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Applied Economics11 - q1 - m1 - Introduction To Applied Economics
Applied Economics11 - q1 - m1 - Introduction To Applied Economics
Delivery Mode
Quarter 1 – Module 1: Introduction to Applied Economics First
Edition, 2020
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Applied Economics
Quarter 1 – Module 1:
Introduction to Applied Economics
ii
Table of Contents
Copyright Page i
Module Title ii
Table of Contents iii
CONTENTS
Assessment 21
Answer Key 23
Reference 25
iii
WHAT I NEED TO KNOW
The first lesson will introduce you to the basic terms used in applied
economics and the second and last part would inform you about the economic
problems present in our economy and how applied economics will help you solve
these.
I hope that this module will help you become an informed citizen by being able
to make better judgements on the resources you currently have. If you areinterested
to learn more about how decisions should be made when you have abundant or
limited resources, this module will answer your queries.
Think of this first module as your starting point as you trace the way to
the full understanding of economics. Enjoy and let’s get your journey started!
1
WHAT I KNOW
Before proceeding to the other parts of the module, test your knowledge by
trying to answer the questions that follow. Encircle the letter of your answer.
1. What do you call the condition in which our wants are greater than our
limited resources?
A. Economics C. Scarcity
A. Opportunity Cost D. Trade-off
2. What do you call things that you gave up when you make a choice?
A. Choice C. problem
B. opportunity cost D. Trade-off
3. What do you call the application of economic principles and theories to real-world
situations?
A. Applied Economics C. Macroeconomics
B. Economics D. Microeconomics
5. What is supply?
A. It is a choice that you gave up C. It is the totality of our needs
B. It is the amount of goods for sale D. It refers to the economy
2
9. What is most likely to happen when the population continues to rise?
A. Employment rate will go up
B. Poverty rate will decrease
C. Resources will become scarce
D. Unemployment rate will go down
10. According to Philippine Statistics Authority (PSA) what is the minimum agethat a
Filipino must have in order to be classified as an unemployed person?
A. 13 years old
B. 14 years old
C. 15 years old
D. 18 years old
11. What kind of approach is used by economists to explain how the economy
works?
A. Collaborative C. positive
B. experimental D. scientific
12. What are you experiencing when your wants are greater than yourresources?
A. Poverty C. trade-off
B. Scarcity D. unemployment
14. What type of analysis are economists concerned with in order to become
objective?
A. careful C. normative
B. negative D. positive
3
LESSON 1: Basic Terms in Applied Economics
Learning Competency: Define basic terms in applied economics. ABM_AE12-Ia-d-
1
WHAT’S IN
Have you tried to budget your money in order to buy what you want to eat or
consume in your daily living? Have you tried to run out of water while you were taking
a bath? Have you tried to limit the number of kilos of rice that you will buy for your
daily consumption? If you have answered yes to at least one of these questions,
then you must be facing the trauma of not being able to have enough of what you
wanted.
In this lesson, you will be introduced to the most basic terms used in Applied
Economics and their corresponding definitions. These words will surely guide you in
understanding the real meaning of Applied Economics.
WHAT’S NEW
I H A V E A D R E T S O C Y T I N U T R O P P O A D
S M A S O N G T O S I N G T O H E L P M E C A L L N
C R E Y A L I T Y I F Y O U S E E T H E W O W N D A
A E R L O F A S C I M O N O C E O R C I M F A A I L
R R Y P T A I L Y O S U C A N E T A K E T H N E F U
C T U P D R E E V F E N I S F Y T O U C A N T T C I
I B E U L E E I F V E I N D A N G A E L S O S M A E
T T H S R I M O N G G O O E D I N E G V E R Y T P H
Y I N O G I E A S E E I B E E L I E V E E I N A I N
G E B L W D H E N N I K N N O W T H E T R I M E T F
O A R M A E H A S D C H A N G E D A C R O G S S A T
G T H R E S M A C R O E C O N O M I C S T E G E L T
I H T A V E A E C O N O M I C S D R E A M W I A S H
4
WHAT IS IT
What is Scarcity?
Needs and wants differ from person to person. The easiest way to describe
needs is that these are the things that we can’t live without. Examples of needs are
air, water, food and shelter. On the other hand, wants are those that we can live
without. Examples of wants are jewelries and luxuries.
Scarcity is the reason why people have to study and practice economics.
