APPLIED ECONOMICS - MIDTERM EXAM REVIEWER
LESSON 1: introduction to applied economics
ECONOMICS
- Economics is the study of people and choices.
- It is derived from the ancient Greek word, “oikonomia”, which
means “household management”.
- Economics is the social science that studies how individuals,
businesses, and governments allocate resources to satisfy unlimited
wants and needs in a world with scarce resources.
SCARCITY
- Scarcity is when there's not enough of something for everyone to
have as much as they want. It's the basic idea that resources are
limited, and we have to make choices about how to use them
because we can't have everything we desire.
OPPORTUNITY COST
- It's the idea that when you choose one thing, you're giving up the
opportunity to have something else.
BEHAVIOR GOVERNMENT
SOCIAL SOCIETY
SCIENCE
SATISFACTION RESOURCES
ADAM SMITH
- Adam Smith (1723–1790) was a Scottish economist and
philosopher, often regarded as the father of modern economics. He
is best known for his influential work, "An Inquiry into the Nature
and Causes of the Wealth of Nations," commonly referred to as
"The Wealth of Nations," published in 1776.
THE WEALTH OF NATIONS
- Smith's most significant and influential work is "The Wealth of
Nations," where he discussed economic concepts and principles. In
this book, he argued in favor of free markets, the division of labor,
and the idea that individuals pursuing their self-interest
unintentionally contribute to the overall prosperity of society
through the concept of the "invisible hand."
KARL MARX
- Karl Marx (1818-1883) was a German philosopher, economist,
and political theorist who co-authored "The Communist Manifesto"
and wrote "Das Kapital." He is best known for his theories on
historical materialism, class struggle, and the critique of capitalism,
which laid the foundation for modern socialist and communist
movements.
JOHN MAYNARD KEYNES
- Keynesian economics gets its name, theories, and principles from
British economist John Maynard Keynes (1883–1946), who is
regarded as the founder of modern macroeconomics. His most
famous work, The General Theory of Employment, Interest and
Money, was published in 1936.
BASIC ECONOMIC PROBLEMS
What to produce?
How to produce?
For whom to produce?
CAPITALISM (free market)
- Capitalism is often thought of as an economic system in which
private actors own and control property in accord with their
interests, and demand and supply freely set prices in markets in a
way that can serve the best interests of society.
COMMUNISM
- Communism is an economic ideology that advocates for a
classless society in which all property and wealth are communally
owned, instead of being owned by individuals.
KEYNESIAN ECONOMICS - FISCAL POLICY
- Keynesian economics is an economic theory named after the
British economist John Maynard Keynes. It focuses on the role of
government intervention in the economy to manage and stabilize it,
particularly during times of economic downturns or recessions.
KEYNESIAN ECONOMICS - MONETARY POLICY
- Monetary policy refers to actions taken by a country's central
bank to control and manage the money supply and interest rates in
the economy.
MODERN ECONOMICS
FREE MARKET PLANNED
- In MODERN ECONOMICS, neither are involved in a completely
free market nor planned. There’s a spectrum of government
involvement.
lesson 2: macroeconomics and microeconomics
ECONOMICS AS A SOCIAL SCIENCE
- In Economics as a Social Science, economists act like detectives
studying how people make choices and interact with each other
when it comes to money and resources.
ECONOMICS AS AN APPLIED SCIENCE
- In Economics as an Applied Science, economists take the theories
and ideas from their detective work (Social Science) and apply them
to make practical decisions.
APPLIED ECONOMICS
MICROECONOMICS MACROECONOMICS
MICROECONOMICS
- It is the branch of economics that studies the overall performance
and behavior of an economy. It seeks to understand and analyze
the aggregate economic phenomena that impact an entire country
or region.
ECONOMIC
UNEMPLOYMENT GROWTH
INFLATION NATIONAL
INCOME
 3 ECONOMIC GOALS FACTORS CAUSING INCOME INEQUALITY
Keep the economy growing over time 1. EDUCATION - Some people have better access to good
Limit Unemployment schools and learning resources, while others may not. This can
Keep prices stable affect the types of jobs they can get later on.
2. JOB OPPORTUNITIES - Certain jobs pay more than others. If
GDP (Gross Domestic Product) some people have more chances to get well-paying jobs, while
- Gross Domestic Product (GDP) is a measure of the total others have fewer options, it contributes to income inequality.
economic output of a country, representing the market value of all 3. GOVERNMENT POLICIES - Sometimes, the rules and decisions
goods and services produced within its borders in a specific time made by the government can impact how much money people
period. make. If these policies favor some groups more than others, it
can lead to inequality.
MICROECONOMICS 4. LOCATION - Where you live can also play a role. Urban areas
may offer more job opportunities and better services, creating
- Microeconomics is the branch of economics that examines the a gap with rural areas.
behavior of individual agents, such as households, firms, and
industries, to understand how they make decisions regarding the
allocation of resources. INFRASTRUCTURE
- Infrastructures refer to the fundamental facilities, systems, and
MARGINAL ANALYSIS organizational structures that support the functioning of a society,
region, or enterprise, including transportation, communication,
MARGINAL = ADDITIONAL
energy, and public services.
ADDITIONAL BENEFIT FACTORS CAUSING INFRASTRUCTURE TO BE AN
OR ECONOMIC CHALLENGE
ADDITIONAL COST Insufficient Infrastructure Investment
Poor Maintenance and Deterioration
UTILITY Traffic Congestion
- Satisfaction or happiness people get from consuming a good or Limited Connectivity in Rural Areas
service. Bureaucratic Processes and Delays
UTILS
- Number of Satisfaction
lesson 4: philippine economic developments

