Applied

Economics
Week 1: Module 1

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 Target

What is Economics?
Economics does not teach man how to get rich, nor does it provide magic
formulas as to what business one should venture into, how to get a job and what
kind of products he should manufacture. Economics simply explains why some
businesses succeed while others do not and why a particular economic event occurs.
This learning module will describe economics as a social science, its
relationship to other sciences.

After going through this module, you are expected to:

Differentiate economics as a social science and applied science in terms of nature
and scope.
(ABM_AE12-Ia-d-1-2)

Subtasks:
1. Define what economics is
2. Identify the concerns and types of economics
3. Demonstrate understanding about the importance of economics in their daily
lives
4. Compare and contrast microeconomics and macroeconomics

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 Jumpstart

For you to understand the lesson well, do the following activities. Have fun and
good luck!

Activity 1: Arrange Me!

Direction: To further check your knowledge with our topic, arrange the words in
column A and refer your answers to the given clues in column B. Write your answers
on a separate sheet of paper.

A B
1. COEONSICM It is a social science that deals with how
people organize themselves to share
scarce resources in order to produce
goods and services that satisfy the
infinite and multiplying wants and
needs of man.
1. YITSACRC This means that there is shortage of
supply or has limited resources.
2. ACRMOOCEONSCIM It is a branch of economics that studies
the behavior and performance of an
economy as a whole.
3. OICRMOCNEOCISM It is a branch of economics that studies
the individuals and industry’s behavior
in decision making and allocation of
resources.
4. LAINTEESS OODGS A type of good which satisfy the basic
needs of man.

Discover
NATURE AND SCOPE OF ECONOMICS

Every man of any distinction makes an economics decision every day. Deciding
on how much to spend and save, the kind of food to buy, the type of school to enroll,
the amount of time for work and leisure, and may more are only some situations
where one applies economics. Thus, it is very important to understand the various
issues and intricacies concerning economics. (Silon et.al 2009)

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 If you are going to conduct a research, you will have different aspects to
consider. For example, you are tasked to conduct a research about studying the
economic situation of families here in our locality. You are going to look at the annual
income of these families, including their buying behavior in the market, what specific
products they often purchased and many more. You might also consider the overall
view of the entire economic system. This will include the causes why these families
limit their spending capabilities, what are the environmental factors that affects their
purchasing power; or what makes them satisfied in their buying behavior. These
approaches will examine the same, but the main points differ from each other. In a
similar way, microeconomics and macroeconomics examine the same economy, but
they have distinct perspective. In studying the buying behavior of the people,
macroeconomics is about the particular behavior and spending habits of the
individual which help them understand the overall economic situation on individual
matters, while macroeconomics study the economic situation of the entire economy
that will help to explain the internal and external environment of the country as a
whole.

According to Carnaje 2016, like other social sciences, such as sociology and
political science, economics is trying to understand how people behave and how they
interact within society. It also uses a scientific approach to its investigations. What
makes economics different from the other social sciences? In order to highlight its
distinctions from other social sciences, the following concepts of economics will be
used: Economics is the study of how individuals, business firms, governments, and
societies as a whole make choices under conditions of scarcity. The special emphasis
economists give to choices that scarcity requires us to make- what we give up when
we make those choices- distinguishes economics from the other social sciences.

ECONOMICS AS DEFINED

From the Greek words OIKOS meaning household

and NOMOS meaning management
= household management

ECONOMICS

The wise production and use of wealth to

meet demands or needs of the people
Figure 1: Economics as defined

ECONOMICS- is a social science that deals with how individuals organize themselves
in order to distribute scarce resources to create products and services that meet
man's infinite and multiplying desires and needs.

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Economics as a Science
It is a science because, in relation to those general laws and principles,
it is an organized body of facts, orchestrated, structured and
systematized. (Observation, hypothesis formulation, knowledge set,
experimentation, inference, generalization)
Using some kind of logic based on a collection of systematic relations,
economic analysis attempts to describe economic events.
It is social science since individuals or societies and their actions,
unpredictable in nature, are the subject of economics.

RELATIONS OF ECONOMICS TO OTHER SCIENCES

Figure 2: Relations of Economics to other Sciences

SCOPE OF ECONOMICS
1. Microeconomics (from the Greek word mikros, meaning “small”)
 Takes a closer view on the behavior of individual markets work. It focuses on
how individual households, firms and industries make their choices, and the
interaction of such decisions in the particular market.

