Self-Instructional Packets (SIPacks)

in

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Economics and Applied Economics
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To get the most out of this module, here are some reminders that you need to consider:
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1. Read the lesson and the instructions carefully.
2. Answer all activities and assessments on a whole sheet of paper.
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3. Write the following information on your paper before answering all the activities.
a. Complete Name (student) d. Name of Subject Teacher
b. Grade and Section e. The Quarter No.
c. Learning Area/Subject: Applied Economics f. Week No.
4. Fulfilling the tasks is divided to 5 days. You may refer to the table below to guide you.
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5. Answers to all activities and exercises will serve as output and will be forwarded to the subject
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teacher for checking and recording.

6. Only the answer sheet/s (pad paper) will be forwarded back to the teacher. However, you may
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keep this SIPacks (printed module) for future reference.

DAY ACTIVITIES / ASSESSMENTS POINTS

Day 1 Activity 1. III-C. Jumbled Words 10 points
Day 2 Activity 2. III-F. Developing Mastery : Identification 10 points
Day 3 Activity 3. III-G. Budget Time 30 points
Guide Questions 10 points
Activity 4. III-I. Essay 10 points
Day 4
Activity 5. III-J. Enumeration 10 points
Total Points 80 points

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga
 I. OBJECTIVES

A. Content Standard
The learners demonstrate an understanding of economics as applied science and its utility in
addressing the economic problems of the country.

B. Performance Standard
The learners shall be able to analyze and propose solution/s to the economic problems using
the principles of applied economics.

C. Most Essential Learning Competencies

The learners differentiate economics as social science and applied science in terms of nature
and scope.

D. Objectives
At the end of the lesson, the students shall be able to;
● Know the definition of economics and the basics
● Differentiate normative and positive economics

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● Distinguish the division of economics
● Identify the four factors of production
● Learn the 3 economic questions
● Compare the different economic systems
● Analyze the importance of applied economics SA
● Elaborate on the different economic theories
II. CONTENT
Economics and Applied Economics
LEARNING RESOURCES
A. References
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Applied Economics by Carnaje (2016); by Dinio & Villasis (2017); and by Saluba (2018)

B. Other Learning Materials

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https://corporatefinanceinstitute.com/resources/knowledge/economics/economic-system/
https://en.wikipedia.org/wiki/Applied_economics
https://www.investopedia.com/terms/a/applied-economics.asp
https://managementmania.com/en/economic-theories
https://en.wikipedia.org/wiki/Applied_economics
https://courses.lumenlearning.com/wm-microeconomics/chapter/economic-models/
https://www.infoplease.com/homework-help/social-studies/overview-economics-three-economists-and-their-theories
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III. PROCEDURES
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A. Reviewing previous lesson or presenting the new lesson

As a review of Grade 10 Ekonomiks, recall the meaning of economics and its importance.
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B. Establishing a purpose for the lesson

We need to study economics due to “scarcity” or inadequacy. We cannot have it all. That
means economic resources are limited while human needs and wants are infinite. Through
learning economic theories and concepts, you would become a wise decision-maker.

C. Presenting examples/instances of the new lesson

Jumbled Words (10 points)

Arrange the following scrambled words to create meaningful words related to economics.
Then find and write the meaning of each. (Write your answers on a paper.)
1. R A C S T Y C I
2. R O M I C C O E N O C I M S
3. A B O L R
4. L A T I C A P
5. S U M N O T I P N O C

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga
 D. Discussing new concepts and practicing new skills #1

WHAT IS ECONOMICS?
Economics is considered a social science because it tries to understand how people behave and
interact within a society. Economics is the allocation of scarce resources to meet man’s unlimited
needs and wants. It is synonymous to budgeting. People cannot have everything they want.
Consumers are limited by their income while producers are limited by the factors of production.

Economics is about making choices. Scarcity is a condition of why people study and practice
economics. Scarcity is the insufficiency or inadequacy of economic resources and as result, we
have to decide and choose. Resources are the most basic elements that people use to produce
goods (the tangibles) and services (the intangibles). The fundamental economic resources are
land, labor, capital, and entrepreneurship, which are also called factors of production.