LESSON 3: philippine economic challenges

POVERTY
- Poverty is when people don't have enough money or resources
to meet their basic needs like food, shelter, and education. It often
leads to a lower quality of life and is caused by factors such as
economic inequality and lack of opportunities.
POVERTY INCIDENCE
- Poverty incidence is a measure that tells us the percentage of
people in a country or a specific area who are considered poor.
Being "poor" in this context means that their income or resources
are not enough to meet their basic needs, like food, shelter,
clothing, and education.
SUBSISTENCE INCIDENCE
- Subsistence incidence is a more specific aspect of poverty. It
focuses on the percentage of people who are not just poor but are
also unable to meet their basic food needs.
UNEMPLOYMENT
- Unemployment refers to the condition in which individuals who
are able and willing to work are unable to find employment
opportunities. It is often measured as a percentage of the labor
force that is actively seeking employment but remains jobless.
INCOME INEQUALITY
- Income inequality refers to the unequal distribution of earnings
among individuals or households within a specific population or
country. It is typically measured by the disparity in income levels,
showcasing the differences in wages, salaries, and other sources of
monetary gains among various segments of the population.
Php 140k and above
Php 83k to 140k
Php 60k to 83k
Philippines’ Foreign Investment Negative List (FINL)
The FINL is divided into two sections:
List A pertains to foreign ownership restriction due to the
mandate of the Constitution and other specific laws.
List B pertains to foreign ownership restriction for reasons of
security, defense, risks to health and morals, and protection of
small and medium-scale enterprise (SMEs)
Pres. Gloria Macapagal Arroyo
Term: January 20, 2001 – June 30, 2010
often referred to by her initials PGMA and GMA
ECONOMIC DEVELOPMENTS:
1. Business Process Outsourcing (BPO in PH)
2. Electric Power Industry Reform (EPIRA)
3. Electricity Spot Market (WESM)
4. Value Added Tax (E-VAT)
5. Pantawid Pamilyang Pilipino Program (4Ps)
Pres. Benigno Simeon Aquino III
Term: June 30, 2010 – June 30, 2016
also known as Noynoy Aquino and colloquially as PNoy
ECONOMIC DEVELOPMENTS:
1. Foreign Banks
2. Foreign Ships Co-Loading Act
3. K to 12 Program
Pres. Rodrigo Roa Duterte
Term: June 30, 2016 – June 30, 2022
also known as Digong, Rody, and by the initials DU30 and PRRD
ECONOMIC DEVELOPMENTS:
1. Build build build program
2. Tax Reform for Acceleration and Inclusion (TRAIN)
3. Comprehensive Tax Reform (CTRP)

