Senior High School

Introduction to Applied
Economics
Applied Economics
Quarter 3 – Module 1
Applied Economics – Grade 12
Alternative Delivery Mode
Quarter 3 – Module 1: Introduction to Applied Economics Second
Edition, 2021

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Development Team of the Module

Author: Maria Cecilia N. Gabas

Liza C. Carreon
Content Editor: Glenn S. Manlupig
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Chairperson: Dr. Arturo B. Bayocot, CESO III

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Schools Division Superintendent
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Undersecretary: Diosdado M. San Antonio, PhD
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Applied Economics

Quarter –3Module 1
Introduction to Applied
Economics
 Table of Contents
Overview ............................................................................................................... 2
General Instructions ............................................................................................ 2
What I Know (Pre-test) ..................................................................................................... 3
What I Need To Know .......................................................................................... 5
Lesson 1 Introduction to Applied Economics.................................................... 5
What’s In ................................................................................................................... 5
What’s New – Activity 1 (Think and Write) .................................................... 6
What Is It?
Lesson 1.1. Revisiting Economics as a Social Science ........................ 7
Lesson 1.2. Economics as an Applied Science ..................................... 10
Lesson 1.3. Basic Economic Problems and the Philippine
Socio-economic Development in the 21st Century… ........ 10
What’s More – Activity 2 (Making It Count!) ............................................... 12
What I Have Learned – Activity 3 (Check Your Understanding) ................. 12
What I Can Do? - Activity 4 (I Can Do This!) ...................................................... 13
Additional Activity - Activity 5 (Drawing Out the Artist in You!) ........................ 14

Assessment ........................................................................................................................ 14

Answer Key ......................................................................................................................... 15

References .......................................................................................................................... 15
 OVERVIEW
Dear Teachers and Learners! The writers welcome you all to this Applied Economics
Module. This material tries to bring you to the basic principles of applied economics, and its
application to contemporary economic issues facing the Filipino entrepreneur such as prices
of commodities, minimum wage, rent, and taxes. It also covers an analysis of industries for
identification of potential business opportunities. The main output of the course is the
preparation of a socioeconomic impact study of a business venture.

As your partner in learning, we hope that you will not miss out every detail that we the
writers would like you to learn in this material. Do enjoy it as there are challenging and
interesting activities inside this learning module. Congratulations in advance for this will
make you the master of your own learning.

GENERAL INSTRUCTIONS
For the teacher:
To facilitate and ensure the students’
learning from this module, you are
encouraged to do the following:

For the learners: 1. Clearly communicate learning

To be guided in achieving the competencies and objectives
objectives of this module, do the 2. Motivate through applications
following: and connections to real life.
3. Give applications of the theory
1. Read and follow instructions 4. Discuss worked-out examples
carefully.
5. Give time for hands-on unguided
2. Write all your ANSWERS in your
classroom work and discovery
Activity Book.
6. Use formative assessment to
3. Answer the pretest before going
give feedback
through the lessons.
7. Introduce extensions or
4. Take note and record points for
generalizations of concepts
clarification.
8. Engage in reflection questions
5. Compare your answers against
the key to answers found at the 9. Encourage analysis through
end of the modules. higher order thinking prompts
6. Do the activities and fully 10. Provide alternative formats for
understand each lesson. student work
7. Answer the self-check to monitor 11. Remind learners to write their
what you learned in each lesson. answers in their Philosophy
Activity Notebook
8. Answer the posttest after you
have gone over all the lessons.

What I Know

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Directions. Read the test items carefully and encircle the letter of your choice that

best answers the statement.

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7. Macroeconomics deals with the following except:

A. Gross National Product C. National Income B. Employment D. Price of

rice
8. The word economic is most closely associated with the word:
A. free C. unlimited
B. scarce D. unrestricted
9. Economics is important so that we may able to:

A. Understand problems facing the citizens and family

B. Help the government promote growth and improve quality of life
C. Analyze fascinating patterns of social behavior
D. All of the above

10. Man’s mental and physical efforts exerted in production:

A. Land C. Entrepreneur
B. Labor D. Capital

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 Great job!
Later we will see if your answers are correct by reading the rest of this module.

