APPLIED ECONOMICS

Quarter 1: Module 3 and 4

Basic Economic Problems and How Applied Economics Solves Economic Problems

NAME: ________________________

YEAR AND SECTION: _____________

TRACK AND STRAND: ____________

SUBJECT TEACHER: ______________

ADVISER: ______________________
LESSON 2: Utility and Application of Applied Economics to Solve Economic Issues and Problems

EXPECTATIONS

Specifically, this module will help you to:

* identify the basic economic problems

* illustrate how applied economics can be used to solve economic problem

* construct framework to solve the economic problem

* solve problems on economic activities

PRE-TEST

Let us start your journey in learning more on the resources of production and possible issues on the
production of goods and services. Are you excited to answer the Pretest? Smile and Enjoy!

Part I. Identification: Direction: Please read and analyse the questions carefully. 1) What do you think
were the resources used to produce the products (dresses)? 2) What were the issues/problems in the
production of the products?

Resources In the Issues/Problems in the Production (dress) Production

Part II. Matching Type:

Match Set A or the central economic issues and problems to Set B or the description of economic issues.

SET A SET B

____1. What to produce A. the legalities of the production

____2. How to produce B. the nature of goods to produce

____3. Whom to produce C. the allocation of the among members of the

____4. What provision in the D. the methods of production

production of product
LOOKING BACK TO YOUR LESSON

Great, you finished answering the questions. You may request your facilitator to check your work.
Congratulations and keep on learning!

Last topic, we discussed the nature and scope of economics; the two fields of the study which include
micro and macroeconomics. We also discussed the kinds of goods and the economic resources to
produce the goods. Let’s check your retention of our past lesson.

Part I Multiple Choice. Directions: Kindly choose the letter of the correct answer. Encircle your answer.

1. The physical effort of the manpower to produce the basic needs of the consumers, describes which
factor of production?

a) Land

b) Capital

c) Labor

d) Entrepreneur

2. The initiative and creativity to produce something new describes which factor of production?

a) Land

b) Capital

c) Labor

d) Entrepreneur

3. The equipment of the coffee shop to produce cups of coffee, are what kind of goods or products?

a) Consumer goods

b) Either consumer goods or capital goods

c) Capital goods

d) Economic goods

4. Which best of the following best describes economics as a social and an applied science?

a) The study of products we need to survive

b) The study of how customers make choices when there is unlimited supply of resources
c) The study of human personalities

d) The study of how buyers make choices when there is limited supply

5. The following are examples of customers’ basic needs.

a) Water and shelter

b) Iced tea

c) Laptop and cellular phones

d) Expensive bags

Part II. Matching Type

Direction: Please match the resources with the statements.

A) Land C) Labour

B) Capital D) Entrepreneurship

1. ________________The idea for a car that runs on a rocky road

2. ________________The crude oil used by ABM Firm to produce gasoline

3. ________________The machine used by Mang Jose, a tailor to stitch PPEs

4. ________________The manpower to build bridges and houses

5._________________Technicians who repair computer

BRIEF INTRODUCTION

In the article of Forbes Custom (2017), The Philippines: Asia’s New Economic Powerhouse, the Philippine
economy has transformed into one of Asia’s most dynamic economies on the back of fast-paced Gross
Domestic Product (GDP) growth.(www.forbes.com). For the longest time, it has all the opportunities to
sustain its growth and stability. However, due to the problem on pandemic, at present, it is suffering
from economic depression. The issue of scarcity on supply due to limited resources, but unlimited
wants, is the ultimate economic problem. Scarcity implies a limited quantity of resources needed in
production.

Guru, S. (2020) mentioned, the main issues on production include the products to produce; how to
produce these products and for whom to produce the products and how to make the economy grow.
Economics, therefore, is concerned with the allocation of resources to make the most efficient use of
these resources.
The Four Basic Economic Problems

In the article of Guru, S. (2020) Basic Central Problems Faced by an Economy, there are basic problems
common to all economies. In terms of production, common to all countries is the problem on scarcity.
This arises because the resources are limited and have alternative uses. This problem gives rise to four
basic problems of an economy.

In this topic, we will look into these basic problems of what to produce, whom to produce, how to
produce and what provisions on production for economic growth. As we said earlier, economics can be a
tool to solve these economic problems. Economists formulate strategic solutions to economize the
problems such as economic growth or the ability to produce goods and services, reduce expectation or
the ability to reduce our wants such as lessening consumption, and improve the use of resources or the
capacity to use our existing resources wisely.

What to Produce?

If there is scarcity of goods in a society, the firms have to make wise decision on what goods/service
should be produced and determine the quantity to produced. For example, which do we produce more,
masks or canned goods? But we need capital goods like machines, or consumer goods like laptops. The
society must decide the type and quantity of good/service to be produced to meet the immediate needs
of the society.

How to Produce?

The production of goods or services needs effective methods and processes. For example, you can
produce PPEs using sewing machines; sardines using aqua resources like fish and land resources like
tomatoes. The production requires more labor and capital investment.

