APPLIED ECONOMICS

BASIC ECONOMIC PROBLEM

MODULE 2
What is the basic economic problem?

Scarcity.
Because of this people and nation must
choose how to use their available
resources efficiently.
Every economic system is faced with the
following problems:
• 1. What to produce?
• 2. How to produce?
• 3. For whom shall goods and services be
produced?
What to produce?
What is the desire of the people?
Goods and services to be produced should be
based on the needs of the people. However, a
very important factor like availability of
resources should be considered. A good
example of this is the production of rice.
Since the Philippines is known to be an
agricultural country because of its extensive
rice fields.
How to produce?
What are the resources to be used? How
much labor is needed to produce the needed
quantity?
• Quality should come first before
quantity. Rice planting requires a
lot of labor (workers) to plant rice.
3. For whom shall goods and services be produced?
How are the goods distributed among consumers?

• Goods are produced to meet the

urgent needs of the people. How
much goods are produced for the
basic needs and how much goods are
produced for our wants.
There are two other problems connected with resource
allocation and economic growth.

4. Are the country’s resources being utilized, or

some of them are lying idle and unemployed?
5. Is the economy’s capacity to produce goods
growing or remaining the same overtime?
4. Are the country’s resources being utilized, or some of
them are lying idle and unemployed?

• When resources are scarce it is not good

to see available resources idle. Example
of this is there are a lot of people (labor)
who are not employed or they are without
jobs. As a consequence, production cannot
meet its maximum level capacity.
5. Is the economy’s capacity to produce goods growing
or remaining the same overtime?

• To achieve a growth in productive

capacity is a universal objective. This
makes possible an improvement in the
standard of living if the rate of
population growth is not very high.
PERFORMANCE TASK # 2

• Create your own facemask using materials

that is available at your home… Make it more
creative…. Submit it on our next meeting…
Wrap it with clean plastic upon submission…
THANK YOU..