Lesson Introduction to Applied

1 Economics

What I Need To Know

Objectives: After going through this module, the learners should be able to:

1. Define basic terms in applied economic;.

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 2. Differentiate economics as social science and applied science in terms of
nature and scope;

3. Examine the utility and application of applied economics to solve economic

issues and problems; and

4. Explain how applied economics can be used to solve economic problems.

What’s In

Economics is a broad ranging discipline that uses a variety of techniques and

approaches to address important social questions. Because of the great complexity
of human behavior, economists are forced to abstract from many details, to make
generalizations that they know are not quite true and to organize what knowledge
they have in terms of some theoretical structure in our economy.

Furthermore, economics is important in order to understand problems facing

the citizen and the family; to help government promote growth and improve the
quality of life while avoiding depression and inflation and to analyze fascinating
patterns of social behavior. Because economic questions enter into both daily life
and national issues, a basic understanding of economics is vital for sound decision-
making by individuals and nation.

Now, in this lesson, you will get to understand economics as an applied

science and its utility in addressing the economic problems of the country.

What’s New
Activity 1. Think and Write
Do you still remember any Economic terms in your Araling Panlipunan subject
during your Grade 10? I want you to list down below all the words you remember and
answer the following questions:

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1. Where do you usually apply the term in your daily life?

2. In Philippine economy, what is the significance of using that term?

What Is It?

You might ask, “why do we need to study economics?” To know how important
the subject is, all you need to do is read the front page of the newspapers to see that
the most important news are economic in nature. Watch the news on TV and for
sure, economic news always presents important issues.

The way of introducing the study of economics is interesting since the issues to
be tackled and how they are resolved affect us all. After all, media commentators,
politicians, and even barbers and taxi drivers constantly talk about these issues.

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What we need to understand is how to make more rational decisions in spending
money, saving part of it, and even investing some of it.

On the national level, economics will enable you to take a look on how the
economy operates and to decide for yourself if the government officials and leaders
are effective in trying to shape up the economy and formulate policies for the good of
the nation.

Lesson 1.1 Revisiting Economics as a Social Science

Economics is a social science which deals with the proper allocation of scarce
resources to satisfy the unlimited human wants. Economics is classified as a social
science because it deals with the study of man’s life and how he lives with other men.

Obviously, economics is interdependent with other sciences like sociology,

political science, geography, religion and other social sciences. As a social science,
economics studies how individuals make choices in allocating scarce resources to
satisfy their unlimited wants.

Scarcity is the reason why people have to practice economics. Part of human
behavior is the tendency of man to want to have as many goods and services as he
can. Scarcity is that fact of life which makes man’s material wants never fully
satisfied because the resources he has are limited while his wants are almost
unlimited. However, his ability to buy goods and services is limited by his income and
purchasing power. It is therefore in this context that man has to practice economics.

From the resources point of view, some would define economics as the study
of the efficient allocation of scarce resources. Since resources are generally scarce
while human wants tend to be unlimited, economics encounters not a few problems.
The root problem, which is the real problem, is the unjust distribution of productive
resources among the members of the society. The fundamental problem of unfair
allocation of resources has been a global problem. There are extremely very few rich
while there are very many poor.

Thus, in a broad sense, economics can be defined as a social science that

studies and seeks to allocate scarce human and non-human resources among their
alternative uses in order to satisfy unlimited human wants and desires.

The Economic Resources

Our economic resources are also known as factors of production or inputs.

There are five major factors of production, which are utilized in our economy. These
are land, labor, capital, entrepreneur, and foreign exchange.

1. Land - These resources consist of free gifts of nature which includes all natural
resources above, on, and below the ground such as soil, rivers, lakes, oceans,

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forests, mountains, mineral resources and climate. Land is considered economic
resources because it has a price attached to it. One cannot utilize this natural
resource without paying for it usually in the form of rent or lease.

2. Labor - This is also termed as human resources. Labor refers to all human
efforts, be it mental or physical, that help to produce want satisfying goods and
services. This applies not only to workers, farmers or laborers, but also to
professionals like accountants, economists or scientists. Labor is an indispensable
factor in the production of goods and services. In return, he earns an income in the
form of wages and/or salaries.

3. Capital - It is a finished product, which is used to produce goods. It consists of

all man-made aids to further the production process such as tools, machinery and
buildings. Capital also serves as an investment. Income derived from capital is
interest.

4. Entrepreneur - An entrepreneur is the organizer and coordinator of the other

factors of production: land, labor, and capital. An entrepreneur is one who is
engaged in economic undertakings and provides society with goods and services it
needs. He utilizes his initiative, talent and resourcefulness in the creation of
economic goods. He is able to compensate himself through the acquisition of profits.