Example: Determine the price of rice and how much of it is produced and sold. It
would also look at how regulations and taxes affect the price and supply of rice.

2. Macroeconomics (from the Greek word makros, meaning, “Large”)

 Deals with the problem of the economy as a whole. It looks at the aggregate
prices, production and income.
Example: The study of the Philippine economy would analyze the gross national
income and total employment

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 ECONOMICS

MICROECONOMICS MACROECONOMICS
Specific General
Deals with economic Deals with economic
behaviour of individual problem as a whole such
household, firms and as aggregate prices,
industries production and income

Figure 3. Microeconomics vs. Macroeconomics

Concerns of Economics

1. Production- is the use of inputs for generating output.

* Inputs are commodities or services that are used to produce goods and
services.
* Output are the different goods and services which come out of production
process.
*Society have to decide what outputs will be produced and in what quantity

2. Distribution- Distribution is the total product distribution by members of

society. It is linked to the issue of for whom goods and services are to be
produced.

3. Consumption- is the use of products or services. Consumption is the final

conclusion of economic operation.

4. Public finance- is concerned with government spending and revenue.

Economics studies how the government collects money by taxes and its
borrowing.

Types of Economics
1. Household Economics – the family is the most popular use of economics. At
this stage, someone who knows the economic principles would be able to improve
the functioning of the household.
2. Business Economics – when an individual or a group of people starts to work,
they are part of the business economy system in their workplace. In this form, you're
dealing with rent, salaries, income, and others.

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 3. National Economics – Economic factors that influence the country as a whole.
Deals with the control of a nation's revenue, spending, wealth or capital.
4. International Economics – The highest stage of economic operation concerning
the industry of one country with other countries such as trade, tourism, exchange
rates.
The Economic Agents/Stakeholders:
1. Consumers - are individuals or companies purchasing goods or services. They
are individuals or other economic organizations making use of a good or
service. In addition, they don't sell on the item they purchased
2. Producers- Firms who produce goods and services. They may be individual
entrepreneurs (self-employed) or large multinational companies.
3. G o v e r n m e n t / the public sectors- Attempt to maximize the well-being of
society
* The agents interact in a particular territorial, social, natural and/or cultural
framework which determines their relationships within the market

BASIC TERMS TO BETTER UNDERSTAND ECONOMICS

Goods- anything used to satisfy your needs and wants.

*tangible goods- a physical object or product that can be touch
*intangible goods- a product that cannot be touch, like insurance policy

Classification of Goods according to EXAMPLES

use:
1. Consumer goods- those that yield Soda, bread, juices, water, etc.
direct satisfaction to consumers

https://253.smyln.com/
2. Capital/ industrial goods- are Machinery, buildings, equipment
those goods that help to produce other
goods that directly or indirectly meet
consumers ' needs.

https://bl.thgim.com/migration_catalog/sf2qb5-
Heavyequip/alternates/LANDSCAPE_435/Heavyequip
3. Essential goods- goods that are Medicines
consumed to satisfy the basic needs of
man

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 https://www.pinterest.ph/pin/78158571031742
7025/
4. Economic goods-goods that are
useful and scarce; they need to be paid
for their use with value attached to
them and a price. If a good is so
abundant, and it can meet the needs of
all without anyone paying for it, then
that good is free. The air is free, but the
air-conditioned air is an economic
good. https://www.climamarket.eu/en/wall-split-air-
conditioner-lg-s09et
5. Luxury goods- are goods that are Luxury Car
not necessary, but are highly valued
and linked to people who are affluent
or rich. For several purposes, they are
purchased: to encourage self-worth
and status, or for the product's quality
and craftsmanship.
https://carsoid.com/what-are-the-best-lamborghini-
luxury-cars/
Figure 2. Classification of goods

ECONOMIC RESOURCES
 Also known as factors of production
 Used to produce goods and services

Classification of Resources
1. Land- soil and natural resources found in the wild and not man-made.
Landowners get a lease known as rent.

2. Labor-physical human involvement in production

E.g. Works in building, machine operators, and works in manufacturing,
nurses, lawyers, doctors etc.
*The income received by labours is referred to as Wage.
3. Capital-man-made commodities that are used to manufacture products and
services.
*The capital owner receives an income which is called Interest.

