GUAGUA NATIONAL COLLEGES, INC.

Guagua, Pampanga

G.N.C. Montessori

ACTIVITY SHEET

Name:_____________________________________ Grade /Score:______________

Year and Section: __________________________ Date: ______________________
Signature of parents: _______________________

Activity Title: ECONOMICS AS SOCIAL SCIENCE AND APPLIED SCIENCE

Learning Target: Differentiate economics as social science and applied science in

terms of nature and scope

What is Economics?

analyses how human beings make choices in aneffort to maximize utility.

deals with human beings living in a society, i.e., in a large group of persons with touching
Economics ...

interests and problems.

deals with the activities of people, living in an organised community or society, in so far as
such activities are related to the earning and use of wealth or with the problems of scarcity,
choice and exchange.

as a study, is the social science that ivolves the use of scarce resources to satisfy unlimited
wants

defined as the social science that deals with the production, distribution, and consumption
of goods and services.
Nature of Economics

The nature of economics deals with the question that whether economics falls into the
category of science or arts. Various economists have given their arguments in favor of
science while others have their reservations for arts.
  Economics as a Science

o Economics is a science because it is a systematized body of knowledge in

which economic facts are studied and analyzed. Economics just like science
have laws and theories which trace out a causal relationship between two or
more phenomena.
o Economics is also a science because its laws possess universal validity such
as the law of demand, law of diminishing marginal utility, etc.
o Science deals with systematic studies that signify the cause and effect
relationship. In science, facts and figures are collected and are analyzed
systematically to arrive at any certain conclusion. For these attributes,
economics can be considered as a science. However, economics is treated as
a social science because of the following features:
 It involves a systematic collection of facts and figures.
 Like in science, it is based on the formulation of theories and laws.
 It deals with the cause and effect relationship.

 Economics as an Art

o Economic theories are used to solve various economic problems in society.

Thus, it can be inferred that besides being a social science, economics is also
an art.
o Economics is an art because different theories and laws are explained with
the help of graphs, figures, tables, equations. Also economics make use of
assumptions which helps to define the conditions for the application of
theories, laws and relationship between economic variables.

Scope of Economics

Economists use different economic theories to solve various economic problems in

society. Its applicability is very vast. From a small organization to a multinational firm,
economic laws come into play. The scope of economics can be understood under two
subheads: Microeconomics and Macroeconomics.
 Macroeconomics
Microeconomics

-it is the study of an

-examines individual economy as a whole
economic activity,
industries, and their -it explains broad
interaction. aggregates and their
interactions “top down.”

Scope of Microeconomics Scope of Macroeconomics

 Buying decisions of the individual  Economic growth
 Consumer’s satisfaction  Unemployment and inflation
 Buying and decisions of the firm  Aggregate demand and aggregate
 The determination of prices and in supply
markets  Economic policies (fiscal and
 The quantity, quality and variety of monetary)
products  International trade (exports and
 Profits imports)
 Money supply

Basic Economic Concepts

Scarcity

 Scarcity is the reason why people have to practice economics.

 Scarcity means limited in supply.
 According to Robbins, economics is the science which studies human behavior as a
relationship between ends and scarce means which have alternative uses. This
means that economics is a human science. It involves maximizing satisfaction from
scarce resource and the means available for satisfying these ends (wants) are scarce
or limited in supply. Also the scarce means are capable of alternative uses, that is,
the use of scarce resource for one end prevents its use for any other
purpose at that point in time. The ends are of varying importance which
 necessarily leads to the problem of choice in selecting the uses to which scarce
resources can be put to. It is the various alternative uses of the resources that we
have to decide on the best allocation of resources.
 It is a condition where there are insufficient resources to satisfy all the needs and
wants of a population.
 Scarcity exists because individuals want more than can be produced.
 Scarcity means making choice.

Choice

 A choice is a comparison of alternatives.