It is a reality of life that getting one thing would mean giving up another thing, which is called
trade-off. For example, you chose to renovate your house instead of buying a car. On the other

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hand, opportunity cost refers to the value of the best forgone alternative or the forgone next best
choice. A female manager, for instance, gave up her job to be a full-time mother, thereby giving
up her salary. The salary is the opportunity cost. To understand better, what is the difference
between trade-off and opportunity cost? Trade-off means the exchange or choosing between
alternatives while opportunity cost is the value or cost of the next best choice/alternative.
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Consumers and producers always have to choose. Consumers cannot spend money twice.
Money spent on a cellphone cannot be spent again on buying a TV. On the other hand, producers
cannot use resources again once they are used up. For example, a farmer who decides to use
his land for producing corn gives up the opportunity to produce rice.
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Normative and Positive Economics

In making decisions, economists usually consider both facts and assumptions. In studying
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economics, we must know the difference between positive and normative economics.

Positive economics describes and explains various economic phenomena or the "what is"
scenario. Positive economics is based on facts and cannot be approved or disapproved. For
instance, “Public healthcare increases government expenditures.” On the other hand, normative
economics focuses on the value of economic fairness, or what the economy "should be". In other
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words, normative economics is based on value judgments. For example, “Best healthcare must
be free to all citizens.” Nevertheless, both of these are important in making economic decisions.
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Most government policies are based on a combination of both positive and normative economics.

Major Divisions of Economics

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Economics is divided into two categories based on certain criteria: microeconomics and
macroeconomics.

Microeconomics is the close-up view of the economy, studying individual and business
decisions. It is also called the “bottom-up approach” that focuses on supply and demand, and
other forces that determine price levels. Included in the scope of microeconomics are particular
individuals, households, markets, firms, and industries. It deals with the decision making of single
economic variables such as the demand, price, consumer, etc.

Macroeconomics is the overall view of the economy looking at the decisions of countries and
governments. It takes a top-down approach that tries to determine the course of the economy as
a whole. Included in the scope of macroeconomics are national output (GNP, GDP), economic
growth, overall price level, monetary and fiscal policy, unemployment, government spending, etc.
It deals with averages and aggregates of the entire economy.

Both are interdependent and complementary to one another but also are overlapping at times.

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga
 Factors of Production

In economics, the factors of production (sometimes called economic resources or inputs) are
essential to produce goods and services. These are land, capital, labor, and entrepreneurship

LAND LABOR

FACTORS OF PRODUCTION

CAPITAL ENTREPRENEUSHIP

The 4 Factors of Production

● Land includes all the natural resources such as fertile soil, trees, minerals, and water which
can be sources of raw materials to produce goods or products.

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● Capital refers to anything that people produce and later used in the production of other goods
and services such as manufactured aids, tools, machines, equipment, and factories.
● Labor refers to the physical and mental talents of individuals used to produce goods/services
● Entrepreneurship is the ability to organize the other resources (land, labor, and capital) to
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produce goods and services. It is the ability to establish and operate a business and establish
relationships with suppliers, customers, lenders, investors, and others.
The returns to these factors are often described as rent for land; wage for labor; interest for
capital; and profit for the entrepreneur. That means the owner of land is entitled to receive rent,
the worker is entitled to receive a wage, the owner of capital is entitled to an interest payment,
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and the entrepreneur gains profit.

Three Basic Economic Questions

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To provide for the needs of the people and to cope with constraints and limitations, societies must
answer these basic questions.

1. What to Produce
Since resources are limited, societies must decide and prioritize what goods and services should
be produced and later followed by determining the quantity (how many / how much).
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2. How to Produce
The method of production that has the highest efficiency and yield the highest output shall be
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employed/used. This should be the right combination of resources and technology to be applied.
3. For Whom to Produce
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Producers must also consider the target market to know the demand in the economy.