5. Foreign Exchange - This refers to the dollar and dollar reserves that the
economy has.
Branches of Economics

The study of Economics is divided into two branches: Microeconomics and

Macroeconomics.

1. Microeconomics - It deals with the economic behavior of individual units such as

the consumers, firms, and the owners of the factors of production. Such specific
economic units constitute a very small segment of the whole economy. For example,
the price of rice, the number of workers of a certain firm, the income of Mr. Cruz, the
expenditures of PLDT, etc. Microeconomics is also known as the Price Theory.

2. Macroeconomics - It deals with the economic behavior of the whole economy or

its aggregates such as government, business and households. An aggregate is
composed of individual units. The operation of the various aggregates and their
interrelationship is analyzed to provide a profile of the economy as a whole.

Macroeconomics is concerned with the discussion of topics like gross national

product, level of employment, national income, general level of prices, total
expenditures, etc. It is also known as employment and income analysis.

The Basic Economic Problems

All societies are faced with basic questions in the economy that have to be
answered in order to cope with constraints and limitations. These are:

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1. What to Produce? - First of all, the system must determine the desires of the
people. Goods and services to be produced are based on the needs of the
consumers. However, there are some factors that should be taken into consideration
in producing the goods and services the individuals need. These are:

1.1. Availability of resources;

1.2. Physical environment; and
1.3. Customs and traditions of the people.

2. How much to Produce? - Knowing what to produce is not enough. The system
must know how much of the chosen goods should be produced. It must determine
how many of these buyers are willing to buy the goods and services produced by the
economy. Here, the people’s taste and preference plays a major factor in
determining production.

3. How to Produce? - When producing goods and services, one has to think of
how best to do it. The best way to make goods is not to spend too much. This also
means you have to make goods with quality. To make goods like these, one has to
know the best way of making goods. You have to choose the cheapest way. But this
way must also let you make something with good quality.

4. For Whom Shall Goods and Services be Produced? - The last question has
something to do with the problem of distribution. Once the goods are produced, how
shall they be distributed. Thinking about this problem means asking, “Who gets
what?” on a bigger scale. In this case, this means whatever is being sold can be
bought. But only those who have money and who want it can buy what is being sold.
The poor cannot buy the same goods and services as rich people. When you have
money, you have purchasing power. It means, you have the power to buy things.

Lesson 1.2 Economics as an Applied Science

Applied Economics is the application of economic theory and econometrics in
specific settings with the goal of analyzing potential outcomes. John Neville Keynes
is attributed to be the first to use the phrase “applied economics” to designate the
application of economic theory to the interpretation and explanation of particular
economic phenomena (Dinio, et al., 2017).

We should be able to improve human welfare among Filipinos by the

investigation and analysis of economic problems in the real world. Applying
economic theory in our lives means trying to address actual economic issues and be
able to do something about it. The concept of scarcity and choice should encourage
us as individuals to help in our own way to provide solutions to the country’s
economic problems.

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Lesson 1.3 Basic Economic Problems and the Philippine
Socioeconomic Development in the 21st Century

A solid understanding of economic principles and how they are applied in real-
life situations can serve as significant tools to help address the country’s economic
problem.

To understand the basic economic problems, imagine two countries, one of them
rich and the other poor. Do they have the same economic problems? The answer is
yes, but it is not that simple. There is a difference.

The rich country can solve problems easier. They can solve problems faster.
They do not have to worry about basic problems. But for poor countries, finding food
for daily living is in itself a problem. They have a hard time finding shelter, clothing,
health services, or even education.

Another reason why even rich nations have economic problems is because of the
way human beings act. Human nature means an endless list of wants. But there are
not enough things to give us what we want. Even rich nations cannot escape human
nature and limited resources.

Applied Economics in Relation to Philippine Economic Problems

The Philippine economy has grown significantly during President Benigno

Simeon Aquino’s administration. With a growth rate of the country’s Gross Domestic
Product of 6.8% in 2012, improving to 7.2% in 2013, and slowing down to 6.1% in
2014, these rates are an improvement of past rates preceding President Aquino’s
term. It is also higher than its Asian neighbors such as Malaysia, Thailand, South
Korea, Hongkong, India, and Indonesia (CIA World Factbook, 2013).