Economics studies how people distribute or divide their limited resources in order
to satisfy their unlimited wants. Or simply, it is the study of how individuals and
societies deal with scarcity.
5
For instance, if after your examination you plan to eat a heavy lunch with your
limited allowance which is 100 pesos, you will have to budget it and decide about
which food you will buy to satisfy your hunger. Since we are unable to have
everything we desire, we must make choices on how we will use our limited
resources.
When making choices, there are things that we need to give up. Trade- offs
consist of all the options that we give up when we make a choice.
Following the previous example, you planned to spend your limited
allowance to buy 2 pieces of siopao and softdrinks to satisfy your hunger. Yourother
option is to pay for a heavy value meal at 120 pesos or buy your favorite meal
combo at 115 pesos. You gave these options up since you can only afford to pay for
the siopao and drinks. The choices that you’ve given up are your trade-offs.
Among all your trade-offs, the most desirable alternative that you gave up is
called the opportunity cost. In the previous example, the most desirable option is to
buy your favorite meal combo at 115 pesos. You cannot afford it since you only
have 100 pesos so you gave it up.
No matter what choice you make, there is an opportunity cost, or next- best
alternative, that must be sacrificed. Opportunity cost is the highest- valued
alternative that must be sacrificed in order to get something else. The key to making
the best possible decision is to minimize your opportunity cost by selecting the
option that gives you the largest benefit.
6
man-made tools or objects that may be used to produce supplies. Demand on the
other hand refers to the aggregate or the totality of the needs and wants of the
customers. Balancing these two is one of the goal of Economics so that scarcity is
eliminated.
What is Applied Economics?
Applied Economics is the application of the principles of supply, demand,
trade-offs, opportunity-costs, and other economic theories to solve real-world
problems. It may be practiced in the microeconomic or macroeconomic level.
Applying economic theories in our lives means trying to address actual economic
issues and be able to do something about it.
WHAT’’S MORE
Column A Column B
1. Aggregate
2. Capital
3. Demand
4. Economics
5. Labor
6. Land
7. Macroeconomics
8. Microeconomics
9. Needs
10. Opportunity Costs
11. Scarcity
12. Supply
13. Trade-offs
14. Wants
WHAT I CAN DO
9
ADDITIONAL ACTIVITIES
Situation: Imagine that you were on a class field trip for three days. Your mom sent
you a pocket money of Php 1,500.00. You have already planned to use this to buy
an acoustic guitar so you could practice playing it when you got home. While
strolling around the mall, you found a beautiful necklace which would certainly look
good on your mom and it costs Php 500. You know that if you bought the necklace,
your mom would be glad, however, buying it would make you unable to buy your
beloved guitar. Which one would you buy? Why?
Answer:
_
What basic economic term(s) can we extract from the situation above? Listthem
down here:
10
Welcome to Lesson 2!
WHAT’’S IN
In the previous lesson, you were introduced to the basic terms used in
Applied Economics. These terms will help you to better understand applied
economics and the current situations faced by our country.
In this lesson you will be identifying the basic economic problems of the
country which are all linked to scarcity. Take time to read and feel the different types
of situations you will be immersed in.
WHAT’’S NEW
__
__
11
WHAT IS IT
All societies are faced with questions about what goods and services should
be produced, how these should be produced and who consumes these. Knowing the
answers to these questions would lead us to identify possible problems and
solutions to existing economic problems.
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2. In this situation, you are affected by the so-called underemployment problem,
which is also among the basic problems of the country. Accordingly, labor that
falls under the underemployment classification includes those workers who are
highly skilled but working in low paying jobs, workers who are highly skilled but
working in low skill jobs and part-time workers who would prefer to be full time.
According to the records of PSA (Philippine Statistics Authority), the
underemployment rate in the year 2018 is at 18.0% and this went down a little bit in
the year 2019 becoming 15.6%. There is a decrease in the percentage rate which
means the Philippines is getting better, however it remains to be an economic
problem. Having a job that doesn’t match your skills still boils down to being prone
to scarcity issues.
Situation #3: Suppose that you, being the eldest of ten siblings were not able to
finish your studies. You were forced to stop going to school at the age of 13 and find
a job at an early age in order to support your siblings. What economic problem can
be seen here?
3. In this situation, you are affected by the number one problem of the
country which is poverty.