Php 21k to 60k

Php 10k to 21k

Php 10k and below

 MAJOR GROWTH DRIVERS OF THE PHILIPPINE ECONOMY
1. Primary Sector - Agriculture
2. Secondary Sector - Manufacturing
3. Tertiary Sector - Services
MEASURING THE PHILIPPINE ECONOMY
1. Value-added approach
2. Expenditure Approach
3. Income Approach
VALUE-ADDED APPROACH
- This measures the Philippine economy by adding up the value that
each business or industry contributes when making a product or
service, showing how much they help the economy grow.
EXPENDITURE APPROACH
- This method measures the Philippine economy by looking at how
much money people spend on goods and services, including what
the government and businesses spend, to understand the overall
economic activity.
INCOME APPROACH
- This way of measuring the Philippine economy looks at all the
money earned by individuals and businesses within the country,
showing the total income generated by everyone's work and
investments.
LESSON 5: SUPPLY AND DEMAND
DEMAND
- It is a relationship between quantity and price. It is defined as the
quantity of items that consumers are willing and able to buy in the
market at different prices during some specified period of time.
LAW OF DEMAND
- The Law of Demand states that as the price of a good or service
decreases, the quantity demanded of that good or service increases,
and conversely, as the price increases, the quantity demanded
decreases, assuming other factors remain constant. It illustrates the
inverse relationship between price and quantity demanded in a
market.
SUPPLY
- It is defined as the quantity of items that sellers are willing and
able to sell in the market at different prices during some specified
period of time.
LAW OF SUPPLY
- The Law of Supply states that as the price of a good or service
increases, the quantity supplied by producers also increases, and
conversely, as the price decreases, the quantity supplied decreases,
assuming other factors remain constant. It illustrates the direct
relationship between price and quantity supplied in a market.
IF THE PRICE IS TOO HIGH
DEMAND SUPPLY
IF THE PRICE IS TOO LOW
DEMAND SUPPLY
EQUILIBRIUM
- Equilibrium is a state in a market where the quantity demanded by
consumers equals the quantity supplied by producers, resulting in no
shortage or surplus.
EQUILIBRIUM PRICE
- Equilibrium price is the price at which the quantity demanded by
consumers equals the quantity supplied by producers, establishing a
balance between supply and demand.
FACTORS AFFECTING THE DEMAND
1. Price of related goods
2. Advertisement
3. Income
4. Number of consumers in the market
5. Taste of preference of the consumers
FACTORS AFFECTING THE SUPPLY
1. Productivity
2. Input Price
3. Government Policies
4. Expectation
DEMAND AND SUPPLY CURVE
A demand curve is a graphical representation showing the
relationship between the price of a good or service and the
quantity demanded by consumers, assuming other factors
remain constant. It typically slopes downwards from left to
right, indicating that as the price decreases, the quantity
demanded increases.
A supply curve is a graphical representation illustrating the
relationship between the price of a good or service and the
quantity supplied by producers, assuming other factors remain
constant. It usually slopes upwards from left to right,
indicating that as the price increases, the quantity supplied also
increases.
ELASTICITY
- Elasticity is like a measure of how much people or businesses react
to changes in prices. It shows us whether we're likely to buy more or
less of something when the price changes.
ELASTIC DEMAND
- Elastic demand refers to a situation where a change in price leads
to a relatively larger change in the quantity demanded.
INELASTIC DEMAND
- Inelastic demand describes a scenario where a change in price
results in a proportionately smaller change in the quantity
demanded.
ELASTIC SUPPLY
- Elastic supply means that a change in price leads to a relatively
larger change in the quantity supplied.
INELASTIC DEMAND
- Inelastic supply refers to a situation where a change in price results
in a proportionately smaller change in the quantity supplied.
LESSON 6: MARKET STRUCTURES MARKET POWER
- It refers to the ability of a company to influence prices or control
the market due to its size or unique product.
PERFECT COMPETITION
- Perfect competition is a theoretical market structure characterized PRICING STRATEGIES
by a large number of buyers and sellers, homogeneous products, - These are plans that businesses use to decide how much to charge
perfect information, ease of entry and exit, and no barriers to for their products or services.
competition.
BARRIERS TO ENTRY
Government or local authorities have a little significant or no
control in this kind of market - These are obstacles that make it difficult for new businesses to
In a perfectly competitive system, cheap and efficient start operating in a particular industry.
transportation is important.
Built of so many small firms that have no influence over the CONSUMER WELFARE
product’s prices. - It refers to how well off or satisfied consumers are when buying
Made up of firms that sell homogenous product or likely same goods and services.
products.
Good for short term profit.
EXAMPLES: STREETFOOD; WET AND DRY MARKET lesson 7: economic indicators
MONOPOLY
- In a monopolistic market structure, there is only one seller or
GROSS DOMESTIC PRODUCT (GDP)
producer in the market, giving them significant control over the - GDP is a monetary measure of the market value of all final goods
price and supply of the product or service. and services produced in a country during a specific time period,
typically annually or quarterly. It encompasses consumption,
investment, government spending, and net exports (exports minus
Limited Competition Regulatory Oversight imports) and serves as a key indicator of a country's economic
performance.
Market Power Inefficiency
To better understand: GDP is like a report card for a country's
Potential for Rent - economy. It shows how much all the goods and services produced
Barriers to Entry
seeking Behavior
within the country are worth in a certain period, usually a year. It's a
big picture way to see if the country's economy is growing or
EXAMPLES: WATER SUPPLY - MAYNILAD; ELECTRICITY shrinking.
DISTRIBUTOR - MERALCO
CONSUMER PRICE INDEX (CPI)
OLIGOPOLY - CPI is a measure that examines the weighted average of prices of a
- An oligopoly is a market structure characterized by a small number basket of consumer goods and services, such as transportation,
of large firms dominating the majority of market share within a food, and medical care. It is used to gauge changes in the cost of
particular industry. These firms typically have significant market living and inflation rate by comparing the current prices with those
power, allowing them to influence prices and control the market to in a base year, providing insights into purchasing power and
some extent. inflationary trends.
CPI is like a shopping list that tracks the prices of everyday things
THINGS TO REMEMBER UNDER people buy, like food, clothes, and gas. It helps us see if the cost of
OLIGOPOLISTIC MARKET STRUCTURE living is going up or down by measuring how prices change over
time.
Few Dominant Firms Non-Price Competition

