ABM007: APPLIED ECONOMICS

Economics – concerned w/ wise allocation of scarce resources

Applied economics
- study of how u make choices
- the use of insights from economic theory/principle to make better
decisions and solve real-world problems.
- popular tool in business planning and public policy analysis
Economic questions

• What to produce?
➢ What the people want
➢ Demands for goods n services
• How to produce?
➢ Process or technology used to produce
• For whom to produce?
➢ Target market
• How much to produce?
➢ Amount of goods n services to produce in a period of time
Economic System
- institutional framework
- guides the economy in answering economic questions
- organized way to allocate resources in the national community
- 4 types:
➢ Traditional – no govt
➢ Command Economy – govt decides ALL econ activities
➢ Capitalist Economy – little to no govt
➢ Mixed Economy – govt creates/regulates biz activities
Consumer Sovereignty - power of consumers to determine what goods and
services are produced
Opportunity Cost
- value of alternative that is given up (wala gi choose)
- Foregone revenue
Economy of Philippines > 36th largest in the world
Poverty - condition where the population is only able to meet its basic needs
Unemployment - Portion of the labor force willing to engage in productive
activities (work) yet fails to do so
Income Inequality – gap in income that exists between the rich and poor
Poor quality of infrastructure – lack of basic infrastructure to access to
transport services
Law of supply n demand

• Surplus (daghan supply) - S>D – prices decrease

• Shortage (kulang supply) – D>S – prices increase
• Equilibrium – S=D – prices remain constant
Equilibrium price – price where buyer and seller meet
Labor
- amnt of physical, mental, social effort used to produce goods n services
 - supplies the expertise, manpower, service needed to turn raw materials
into finished products
Labor Supply
- number of hrs ppl are willing and able to work at a given wage rate
- . supply labor = surplus of workers at orig wage > quantity labor VV
Population - population = supply labor
Supply – quantity of goods producers are willing and able to sell
Supply curve – upward sloping curve; graphical representation between
quantity supply and price
Market – venue that brings buyers and sellers together
Demand – quantity of goods buyers are willing and able to buy
Demand curve
- inverse (baliktad) relationship between price and quantity demanded
- Shifts to right when ; shifts to left when (same sa supply curve)
- Downward slope
Determinants of demand

• Taste and preferences

• Prices of related goods
• Income
• # of consumers
• Expectations of future prices and income
Determinants of supply

• # of producers
• Cost of production
• Technological change
• Prices of other goods
➢ Complements – things made together
➢ Substitutes – goods that can b produced using the same inputs
• Taxes and subsidies
• Producer Expectations
➢ Optimistic – future prices then future costs of production
➢ Pessimistic – future prices then future costs of production
Ceteris Paribus – “all other things being equal”; assumption in the law of
demand
International Labor Migration – movement of ppl from one country to another
for employment (work)
Utility – satisfaction
Marginal – additional
Currency
- form of money issued by d govt
- used as a medium of exchange for goods
- basis for trade
Exchange rate - rate at which one currency may be converted into another
Appreciation – rise in market value of currency over time relative to its
historical value or other currency
Depreciation – decrease in market value “ “ “
Purchasing power – measures the value of goods that can b bought w/ a
specific amnt of currency
Housing shortage
- insufficient housing to accommodate the population in an area
- demand > supply of houses
Economic rent – excess payment for a factor of production
Real estate boom – rapid increase in market price of real property

• Fueled by:
➢ Biz process outsourcing
➢ Continuous supply of flexible workplace
➢ Chinese investors n workers
➢ High Remittances from overseas filipinos
Common types of houses in PH

• Bungalow – single storey

• Multi-story house
• Townhouse – apartment
• Condo unit – mid-rise or high-rise residential building

Economist – sum1 who studies econ theory and applies it to the real world
Microeconomics – study of a single factor of an economy
Macroeconomics – study of an entire economy
Resources – factors or inputs of production
Scarcity – condition where there r insufficient resources to satisfy all needs and
wants
Needs – essentials
Wants – desires
Choice – decision made w/ the presence of scarcity to maximize satisfaction