APPLIED

ECONOMICS
Economics as Social and Applied Science
in Terms of Nature and Scope
• ECONOMICS- Is the study of scarcity and its
implications1 for the use of resources, product1ion
of goods and services, growth of production and
welfare over time, and a great variety of other
complex issues of vital concern to society.
• APPLIED ECONOMICS- is the use of insights
gained from economic theory and research to make
better decisions and solve real world problems. It is
also popular tool in business planning and for public
policy analysis and evaluation.
 The activity aims to give you a clear
understanding of the reason why people have to
practice economics.
• Directions: Identify what scarce resource is
represented in each picture. Analyze the supporting
sentence of each item and write MICRO if it belongs
to microeconomics and MACRO if it is
macroeconomics. Jumbled word is provided to guide
you identify the scarce resource asked. Write your
answers in your activity notebook.
 OOFD

1. Many people are not able to eat enough in a day because of the lockdowns during the pandemic.

OMNYE
2. People are having a problem on saving money due to
Inflation or increase in the price level of goods and services.
 ERTAW

3. Global warming has caused water resources in some areas to run-short of .

TNEMPLMEYO

4. Overpopulation and oversupply of the labor force have caused many people to be
unemployed.
 NETINRET AESSCC

5. Some students in rural areas are having

trouble doing their work due to lack of internet
access.

LOOHCS SUPPEILS
6. There’s a shortage of school supplies in the
market of some remote islands due to the delayed
delivery from the suppliers caused by restrictions
on transportation during the pandemic.
 CALMEDI SUPPEILS