FOREIGN EXCHANGE
Interdependence Barriers to Entry - Foreign exchange refers to the market where currencies of
different countries are bought and sold, facilitating international
trade and investment. It involves the exchange of one currency for
EXAMPLES: TELECOMMUNICATION - PLDT, GLOBE, CONVERGE another at an agreed-upon rate, which fluctuates based on supply
GASOLINE PROVIDER - PETRON, CALTEX and demand dynamics, interest rates, geopolitical events, and
economic indicators.
MONOPOLISTIC COMPETITION
Foreign exchange is like a currency swap between countries. It's
- Monopolistic competition is a market structure characterized by a how one country's money gets traded for another country's
large number of firms competing with each other. These firms money. Just like when you trade cards with a friend, countries trade
produce similar but slightly differentiated products, giving them their currencies with each other.
some degree of market power.

BALANCE OF PAYMENT
Product Non-Price
Differentiation Competition
- Balance of Payment is a systematic record of all economic
transactions between residents of a country and the rest of the
Downward-Sloping world over a specified time period, typically a year. It includes trade
Many Sellers in goods and services, financial transfers, and capital flows, with the
Demand Curve
balance reflecting whether a country is a net creditor or debtor to
Freedom of the world.
Consumer Choice
Entry and Exit

EXAMPLES: CLOTHING INDUSTRY - PENSHOPPE, BENCH,

HUMAN;
 Balance of payment is like a big record book that keeps track of all
the money coming into and going out of a country. It includes
things like exports, imports, and payments for services. It helps us
see if a country is spending more money abroad than it's earning, or
vice versa.

BALANCE OF TRADE
- Balance of Trade represents the difference between the value of a
country's exports and imports of tangible goods (merchandise) over
a specific period. A positive balance (surplus) occurs when exports
exceed imports, indicating a trade surplus, while a negative balance
(deficit) indicates that a country imports more than it exports.
Balance of trade is like a scale that measures how much a country
exports compared to how much it imports. If a country exports
more than it imports, it's called a trade surplus. If it imports more
than it exports, it's called a trade deficit.

INTEREST RATE
- Interest rate is the percentage charged or earned on the principal
amount of a loan or investment over a specific period, typically
expressed on an annual basis. It serves as the cost of borrowing
money or the reward for saving, influencing consumer spending,
investment decisions, inflation, and monetary policy.

Interest rate is like a fee you pay for borrowing money or a reward
you earn for saving money. It's the percentage of money added to
a loan or investment over time. High interest rates mean it costs
more to borrow money, while low interest rates mean it costs less.

INTEREST RATE
- A stock market index is a statistical measure that tracks the
performance of a specific group of stocks representing a particular
market, sector, or asset class. It is calculated by aggregating the
prices of constituent stocks using a weighted average or market
capitalization methodology and serves as a benchmark to assess
overall market trends and investor sentiment.

A stock market index is like a scoreboard for the stock market. It's a
way to measure how well the overall market or a particular group of
stocks is doing. It's like keeping track of the points scored in a game
to see who's winning or losing.