Needs
Wants
are things, such as
desires that can be
food, clothing, and
classified by
shelter, that are
consuming a good
necessary for
or service
survival
Scale of Preference

 In economics, it is assumed that man is rational in his choice making, that is, if man
has to choose between one thing and another, it is expected that he will always
choose the alternative that will yield the greatest satisfaction. Similarly, a firm faced
with how to make a choice between production of one product and another, will
choose the product that will yield the greatest profits. Scale of preference presents a
list of wants arranged in order of importance with the most pressing want listed
first, followed by the second most pressing need and so on.

Opportunity Cost

 Opportunity cost means forgone alternative. People must make choices because of
limited resources. Every choice has an opportunity cost and so the
satisfaction of one want involves forsaking the other. Therefore, the real cost of
satisfying any want is the alternative forgone or the opportunity cost.

Central Economic Problems of any Economy

  What to produce
o This has to do with the problem of allocation of resources among different
goods and services. It involves selection of what should be produced and in
what quantity in order to satisfy consumer wants as best as possible using
the available resources.
 How to Produce
o This problem refers to selection of appropriate technique of production, that
is, how to combine resources in other to produce goods and service in a more
efficient way and at a minimum cost.
 For whom to produce
o This economic problem focuses on how the national product is to be
distributed among the members of the society, that is, how the consumer
goods and capital goods will be distributed.

Economics as a Positive and Normative Science

According to J.N Keynes, a positive science may be defined as a body of systematized

knowledge concerning what it is; while a normative science is a body of systematized
knowledge relating to the criteria of what ought to be. The objective of a positive science is
the establishment of scientific laws; while the objective of a normative science is the
determination of the ideals. A positive science is concerned with what is. According to
Robbins, economics is a science of what is which is not concerned with moral or ethical
questions. The positive science of economics makes it devoid of value or ethical judgment
that is, it relates and describes facts without saying whether they are good or bad. For
instance, statements such as ‘Growth creates pollution’ or Growth gets rid of pollution’ are
called positive statements –assertions of facts that can be tested.

Normative economics involves value judgment or what are simply known as value.
It is concerned with the question of what ought to be. It makes distinction between good
and bad depending on ethics and beliefs of the people rather than on scientific laws
and principles. For instance, positive economics is concerned with how aggregate
consumption and investment, how the national income and employment, and how the
general price levels are determined; it does not go into the question of what should the
prices be, what should be the savings rate, etc. these questions of what should be and what
ought to be, falls within normative economics.

Economics is both a positive and normative science because positive

economics sets about to discover what is true about the economy, while normative
economics evaluates whether the facts found are good or bad.
 Economics as Applied Science and as Social Science

Applied Science Social Science

Definition Applied science is a discipline that Social science is a study of human
used to apply existing scientific behavior, relationship with other
knowledge based on scientific human in terms of emotions,
researches and also to developing psychological, the impact of belief
a practical application of science - to environment based on scientific
such as technology, methodology, research.
inventions.
Purpose Solving Problem Theory Driven
Trigger Problem to be solved or needs to Curiosity
be developed
Object System People
Methodolog Both quantitative and qualitative Qualitative
y
Output Technology, Invention Qualified Hypothesis or Behavioral
Theory
Connection Applied Economics is the study of Economics is regarded as a social
 to economics in relation to real world
Economics situations, as opposed to the
theory of economics. It is the
application of economic principles
and theories to real situations, and
trying to predict what the
outcomes might be
science because it uses scientific
methods to build theories that can
help explain the behavior of
individuals, groups and
organizations. Economics attempts
to explain economic behavior,
which arises when scarce
resources are exchanged.

Answer the following questions based on what you have learned in Lesson 1.

1. Why do we need to study economics?

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2. How do think your choices affect the economy?

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3. Cite a scenario wherein you can apply the questions: What to Produce, How to
Produce and For Whom to Produce.
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4. How can you apply the concepts of economics in your everyday living?
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5. During this time of pandemic, how can the knowledge in economics will be applied?
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