web map, each group to BASIC ECONOMIC
create a cartooning of any of the
basic economic problems in the
PROBLEMSOF
Philippines. THE COUNTRY
15 minutes to complete the task.

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UNEMPLOYMENT
• UNEMPLOYMENT
• POVERTY COMMON CAUSES
• POOR QUALITY OF •The number of people entering the job
market has been greater than the number of
INFRASTUCTURE jobs created.
•The rural-urban migration increases due to
• INCOME INEQUALITY employment opportunities.
•May of the unemployed individuals are
college graduates.

RURAL TO URBAN MIGRATION WHAT CAN BE DONE TO SOLVE

UNEMPLOYMENT PROBLEM?
1. Appropriate economic policies for
labor-intensive industries.
2. Improve the educational system of the
country especially in the rural areas.
3. Minimize rural-urban migration by
improving the economic environment in
rural areas.

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WHAT CAN BE DONE TO SOLVE

UNEMPLOYMENT PROBLEM? POVERTY
4. Proper coordination between COMMON CAUSES
government and the private sector to •Increase in population
solve the problem of job mismatch.
•Increase in the cost of
5. Slowing population growth. Philippine living
growth must increases faster than the
•Unemployment
population. Limit the size of the families.
6. Provision of more investment
•Income inequality
opportunities to encourage local and
international investment.

WHAT CAN BE DONE TO SOLVE THE WHAT CAN BE DONE TO SOLVE THE
POVERTY PROBLEM? POVERTY PROBLEM?
1. Reduce unemployment 4. Increase social services like education,
health care and food subsidies for
2. Appropriate policy on labor income
sustainable poverty reduction.
3. Provision of unemployment benefits for
those who will be unemployed due to
Self-
natural or man made calamities. Subsistence Sustainable
existing

Ex. Typhoon, Bombing of terrorists,

Earthquake
5. Appropriate policy on labor income.

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POOR QUALITY OF INFRASTRUCTURE

WHAT CAN BE DONE TO IMPROVE THE
QUALITY OF INFRASTRUCTURE?

91ST OUT OF 144

COUNTRIES ON POOR
1.The government shall implement fiscal
INFRASTRUCTURE QUALITY
reform program
2.Continue reform in key sectors-
particularly power, roads and water – to
improve cost recovery, competition,
LOST ABOUT $250 BILLION and institutional credibility and to
IN ECONOMIC
GROWTH sharply reduce corruption.

WHAT CAN BE DONE TO IMPROVE THE INCOME INEQUALITY

QUALITY OF INFRASTRUCTURE?
•Income is the money
that an individual
3. Improving central oversight of the earned from work or
planning and coordination of investments business received
4. Focus on investments through public- from investments.
private partnerships to achieve faster •Income inequality –
delivery of service refers to the gap in
income that exists
between the rich
and the poor

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MAJOR CAUSES OF INCOME INCOME INEQUALITY

INEQUALITY
3. Income Taxes
1.Political culture
“ palakasan” “utang na loob”
Ex. Voting for the wrong person during
election

2.Indirect taxes – poor people shoulder

this taxes like the Value Added Tax – 12%
Minimum Wage A little more than minimum wage
32% Tax
No Tax

WHAT CAN BE DONE TO SOLVE THE

PROBLEM OF INCOME INEQUALITY SOLUTIONS TO INCOME INEQUALITY
3. Direct government
1. Policies to enforce progressive rates of policies to keep the
direct taxation on high wage earners price of basic
and wealthy individuals. commodities low
2. Direct money transfers and subsidize
food programs for the urban and rural 4. Raise minimum wage
poor
5. Encourage profit
sharing

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