BASIC ECONOMIC PROBLEMS OF THE COUNTRY

For whom to Produce? What provision/laws should be The society would always made for economic
growth? A society uses all its resources for consider the immidiate

beneficiary of the goods. For current consumption. If a society example when we produce uses all its
resources, then its masks and PPEs we suppose to production capacity will not produce first these for
the increase. The standard of living of frontliners of COVID Pandemic the people and the income of the
fight. A society decides on the workforce remain constant until distribution of the goods the standard of
living will decline in and services among the the future. The society must decide members of society
who need also on the part of the resources to them the most. be saved for future progress

APPLIED ECONOMICS ON BASIC ISSUES AND PROBLEMS

Applied Economics seeks to solve the problems on scarcity. This happens when human wants for goods
and services exceed the available supply. In a modern economy, it is evident that a division of labor
happens when people earn income by specializing in what they produce. They will use that income to
purchase the products they need or want every day (BC Campus 2020).

Also, in the division of labor, it allows workers and firms to produce more. This is because: a) agents
focus on areas of advantage due to natural factors and skill levels; b) the agents learn and invent; c) the
agents take advantage of economies of

scale. Division and specialization of labor only work when individuals can purchase what they do not

produce in markets. Applied economics then helps you understand the basic problems facing the

world today. It helps you

become a well-rounded thinker. And most importantly, it prepares you to be a good citizen

Activity 1. Multiple Choice (with critical thinking analysis)

Direction: Please encircle the correct answer.

1. Scarcity of resources in your locality (Manila) is evident. Only available are fabrics, electric sewing
machines and skilled workers. The government said, you are only allowed to work from home to be safe
and free from infection of viruses. Which items most likely you need to produce?

a) PPEs

b) Canned goods

c) Sacks of rice

d) Sewing machines

2. Manila is ranked 2nd in the most cases of COVID patients in Metro Manila. The city needs urgent
services of the medical frontliners in curing the increasing number of patients. There is scarcity in the
raw materials for production. To whom would you produce first the available resources?

a) Soldiers

b) Police Officers
c) Medical Frontlines

d) Your family

3. There is an urgent need of PPEs by the medical frontliners in the City of Manila due increasing number
of COVID patients every day. Which is not true of producing the products (PPEs)?

a. Import from China

b. TESDA students and skilled workers may produce the PPEs

c. Manufacturers/suppliers may supply the PPEs

d. Export PPEs to Japan as gross national products

4. The ABM Manufacturing Company decides to produce more on liquid soap than bar soap to supply
the growing demands in the market. It solves issues on:

a. Whom to produce b. How to produce c. How much incentive d. What to produce

REMEMBER

* Economics can be a tool to solve economic problems on the production of goods and services.

* Production is the process by which resources are transformed into useful forms.

*Resources are things provided by nature that can be used directly or indirectly to satisfy human
needs.

* The basic economic problems on production includes: what to produce, whom to produce, how to
produce and what provisions on production for economic growth.

* Strategic options/decisions to economize the problems include: economic growth – ability to produce
goods and services; reduce expectation- reduce our wants - lessening consumption; improve the use of
resources - use our existing resources wisely; don't waste the limited resources; productive efficiency;
allocate efficiency; full employment and equity of resources; and reduce expectations – reducing
wants.
CHECK YOUR UNDERSTANDING

Fill in the Blanks.

Directions: Please read and answer the following sentences

Among nations, these are the common economic problems on production of goods and services:
a)__________________; b)_______________________;

c) ________________; d) __________________.

 Economics can be a tool to solve the fundamental problem in economics which is

The strategic solutions/decisions/options to economizing problems include a)________________;

POST TEST:

Part I TRUE or FALSE

Directions: Please write TRUE if the statement is correct and FALSE if the statement is incorrect.

1. _______________Scarcity in goods and services happens if the resources in the production are
inadequate or scarce.

2. _______________Customers must choose among several alternatives if scarcity exists.

3. ________________ Income inequality is the gap in income that exists

between the rich and the poor customers willing to buy the same products.
4. ________________Shortage of goods and services is an economic problem; and shortages are
always constant

5. _________________The Build Build Build Program by the government aims to help improve the
infrastructure projects and other programs of the country.

Part II Multiple Choice. Choose the letter of the correct answer.

1. The fundamental economic problem that must be solved efficiently

a) Scarcity of resources b) Health system

c) Surplus of demands d) Export policies

2. Economists point out that scarcity must be addressed to protect the

a) The poor but not the rich b) Both the poor and the rich

c) Neither the poor nor the rich d) The poor but never the rich

3. What two factors contribute to scarcity in the production of goods and services?

a) Unlimited resources and limited wants b) Unlimited resources and wants

c) Unlimited wants and limited resources d) Limited resources and wants

4. If there is scarcity in public transportation, what should the learners do?

a) Home based learning is an alternative choice for access to education b) Stop learning while waiting
for transportation shortage to be solved

c) The government must import units of car from neighbor countries d) All choices are applicable

5. The economists describe the amount of resources in an economy as:

a) Always constant b) Can never decrease or increase

c) Unlimited at any moment in time d) Limited at any moment in time