Economic Systems
An economic system is a means by which a society determines the answers to the basic economic
questions mentioned above. Economic systems control the factors of production and the
distribution of goods and services. The following are the four types of economic systems.

a. Traditional economy

The traditional economic system is the most basic type wherein economic decisions are based
on traditions, beliefs, and practices of the community. There is very little division of labor or
specialization here because families are usually self-sustaining. This type is common in rural
settings where economic activities are predominantly farming, fishing, hunting, and gathering.
This system lacks the potential to generate surplus because of limited resources to share.
However, this system is highly sustainable and wastage is very little. Bhutan and Haiti are
examples.

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga
 b. Command economy

In a command system, which is also called “planned system”, the government (or any centralized
authority) controls the production and the distribution of goods and services. This type is common
in communist societies where power is centralized. People do not have the power to decide on
what, how, and for whom to produce. Because of this, society is vulnerable to economic crises or
emergencies, as they cannot quickly adjust to changed conditions. In theory, this system works
well if the central authority exercises control for the public’s best interests, which is rarely the
case. North Korean and Cuba operate under this system.

c. Market economy

This is based on the concept of free markets wherein competition dictates how goods and services
are allocated. There is very little government interference on economic activities wherein people
have the freedom to produce and/or consume in any way and in any amount they want. However,
a pure market system does not really exist because the government inevitably has to intervene
through laws and policies. Arguably, growth is highest under a market economic system, however,

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the distribution of resources is not equitable because those who succeed economically control
most of them and amass a lot of economic power. Some countries that operate under this system
are the USA, Japan, and Canada.
d. Mixed economy
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A mixed economy is the combination of the characteristics of the market and the command economic
systems. This is where the market system is under strict regulatory control. Most industries are
privately-owned but still under regulation, however, industries that provide essential services are under
the control of the government. Mixed systems are the norm globally. The challenge here is finding the
right balance between free markets and government control. Governments tend to exert much more
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control than is necessary. Sweden, Russia, and China are examples.

E. Discussing new concepts and practicing new skills #2

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APPLIED ECONOMICS
Applied economics is the use or application of economic
theories, researches, and econometrics (Econometrics is
the application of statistical and mathematical models
using data) to real-life situations to make informed
economic decisions and of predicting possible outcomes.
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It may be practiced at macroeconomic or microeconomic

levels. The purpose is to improve the quality of life of
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people, the practices in business, and the implementation

of public policies by considering the costs and benefits, and
human behavior.
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Applied economics is characterized by the application of

economic theory and econometrics to address practical issues in a range of fields including
demographic economics, labor economics, business economics, industrial organization, agricultural
economics, development economics, education economics, engineering economics, financial
economics, health economics, monetary economics, public economics, and economic history.

For example, we may apply the Law of Supply and Demand to understand why quantity supplied or
quantity demanded is high or low, or why prices are high and eventually what the government can do
to stabilize the prices. On the level of the students, knowing the inevitable existence of scarcity may
help them realize how to maximize their allowances.
Most pressing and recurring problems of countries and governments are actually economic in nature.
These can be frequently seen on TV news or read in newspapers. Economics also helps people
understand and assess if public officials run the government and formulate policies effectively. If
people have a deeper and better understanding of economic principles, they become wise decision
makers and may help in addressing national economic problems.

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga
 To address economic problems, great economists established theories. What are economic theories
anyway? Economic theories are ideas and principles that aim to describe how economies work. This
comprehensive system of assumptions, hypotheses, definitions and instructions try to explain
economic phenomena, interpret why and how the economy behaves, and propose the best solution/s
to economic problems. Economic theories are statements of a presumed relationship between two or
more variables, such as the relationship of price to demand, price to supply, and so on. In principle,
the approach to economic theory is divided into positive and normative. On the other hand, economic
models may represent economic theories in simplified ways that are composed of diagrams or
equations. Through a model, a complex, real situation is pared down/summarized to the essentials. A
good economic model is simple enough to be understood while complex enough to capture key
information.
What makes economic theories and models necessary is our desire to apply economics. A theory is
a more abstract representation, while a model is a more applied or empirical representation. Their
validity is tested by comparing assumptions against the facts through gathering data.