4. Entrepreneurship transforms an idea into a business. In order to add to

supply, an entrepreneur incorporates the other three output factors. Innovation

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and risk-takers are the most successful entrepreneurs. Profits are the money
entrepreneurs receive.

Characteristics of Resources:
1. Scarcity- is a condition where there is an insufficient amount of what is accessible
to fulfill the demand for it.
There are problems that economics will face in the development of products and
services: for land – insufficient land and natural resources; contaminated areas;
overcrowded spaces; for labor – unqualified workforce; insufficient workforce; for
capital – low equipment/machines; inadequate fund/capital; and for
entrepreneurship –inadequate training of entrepreneurs; inadequate timely
training; limited opportunity; scarcity of great ideas but many competitors in the
market.

2. Multiple Usage- there can be more than one potential use of resources. A plot of
land can be used, for example, to plant coffee or to build a factory.

3. Partially replaceable: in the production of a good or service one resource may

replace another (e.g. replaces manual labor with technology).

Choice and Decision- Making

Opportunity Cost
There is a need for a man to make choices in choosing how to optimize the use
of finite resources to fulfill as many wants as possible due to the existence of scarcity.
For instance, a homemaker who has a monthly budget has to determine how to use
it to pay the rent, buy food, pay tuition fees for children, and buy new clothes and
shoes. If the budget isn't adequate, then some of these items have to be given up by
the homemaker. She has a decision to make. If at the beginning of school, she
chooses not to buy a new shoe for her kids, then this is the option she gave up on.
When you hear the phrase "opportunity cost," you hear a fancy word for "trade-
off." There is a trade-off to consider each time you make a choice. You have to
consider what you get as well as what you might give up. The most fundamental
definition of opportunity cost is the cost of the next best thing you might have done
if you hadn't made your first option. The costs of opportunity include both overt and
implicit costs.

Importance of Economics in our daily lives

Both visible and subtle ways, economics impacts our everyday lives. Economics
frames several decisions that we have to make about employment, leisure,
consumption and how much to invest from an individual perspective.
Macroeconomic patterns, such as inflation, interest rates and economic growth, also
affect our lives.

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 www.economicshelp.org
Figure 4. Summary why economics is important

Here are some enrichment activities for you to work on to master and strengthen
the basic concepts you have learned from this lesson.

Explore

Enrichment Activity 1: Crossword Puzzle

http://puzzlemaker.discoveryeducation.com/CrissCrossSetupForm.asp

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Across
2. A physical object or product that can be touch
3. The family is most popular use of economics
4. Are individuals or companies purchasing goods or services
5. Physical human involvement in production
7. Is concerned with government spending and revenue.
9. Insufficient amount of what is accessible to fulfill the demand for it.
10. Deals with the problem of the economy as a whole.
Down
1. From the Greek word mikros, meaning “small”
6. Man-made commodities that are used to manufacture products and services.
8. Is the use of inputs for generating output

Assessment 1: Am I right or wrong?!

Direction: Classify the statement if correct or wrong. Write TRUE if correct and
FALSE if wrong then explain or identify the word/s that makes the statement
incorrect. Use separate sheet of paper for your answers.
___________1. Inputs are the different goods and services which come out of
production process.
___________2. Consumption is the use of products or services. Consumption is the
final conclusion of economic operation.
___________3. Business Economics is the highest stage of economic operation
concerning the industry of one country with other countries such as trade, tourism,
exchange rates.
___________4. Producers are firms who produce goods and services. They may be
individual entrepreneurs (self-employed) or large multinational companies.
___________5. Economics as a science follows the scientific approach in arriving at
conclusions.
___________6. Production is the use of outputs for generating input.
___________7. Output are the different goods and services which come out of
production process.
____________8. Microeconomics is concerned with the performance of the economy as
a whole or its major aggregates.
____________9. Landowners get a lease known as rent.
____________10. Capital goods yields direct satisfaction to consumers.

Enrichment Activity 2: Pick me!

Direction: Base your answers from our discussion. Pick all the goods and classify
them accordingly. Write your answers in the box below.
Your mother asks you to accompany your father to purchase some goods. You
were excited to ride on the newly purchased limited edition car bought by your dad
a month ago. So you went to the supermarket and buy for the goods needed by your
mother. In her lists are the following; two sacks of rice, assorted vegetables,
toothpastes, laundry detergents, bath soaps, shampoo, milk, oatmeals, breads, and
canned good. She also listed multivitamins and you need to buy it in the drugstore.
Your dad bought a food processor as a surprise to your mother. He also purchased

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an air condition unit for your guestroom. You are about to go out to the mall when
you pass by a jewelry store. He bought you a necklace as a gift on your birthday.