7. Medical practitioners do not have enough supplies to

protect themselves during the COVID-19 pandemic.
• Let’s classify…
Directions: Evaluate the following situations and classify if the
situation considers economics as Social Science or Applied
Science. You will be given a hint of what is meant by social and
applied. Copy the given format in your activity notebook. Social
– explain how a particular social group or socioeconomic class
behaves within a society, including their actions as consumers.
Applied - application of economic theory to determine the likely
outcomes associated with various possible courses of action in
the real world
1. Economics students analyze how to maximize the use of available resources
to overcome scarcity
2. Motorists complain of high gasoline prices
3. Philippine congress passed the Value Added Tax Law to strengthen the
Philippine tax system .
4. People have no freedom of choice in arriving at decisions on what to buy.
5. People always complain about having not enough -- not having enough
money to pay one’s debts, not enough food on the table, not enough income to
meet all the family’s needs.
• 6.Business understands Laws of supply and demand by combining past sales
data and marketing research regarding their target market and production
decisions.
Let’s define… Based on the activity found in task 2,
can you now define economics as social science and
applied science? Directions: In the box, identify the
sentences that define Economics as social science
and Economics as applied science.
• the study of society and how people behave and influence the
world around them.
• is the application of economic theory and econometrics in
specific settings with the goal of analyzing potential
outcomes.
• assesses the relationship between the consumption and
production of goods and services in an environment of
infinite resources.
• application of economic principles and theories to real
situations and trying to predict the outcomes.
Let’s analyze the flow… As illustrated below, analyze the circular flow of income from good
and services, and answer the following questions.
• 1. By looking at the diagram, do you think there’s an
economic interaction between households and firms? Why or
why not?
• 2. How do households and firms interact with each other in a
modern economy?
• 3. What is the role of the household in an economy?
• 4. What is the role of a firm in an economy?
• 5. When each agent doing their role, why do you think
scarcity is still present in an economy?
• Everybody goes through each day faced with constraints or limitations: motorists complain of high gasoline
prices, times when people suffer because of a shortage of chicken within the market, or insufficient
allowance for a student who has to buy books and faculty supplies. People always complain about not
having enough-not enough food on the table, not enough money to pay one’s debts, or not enough income to
fulfill all the family’s needs. With this, we can say that there is an existing scarcity and there is insufficiency
to satisfy the requirements of consumers and insufficiency of resources for producers that hamper enough
production of products and services. And that is the reason why we have to practice economics. Economics
is a branch of social science concerned with the use of limited resources to meet boundless desires (Rabanal,
2018). The desire to have as many goods and services as possible is a part of human behavior. Consumer's
salary and purchasing power, however, limit their ability to purchase goods and services. As a result,
consumers must conduct economics in this setting" (Introduction to Economics, n.d.). Because economics is
derived from the ancient Greek word oikonomia, which means family or household management (Top 4
Definitions of Economics, n.d.), Alfred Marshall, a well-known economist, defined economics as a study of
humans engaged in everyday activities. “It investigates part of the individual and social activity that is most
intimately related to the acquisition and use of material requisites of well-being,” he says. Because of the
presence of scarcity, there’s a necessity for man, to create decisions in choosing a way to maximize the
utilization of scarce resources to satisfy as many needs as possible. As an example, a worker who includes a
monthly budget must choose the way to utilize it to pay the rent, buy food, and buy new clothes. If his
budget isn’t enough, then the worker needs to hand over a number of this stuff. If he decides to not buy new
clothes this year, then this is the choice to give up.
• The social science of economics is described as the study of the production, distribution, and consumption of goods
and services (The Nature and Scope of Economics, 2018). Economic studies became one of the most important subjects of
recent times as it evolved over the nineteenth century. Economics plays a critical part in the smooth operation of both a small
store and a country. Without the use of economic principles, no business can thrive. The field of economics is vast and
diverse. The interaction of economic agents and the way economies run are central to the nature and scope of economics.
Nature of Economics The topic of whether economics belongs in the realm of science or the arts is addressed in the nature
of economics. Several economists have argued in favor of science, while others have qualms about the arts. Economics is
treated as a social science because of the following features (The Nature and Scope of Economics, 2018): ▪ It involves a
systematized collection of facts and figures. ▪ It is based on the formulation of theories and laws. ▪ It deals with the cause-
and-effect relationship. These characteristics that demonstrate the nature of economics is linked to science. Various
economic theories are built on logical reasoning, and real-life scenarios are utilized to develop models on which assumptions
are made, much as they are in science. The foundation of economic theory is the evaluation of human interactions in terms
of desires, decision-making, and constraints. Because of the complexity of human motivation and systems, assumptions have
been established that serve as the foundation for consumer and company behavior theories, which are both used to simulate
circular flow interactions within the economy. Economics provides a simple foundation for comprehending the complexity
of the world's relationships. The circular flow picture in Task 4 Figure 1 by Irconomics 2008, for example, depicts the
economic framework associated to the dynamic interconnection of economic agents. The circular flow is limited to
households and businesses in the figure above, while some renderings include the government and foreign trading partners.
In the case of consumer and corporate behavior, economics gives sophisticated frameworks for analyzing complicated
societal interactions. Representatives who grasp how salaries and consumption move between consumers and producers are
better able to understand the relationship's symbiosis rather than focusing on the controversial elements that surface from
time to time.
• Individuals can become better decision-makers in their own lives and
maintain a balance with respect to an externality that has the ability to
supplement or hinder their ambitions by having a grasp of the
foundations of economics. Knowing the basics of economics allows an
individual to be an active and informed participant instead of a passive
economic agent, as economic theories serve as a foundation for
decision-making and regulatory policy. Economics is a social science
that studies the relationship between the production and consumption
of commodities and services in a finite resource environment. The
discipline focuses on how economic agents behave or interact both
individually (microeconomics) and collectively aggregate
(macroeconomics).
• Scope of Economics The scope of economics is divided into
two categories:
1. microeconomics and 2. macroeconomics (The Investopedia Team, 2021).
Microeconomics studies the behavior of individual market participants such as
consumers, producers, and resource owners, as well as corporations. It is more
concerned with the flow of commodities from the business to the consumer, as well
as the movement of resources from the resource owner to the business. It also deals
with the process of determining the price of commodities, commonly known as
Price Theory. Microeconomics examines individual economic activity, industries,
and their interaction. It has the following characteristics: • Elasticity: The ratio of
change in the percentage of one variable to another variable is determined by