Three Great Economists and Their Theories

The following economists developed economic theories that were employed and affected the world’s

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economies for centuries.

Adam Smith and the Invisible Hand

Adam Smith, a Scottish philosopher and economist who was born in 1723, is
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considered as “The Father of Economics” or “The Father of Capitalism”. He
believed that all individuals act in their self-interest, and can produce and
purchase by themselves. In his book The Wealth of Nation published in 1776,
he called this mechanism of self-regulation of economy as “the invisible
hand” which became the basic idea of free- market economy or capitalism.
Later during the 1900s, the doctrine of laissez faire, anchored with Smith’s
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idea, was coined and found use to describe an approach that holds that the
market will find its equilibrium without government intervention. Smith also
emphasized that new machinery, division of labor, and specialization would
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lead to higher production and greater wealth to a nation.

Karl Marx and Class Struggle

Karl Marx, a German philosopher born in 1818 viewed capitalism negatively.
Contrary to the ideas of Smith, Marx saw instability, struggle, and the decline
of a free market economy. Presented in his 1867 work titled Das Kapital, he
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explained that the capitalists (the bourgeoisie/ the rich/ the ruling class) make
profit by exploiting the labor of the workers (the proletariat/ the poor/ the ruled
class). He said that the workers were underpaid for the value that they
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worked for. Marx believed that this struggle eventually intensifies and would
lead to the fall of capitalism. To him, this situation later leads to the
movement of society toward communism wherein everybody, through
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government intervention, owns the means of production.

John Maynard Keynes and Government Intervention

John Maynard Keynes, a British economist born in 1883, also examined

capitalism and came up with different views. In 1936, he published his
work General Theory of Employment, Interest, and Money. His most
significant work is about the role of the government in a capitalist
economy. His works were written during the Great Depression in the US
which questioned the validity and applicability of Smith’s invisible hand
(no government intervention). Keynes strongly believed that the only
solution is government intervention through government spending by
creating massive public works program to employ the idle workforce
(unemployed). This way the money is put back to the economy and into
private-sector pockets, ignite demand for goods and services, and pump
the economy again.

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga
 F. Developing mastery
Identify the following. (Write your answers on a paper.)
1. The allocation of scarce resources to meet man’s unlimited needs and wants
2. Intangible products sold in the market
3. The condition of insufficiency or inadequacy of economic resources
4. Economic resources that include land, labor, capital, and entrepreneurship
5. Approach in economics based on facts and cannot be approved or disapproved
6. The close-up view of the economy, studying individual and business decisions
7. Anything that people produce and later used in the production of other goods and
services such as manufactured aids, tools, machines, equipment, and factories
8. The return for wage
9. Based on the concept of free markets wherein competition dictates how goods and
services are allocated
10. The economist who believed that all individuals act in their self-interest, and can
produce and purchase by themselves

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G. Finding practical applications of concepts and skills in daily living

Activity: Budget Time (Write your answers on a paper.)

In a pie graph, show how your family budget the household income. Show the percentage
as well as the actual amount. SA
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Content & Correctness 15 points
Presentation & Clarity 15 points
Total 30 points
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Guide Questions
Based on the activity above, answer the following. (10 points)
•
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What expense consumes most of the family’s budget? Why?

• Is the budget adequate? How does it suffice for all the expenses?
• Did the budgeting change due to Covid19? How?
H. Making generalizations and abstractions about the lesson

Economics is the study of theories and the history of these theories in general terms while
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applied economics helps people and governments evaluate the costs and benefits of
applying economic to ensure stability based on numbers and trends.
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I. Evaluating learning
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ESSAY: Answer the following questions in maximum of 10 sentences for each. (10 points)
(Write your answers on a paper.)

1: At your age, what is the importance of economics and how do you apply it?
2. Explain the relationship or connection of the factors of production to each other.

J. Additional activities for application or remediation

Enumeration:
Enumerate the following. (Write your answers on a paper.)
1-3. Basic economic questions
4-7. Types of Economic Systems
8-10. Three Great Economists

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Property of Pampanga High School - DepEd Division of City of San Fernando, Pampanga