APPLIED ECONOMICS-SY 2022-2023-
ST.BARBARA OF HELIOPOLIS
WEEK #1
LESSON 1: INTRODUCTION TO APPLIED
ECONOMICS
CHAPTER I: INTRODUCTION TO APPLIED
ECONOMICS
DEFINITION OF ECONOMICS
I’m guessing you’re expecting to see the
definition of Economics here already. But let’s
not work that way, shall we? I’d like to explain
chunk by chunk so you can, hopefully,
appreciate what Economics really is.
Like I said, decisions that we've talked
about earlier are part of Economics. Actually,
Economics covers many aspects of human life!
Since this is quite broad, we cannot even
escape the economic implications of human
actions, behavior, and decisions. Consequently,
this explains why we teach Economics to a
student like you to prepare the youth on their
roles as members of a society which envisions
material survival, stability, and growth.
Since we’re talking about Economics, let me
tell you that there are three strands in the
development of the definition of Economics and
these are:
 Wealth-This strand defines Economics
as the science of wealth-getting and
wealth-using. As the focus is on
wealth, this pertains to
activities answering the two major
economic problems in any society, and
that is production and consumption.
 Making Choices -In everything that we
do, whether we produce or consume,
whether it is wealth getting or wealth-
using, we make decisions and these
decisions are based on alternative
choices. It could also tackle how
resources can be distributed to the
consumers.
-In making a decision, we have to
consider a major concept in the study of
economics, and that is opportunity cost.
Remember the choices you made
earlier? Whichever option you did not
choose, that has now become your foregone
alternative. Therefore, in whatever you decide
upon, there will always be a
sacrificial choice; hence, an opportunity cost.
 Allocation-Economics is primarily a
social science. As a social science, it
utilizes a systematic or scientific
method in the study of society and its
components. Further, Economics is a
study of allocation of scarce resources
to answer to the unlimited human
needs and wants.
“Economics is a social science which analyzes
the production, consumption, and distribution of
goods and services.
BRANCHES OF ECONOMICS
1.Microeconomics
-It deals with the behavior of individual
components as an economic agent such as
household, consumer, worker, firm, and
individual owner of production (producer).
-It also refers to the study of choices by
individuals.
2.Macroeconomics
-It deals with the behavior of the economy as a
whole with the view to understand the
interaction between economic aggregates such
as employment, inflation, and national income /
country’s Gross National Product (GNP).
1.Positive Economics
-It describes facts and data in the economy.
-It avoids making value judgments
2. Normative Economics
-It involves ethics and value judgment
-It is subjective.
3.Applied Economics
-It applies tenants behind economic theories
and principles to real-world situations with the
desired aim of predicting possible outcomes.
ECONOMIC SYSTEM
Economic System refers to a set of economic
institutions that dominate a given economy with
the main objective of solving economic
problems.
1.Traditional Economy
-It is a system whose past experiences are
used as bases for economic decisions.
-Economic decisions are made with great
influence from the past because it is copying /
duplicating the decisions made by previous
generations.
-East Africa was once a Traditional Economy
but is already transitioning.
2.Command Economy
-It is a system in which people do not have
political and economic freedom.
-Factors of production and distribution are
owned and managed by the state.
-This is also called Socialism.
-Countries that practice Command Economy
are China, North Korea, Cuba, Iran, Libya, and
Russia.
3.Free Market Economy
-It is a system that consults with the majority,
which means that interaction takes place
between buyers and sellers in determining the
price of a particular good / commodity.
-This is also called Capitalism.
-Hong Kong practices Free Market Economy.
4. Mixed Market Economy
-In reality, there is no economy using the purest
form of economic system. Hence, a mixed
economy, with elements of the first three
systems mentioned, are present in varied
degrees.
-Both private and public institutions exercise
economic control.
-Countries such as India and France have this
type of economic system

SCARCITY
“Scarcity is the basic and central economic
problem confronting every society.” Scarcity is
the heart of the study of economics and the
reason behind its establishment. It can be
defined in various ways:
1.as a commodity or service being in short
supply, relative to its demand which implies a
constant availability of a commodity or
economic resource relative to the demand for
them;
2. in quantitative terms, scarcity is said to exist
when at a zero price there is a unit of demand,
which exceeds the available supply; and
3.pertains to the limited availability of economic
resources relative to society’s unlimited demand
for goods and services.

GENERALIZATION
This week, you learned about the definition
of economics and its various branches.
"Economics is a social science that analyzes
the production, consumption, and distribution of
goods and services." Microeconomics is one of
the branches of economics that deals with the
behavior of individual components as an
economic agent such as a household,
consumer, worker, firm, and individual producer
(producer) and Macroeconomics deals with the
behavior of economy as a whole with the view
to understand the interaction between economic
aggregates such as employment, inflation, and
national income / country’s GNP.