elasticity. For example, demand elasticity of income, demand elasticity of price,
demand elasticity of supply, and so on.
• Theory of Production: It entails the conversion of inputs into outputs
in a cost-effective manner. Packaging, shipping, storage, and
manufacturing are only a few examples. • Cost of Production: This
theory evaluates the object price based on the cost of resources. •
Monopoly: In this theory, the dominance of a single entity in a certain
field is investigated. • Oligopoly: It refers to the market domination of
tiny businesses. Macroeconomics is a branch of economics that
studies the whole economy and the issues that affect it.
Unemployment, inflation, economic growth, and monetary and fiscal
policy are the main focal areas. Macroeconomics is concerned with
the nature of economic growth, as well as the extension of productive
capacity and national income.
• It is the study of an entire economy. Macroeconomics is a branch of economics
that discusses broad aggregates and their interactions from the top down: •
Growth: It investigates the elements that contribute to economic growth, such as
an increase in a country's output per capita through time.
• • Business Cycle: It argues for the central bank and the government to
collaborate in formulating monetary and fiscal policies to track output throughout
the business cycle.
• • Unemployment: The unemployment rate is used to calculate it. It is caused by
a number of variables, including pay increases, a shortage of job openings, and
so forth.
• • Inflation and Deflation: Inflation refers to an increase in a commodity's price,
whereas deflation refers to a reduction in a commodity's price. These indicators
are useful for assessing the state of a country's economy.
• Economics as an Applied Science Applied Economics, as opposed
to economic theory, is the study of economics in real-world settings.
It is the application of economic ideas and theories to real-world
circumstances with the goal of predicting the results. Simply put,
applied economics is the study of how theories work in the real
world. At either the macroeconomic or microeconomic levels, the
discipline can be applied. Microeconomics examines economics at
the individual consumer company level, whereas macroeconomics
examines the entire economy.
• It is the application of economic theory and econometrics to specific
situations in order to analyze possible outcomes. It is characterized
by the application of the core, referring to economic theory and
econometrics, as a means of dealing with practical issues in fields
such as demographic economics, labor economics, business
economics, agricultural economics, development economics,
education economics, health economics, monetary economics,
economic history, and many others. The phrase “applied economics”
was coined by John Neville Keynes to describe the application
application of economic theory to the interpretation and explanation
of specific economic occurrences.
What is Econometrics?
Econometrics – is the application of statistical and mathematical
theories to economics for the purpose of (Cambodian Economics)
The results of econometric are compared and contrasted against
real-life examples. Econometrics Example: Real life application
of econometrics would be to study the hypothesis that as a
person’s income increases, spending increases (Macalinao, E. M.,
2017).onomist Group, n.d.):
⚫ Testing hypotheses
⚫ Forecasting future trends
What is the Importance of Applied Economic Application? 1. When economics is applied to a firm, a
household, or a country, it helps to eliminate any attempts to make a situation appear worse or better than it is. •
Applied economics becomes a powerful tool for revealing the genuine and entire situation so that actions can be
taken. Example: Applied economics can be used to evaluate a company's earnings. The findings may aid CEOs
in devising tactics to increase sales.
• 2. Applied economics serves as a framework for determining what activities can
be taken to improve the current economic condition in a reasonable manner. • by
examining each aspect, it is possible to improve areas where performance is
lacking. Example: • Buying and selling products and services • The utilization of
raw materials • Within the organization, there is a division of labor (e.g., firm,
company, agency)
• 3. Applied economics may educate you the way to avoid making costly mistakes. •
to review what steps were taken to improve and correct situations and continue
good strategies to keep the economy flowing in a correct direction.
• By investigating and analyzing real-world economic problems, we should always
be ready to increase human wellbeing among Filipinos. Applying economic theory
in our lives means to handle actual economic issues and be able to do something
about it. The concept of scarcity and selection should encourage us as individuals
to assist in our own way to provide solutions to the country’s economic problems.
The scope of economics can be understood under two subheads:
Microeconomics and Macroeconomics. Explain in the Venn diagram their
differences and similarities.
MICRO MACRO
• Direction: Do what is asked. Write your answers on your notebook.
• 1. Why is economics deeply rooted within the concept of scarcity?
_________________________________________________________________________
_________________________________________________________________________
• 2. Why is economics important in everyday life?
_________________________________________________________________________
_________________________________________________________________________ 3.
Why economics considered as social science and applied science?
_________________________________________________________________________
_________________________________________________________________________
• 4. As a student, how does Applied Economics work in your life situation and your family as a
whole?
________________________________________________________________________
________________________________________________________________________
• 5. Give at least (1) importance of Applied Economics and explain its contribution to the
consumers or the producers as well.
ASSESSMENT
Directions: Read the statements or questions below and write your answers on your activity notebook.
I. Classify the following topics. Write MIC if it falls under Microeconomics; MAC if it falls under Macroeconomics.
_______1. The inflation rate in the Philippines in the last quarter of 2019 was 4.8%
_______2. A P340-billion deficit in the Philippine budget is expected in the year 2021.
_______3. Prices of Tire Less vehicles are predicted rise up in December.
_______4. Garlic prices in the past months have risen because producers hoarded their supplies in
their bodega.
_______5. The unemployment rate has dropped because of the increase in the number of OFWs.
_______6. In the past year, Soda Cola was named the fastest-selling product within the market.
_______7. Land owners could not increase their rental on land, because of the Rent Control Law.
_______8. Prices of apples and grapes tend to rise up during the Christmas season.
_______9. The
Philippine economy grew at the rate of 5.8% in 2019.
_______10. Philippine congress passed the Value Added Tax Law to strengthen the Philippine tax
system.6
II. Multiple Choice: Write only the letter of the correct answer.
1. Is the study that attempts to explain how an economy operates and how the consumer
attempts to maximize his/her wants within limited means.
A. Economics C. scarcity
B. Microeconomics D. Macroeconomics
2. Is a condition where there are insufficient resources to satisfy all the needs and wants
of a population.
A. Scarcity C. insufficiency
B. Economics D. none of the above
. Economics as __________ because it studies of observing how theories work in practice
A. Social C. psychology
B. Applied D. Scarce
4. Economics as ____________ science, because it studies human behavior and how
individuals make choices in allocating scarce resources to satisfy their unlimited
wants.
A. Applied C. social
B. Scarce D. econometrics
5. An applied economics where there is an application of statistical and
mathematical theories to economics for the purpose of testing hypotheses,
forecasting future trends, and compare and contrast against real life
A. Microeconomics C. Economics
B. Macroeconomics D. Econometrics
III. Essay: If you were to advise the president of the Philippines on how to cope
with the crisis on Pandemic we are facing today to solve and improve the lives of
the Filipino people, what would you tell him and why?