THE TWO BRANCHES

OF ECONOMICS
Applied Economics
Prepared by: Herald Roven U. Baello

Unit 1: Introduction to Applied Economics (Lesson 2)

 Prepared by: Herald Roven U. Baello

OBJECTIVES

Through this lesson, we will learn to:

• explain the basic concepts relevant to applied economics; and
• differentiate macroeconomics and microeconomics.

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

WRITTEN WORK #1 (W1)

Based on what you knew about economics (from your JHS

days) and connecting it to what we previously learned,
illustrate the difference between “economics” and “applied
economics” using a Venn diagram. Then, explain the
importance of applied economics to ordinary people.

(20 pts)

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

THINK OF IT

Gross domestic product (GDP) and inflation are

two of the most used terms in economics. What
do you know about GDP and inflation?

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

THINK OF IT

Watch and analyze the short news about the Philippines’

GDP and inflation rate and answer the following questions:
1. What happened to the country’s GDP during Q1 2023?
2. What happened to the country’s inflation rate in July
2023?
3. What do these things mean on a nationwide basis?
4. How do these things affect you as an individual
member of the society?

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

INCOME
• Disposable Income – income
after taxes
• Discretionary Income –
income left from disposable
income after all other
necessary (nontax) expenses
have been deducted.
 Prepared by: Herald Roven U. Baello

THINK OF IT

GDP is a measure that indicates a country’s total

production over a specific period within its borders
(Kramer, 2022) while inflation, simply put, refers to
the decrease in purchasing power which is reflected in
the rise of prices of a wide variety of goods and
services (What is inflation?, 2022).

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

TWO BRANCHES OF ECONOMICS

ECONOMICS

MACROECONOMICS MICROECONOMICS

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

MACROECONOMICS

Macroeconomics is the branch of economics that looks

into the overall performance of an economy (DepEd
ETUlay, 2022).

In macroeconomics, the focus is on the overall flow of

goods and resources, expansion of productive capacity,
and growth of national income.

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

Gross domestic product (GDP) – the

total value of final goods and services
consumed during a given period.

Gross national product (GNP) – factors

in outputs or products by Filipinos or
Filipino companies abroad.
 Prepared by: Herald Roven U. Baello

MACROECONOMICS

Terms such as GDP and inflation are macroeconomic

indicators because it measures the overall performance
of the economy in terms of production and aggregate
rise in prices.

These are used by the government and other large-

scope institutions to make policies and decisions.

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

MICROECONOMICS

On the other hand, microeconomics is the branch of

economics that looks into the individual behavior of
the members of society, including consumers,
producers, and resource owners (de Mesa, n.d.).

In microeconomics, the focus is on individual choices

and on level of production, employment, and income.

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

MICROECONOMICS

Examples of microeconomic indicators are income,

demand, and supply.

Individuals may behave differently depending on their

income and businesses might decide to increase the
price of a certain good or service depending on the
demand and supply.

G12 | Applied Economics

 Prepared by: Herald Roven U. Baello

MACRO AND MICRO HAND-IN-HAND

Although macroeconomics and microeconomics are two different

branches that focus on different aspects of the economy, we shall not
assume that they are two completely independent fields but rather
are interdependent and complementary (Investopedia, 2023).

FOR EXAMPLE:

Individual investors look at the microeconomics of a

company to see the business’ current state and use
macroeconomics to decide when to invest in that business.

G12 | Applied Economics