The booming population growth in the Philippines is another basic economic
problem that can be connected to the issue of scarcity. When population becomes
too big, economic resources may no longer be enough to support the increasing
number of people. Food, water, shelter, medicine and other resources wouldn’t be
enough to satisfy every people’s needs and wants.
On a 2015 report by the Philippine Statistics Authority (PSA), five (5) out of
nine (9) basic sectors of the economy are considered very poor. The farmers came
first, followed by fishermen, children, self-employed and unpaid family workers, and
women. You see, those who do hands-on jobs usually get lower incomes. This is
even the reason why Filipinos tend to go abroad as they get better pays outside the
country.
All of the country’s basic economic problems vary with times and
circumstances. Unemployment, underemployment, poverty and population increase
are just few of the basic economic problems faced by our country. These problems
are linked to scarcity. These problems would not have occurred if the resources or
supplies are equally distributed to suit to the needs and wants of people. It is now a
challenge for you to observe and identify other economic problems so you may be
able to think about it and reflect on how youcould help in solving it.
13
WHAT’’S MORE
Situation 1: Imagine that you were born and raised in a wealthy family. You can
buy what you want, go to places you love and enjoy the things that money can buy.
You wanted to become a doctor so you pursued your education and graduated with
honors. The only problem is that, since you are the heir of the CEO of a large
business company, you cannot practice your profession as a doctor. Instead, you
are forced to succeed the business of your family. Thus, you are now working as a
businessman. Identify the economic problem that can be seen from this scenario.
Briefly explain your answer.
Answer:
__
__
_
__
Directions: Try to summarize what you have learned by completing the followingstatements:
1. All societies are faced with questions about _ goods and services
should be produced, _ these should be produced and
consumes these.
4. On a 2015 report by the Philippine Statistics Authority (PSA), five (5) out of nine
(9) basic sectors of the economy are considered very poor. The
came first, followed by , children, self-
employed and unpaid family workers, and women.
5. Unemployment, underemployment, poverty and population increase are justfew of
the basic economic problems faced by our country. These problems are linked to
. 14
ADDITIONAL ACTIVITIES
15
WHAT’’S IN
You have learned from the first lesson of this module that applied economics
is the application of economic principles and theories to real-world situations in
order to predict future outcomes. Therefore, it makes sense that if you will apply the
economic theories that you will learn in your personal life and the society you’re at,
you may actually be able to address actual economic issues and do something
about it.
WHAT’S NEW
Let’s go back to one of the situations in lesson 2. You are a fresh graduate at
a prestigious university. You graduated as summa cum laude and received
numerous recognition awards. You took up an education course in order to become
a teacher, however, after graduating, you could not find available jobs within the
province. You have known that you were affected by the unemployment problem
here. What do you think should be done to address this problem which is just one of
the many cases in the country? Briefly explainyour answer.
Answer:
__
_
__
__
WHAT IS IT
Going back to the previous activity that you’ve answered where you have been
affected by unemployment since you cannot find available jobs, the most
appropriate thing an economist must do is to apply positive analysis.
Unemployment happens due to scarcity of jobs which means the number of
prospect workers or job applicants do not match the number of jobs available.
Thus, these numbers must be looked into. Data should be gathered and
validated before economists could suggest or recommend something that will
equalize the numbers. This would need government intervention at the end since
they have control over the economy. This is how applied economics works.
WHAT’S MORE
_
__
Applied Economics makes use of the scientific approach to explain how the
economy and the world works.
Economists try to avoid letting personal beliefs and values influence the
outcome of their analysis by being objective.
ASSESSMENT
Before proceeding to the next module, test your knowledge by answering the
questions that follow. Encircle the letter of your answer.
1. What do you call the condition in which our wants are greater than our
limited resources?
A. Economics C. Scarcity
B. Opportunity Cost D. Trade-off
2. What do you call things that you gave up when you make a choice?
A. Choice C. problem
B. opportunity cost D. Trade-off
3. What do you call the application of economic principles and theories to real-world
situations?
A. Applied Economics C. Macroeconomics
B. Economics D. Microeconomics
4. Which of the following is not a factor of production?
A. Capital C. Labor
B. Tax D. Land
5. What is supply?
A. It is a choice that you gave up C. It is the totality of our needs
B. It is the amount of goods for sale D. It refers to the economy