Despite this admirable growth, people, especially the poor, have been
complaining of non-inclusive growth. Millions of Filipinos are claiming they
experience hunger or they still live below the poverty level.

Unemployment is still a main problem of the Philippine economy with an

unemployment rate rose to 17.7 percent accounting to 7.3 million unemployed
Filipinos in the labor force in April 2020. According to the Philippine Statistics
Authority, this is a record high in the unemployment rate reflecting the effects of
Corona virus disease 2019 (COVID-19) economic shutdown to the Philippine labor
market.

Employment rate in April 2020 fell to 82.3 percent from 94.7 percent in January
2020. In April 2019, it is posted at 94.9 percent. This translates to 33.8 million
employed persons in April 2020 from 41.8 million in April 2019. All regions reported
double-digit unemployment rates. The highest unemployment rate was in
Bangsamoro Autonomous Region in Muslim Mindanao (BARRM) at 29.8 percent. It
is followed by Region III (Central Luzon) and Cordillera Administrative Region (CAR)

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with unemployment rates recorded at 27.3 percent and 25.3 percent, respectively
(https://psa.gov.ph/content /employment-situation-april-2020).

Another significant socioeconomic problem in the country is poverty. According

to the Philippine Statistics Authority, in the first semester of 2018, a family of five
needed no less than P7,337, on average, to meet the family’s basic food needs for a
month. On the other hand, no less than P10,481, on average, was needed to meet
both basic food and non-food needs of a family of five in a month. This amount is the
poverty threshold. These are 10.9 percent higher than the food and poverty
thresholds from the first semester of 2015.

The booming population growth in the Philippines is another basic economic

problem that can be connected to the issue of scarcity. When population becomes
too big, economic resources may no longer be enough to support the growing
population. According to the 2014 census, the Philippine population stood at 100
million. As of 2020, from World Population Review data, it has reached 110 million
people. This is apparently the reason why schoolrooms are not enough for the
children who are of school age. This could also be an explanation why government
hospitals are crowded with sick people and maternity wards are full of women giving
birth with hospital beds that are not enough to accommodate them.

The country’s problems vary with times and circumstances. It is now a

challenge for the students to observe and identify what these problems are.

What’s More
Activity 2. Making It Count!
The Philippines has encountered many serious problems most of the time. In view of
this, list down some of these economic problems the country has encountered for
this

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year. Opposite that problem, give at least three possible solutions that you think will
helpsolve the problem.
Economic
Problems PossibleSolutions

1.

2.

1. 3.

1.

2.

2. 3.

1.

2.

3. 3.

WhatI HaveLearned?

Activity 3. Check Your Understanding

1. Why is economics a study of social science?

2. Why is economics deeply rooted in the concept of scarcity? How can you relate
scarcity as a Senior High School student?

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 WhatI CanDo?
Activity4. I Can Do This!
If you were to advise the President of the Philippines on how to cope with the issues
on poverty and unemployment to improve the lives of the Filipino people, what would
you tell himand why?

Additional Activity
Activity 5. Drawing Out the Artist in You!
Create a poster showing a basic economic problem in your locality. To make a
poster, you need white cartolina and some drawing and coloring materials. The
poster must look neat and the labels are readable and relevant.

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 Assessment

Test I. Memory Recall

Directions. Write down the correct answer in the space provided.

1. A social science which deals with the allocation of scarce

resources to satisfy the unlimited human wants.
2. The application of economic theory and econometrics in
specific settings with the goal of analyzing potential
outcomes.
3. It deals with the economic behavior of the whole economy or
its aggregates such as government, business and
households.
4. Desires of consumers that have to be satisfied.
5. A condition where there are insufficient resources to
satisfy all the needs and wants of a population.
6. Payment made to labor.
7. It is a finished product which is used to produce other
goods.
8. It deals with the economic behavior of individual units such
as the consumers, firms, and the owners of the factors of
production.
9. Man’s needs required for his survival.
10. It is also termed as human resource.

Congratulations!
You have completed your journey in this module. You did a
great job! It is now time to go on to the next adventure…
Good luck!

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For inquiries or feedback, please write or call:

Department of Education – Division of Misamis Oriental
Don A. Velez St., Cagayan de Oro City
Contact No. (08822) – 724615 / (088) 856 – 4454
Email Address: [email protected]
[email protected]
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