Lists of goods purchased Classification of goods

Assessment 2: Interpret Me!

Direction: Interpret the picture below. Based your answer from our topic about the
importance of economics in our daily lives. A rubric will be use to check your
answers. Use separate sheet of paper for your answer.

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Rubric for picture interpretation
Objective (10pts) Knowledge Interpretation
(5 pts) (5 pts)
Makes a complete and Provides a complete Forms a reasonable
detailed description of summary of the hypothesis about what is
the subject matter situation and time viewed in the
and/or elements seen in period shown, and the photograph and is able
the picture people and objects that to support this with
appear. evidence from the
photograph.

Great job! You have understood the lesson. Are you

now ready to summarize?

Deepen

Compare Me!
Direction: To further check your understanding about the topic, write an essay on
how will you compare and contrast microeconomics and macroeconomics. Examine
the difference between the two and give examples to better support your answer. A
rubric will be used to determine your score.
Ideas Organization Sentence fluency Conventions
The organization The writing has an The writer
This paper is clear enhances and easy flow, rhythm, demonstrates a
and focused. It showcases the and cadence. good grasp of
holds the reader's central idea or Sentences are well standard writing
attention. Relevant theme. The order, built, with strong conventions (e.g.,
details and quotes structure of and varied spelling,
enrich the central information is structure that punctuation,
theme. compelling and invites expressive capitalization,
moves the reader oral reading. grammar, usage,
through the text. paragraphing) and
uses conventions
effectively to
enhance
readability.

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 Gauge

POST TEST: SUMMATIVE TEST

___1. What division of Economics deals with the economic behavior of the
individual units such as consumers, firms, the owners of factors of
productions?
A. Macroeconomics C. Micro Market
B. Macro Market D. Microeconomics

___2. Which of the following is a situation wherein the amount of something

available is insufficient to satisfy the desire for it?
A. Resources B. Scarcity C. Unlimited D. Wants

___3. The following are the relations of Economics to Science, EXCEPT what?
A. Literature B. Mathematics C. Natural Science D. Politics

___4. Which of the following Economic Resources is a manmade resources used in

the production of goods and services?
A. Capital B. Labor C. Land D. Money

___5. What is the ultimate end of an economic activity?

A. Consumption C. Production
B. Distribution D. Public Finance

___6. What type of economics affects the whole nation and deals with the
management of income, expenditures, wealth or resources of a nation?
A. Business Economics C. International Economics
B. Household Economics D. National Economics

___7. Which of the following deals with the economic behavior of the whole
economy?
A. Macroeconomics C. Microeconomics
B. Macro market D. Micro market

___8. Which of the following is the wise production and use of wealth to meet the
demands or needs?
A. Business C. Enterprise
B. Economics D. Output

___9. Which is TRUE about Economics as a social science?

A. Scarce resources and limited needs drive choice
B. Economics explains and predicts economic events

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 C. The scientific method is based on the normative analysis
D. Economic hypotheses lead directly to predictions

___10. Mr. Jundy Estela purchased a new limited car as a gift to his wife on her
birthday. What classification of good is this?
A. Capital Good C. Economic Good
B. Consumer Good D. Luxury Good

___11. R&J Engineering Works acquired additional equipment for the business.
What type of good is this?
A. Capital Good C. Economic Good
B. Consumer Good D. Luxury Good

___12. Which of the following is an example of intangible good?

A. Cellular phone C. Insurance policy
B. Bags D. Laptop

___13. An old man is working in a manufacturing company for almost 20 yrs. He

is in charge in machine operation and also troubleshooting. What
classification of resource is stated here?
A. Capital B. Labor C. Land D. Production

___14. The physical effort of the manpower to produce the protective

devices of the front liners is described as what factor of
production?
A. Capital B. Labor C. Land D. Product

___15. Which of the following are examples of human necessities?

A. LED TV
B. Laptops and desktop computers
C. Milk tea, ice cream and hamburger
D. Water, and a secured place to live like houses

Great job! You are almost done with this module.

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