Introduction to Applied Economics

1. APPLIED
ECONOMICS
CHARLENE MAE G. PADIN
Subject Teacher

2. ECONOMICS

4. BASED ON THE VIDEO
PRESENTATION,
WHAT IS ECONOMICS?

5. ECONOMICS
It comes from the Greek word “oikos” meaning “”household”
and “Nomos” meaning management.
According to Fajardo, economics is the proper allocation and
efficient use of available resources for the maximum
satisfaction of human wants.
Samuelson states that economics is the study of how
societies use scarce resources to produce valuable
commodities and distribute them among different people.

6. Ultimately, economics is dedicated
to figuring out how society manages
its limited resources.
Why "limited"? Because we can't
have everything we want!

7. BRANCHES OF
ECONOMICS

8.  from the Greek word mikros, meaning “small”)
 It zooms in on the behavior of individual parts of the economy. It
focuses on how individual households, firms and industries
make their choices, and the interaction of such decisions in the
particular market.
SCOPE OF ECONOMICS

9. SCOPE OF ECONOMICS
 How households (like your family) make decisions about what
to buy.
 How firms (businesses) decide what to produce and at what
price.
  How industries (like the rice industry or the tech industry)
operate in specific markets.

10. Example: If we're studying the price of rice in a local
market – how much it costs, how much is produced,
and how government rules or taxes affect it – we're
looking at microeconomics.
SCOPE OF ECONOMICS

11.  from the Greek word makros, meaning, “Large”
 Deals with the problem of the economy as a whole. It looks at
aggregate prices, production, and income.
SCOPE OF ECONOMICS

12. Example: Studying the
Philippine economy's
total income (Gross
National Income) or
total employment
levels.
SCOPE OF ECONOMICS
 Looking at
economy-wide issues
like inflation (prices
going up),
unemployment rates, or
how fast the economy
is growing (GDP).

14. CONCERNS OF ECONOMICS

15. It is the use of inputs for generating output.
This is all about creating goods and services.
U T O N R O C I P D
PRODUCTION

16. PRODUCTION
o Inputs: These are the "ingredients" or resources (like labor,
land, materials) used to make something.
o Outputs: These are the final goods and services that come
out of the production process.
o The Big Question: Society has to decide what to produce (Do
we make more phones or more food?) and how much of it.
CONCERNS OF ECONOMICS

17. Once goods and services are produced,
how are they shared among the people in society?
I T R I D T U N O I S
B
DISTRIBUTION

18. DISTRIBUTION
o This is linked to the question: For whom are these goods
and services being produced? Is it for everyone, or just a few?
CONCERNS OF ECONOMICS

19. It is the use of products or services.
It is also the final conclusion of economic operation.
N O C M S U P N O I T
CONSUMPTION

20. CONSUMPTION
o It's the "end game" of the economic
process – when someone finally uses what
was produced.
CONCERNS OF ECONOMICS

21. It is concerned with government spending and revenue.
This focuses on the government's role in the economy.
C L U B P I
A N N E C I F
PUBLIC FINANCE

22. PUBLIC FINANCE
o It studies how the government collects
money (through taxes, borrowing) and how it
spends it (on roads, schools, healthcare,
etc.).
CONCERNS OF ECONOMICS

24. TYPES OF ECONOMICS
1. Household Economics
o Focus: How individual families and households
make economic choices.
o What it looks at: How families manage their limited
money, time, and skills to buy what they need and want,
and to improve their well-being.

25. TYPES OF ECONOMICS
2. Business Economics
o Focus: How businesses use economic principles to
make smart decisions
o What it looks at: Analyzing problems, improving
efficiency, and maximizing profits for companies.

26. TYPES OF ECONOMICS
3. National Economics
o Focus: The overall performance of a country's
economy.
o What it looks at: Big picture numbers like the
country's total income, unemployment rates, inflation, and
how much the economy is growing. (This is closely
related to Macroeconomics).

27. TYPES OF ECONOMICS
4. International Economics
o Focus: How one country's economy interacts with
others.
o What it looks at: Things like international trade
(buying and selling goods between countries), tourism,
and exchange rates (how much one country's money is
worth compared to another's).

28. THE ECONOMIC
AGENTS/STAKEHOLDERS:

30. THE ECONOMIC AGENTS/ STAKEHOLDERS:
1. CONSUMERS
o These are the individuals or companies who buy and
use goods or services.
o They don't sell the item they purchased; they use it to
satisfy their needs or wants. (That's you when you buy a
new phone or a snack!)

31. THE ECONOMIC AGENTS/ STAKEHOLDERS:
2. PRODUCERS:
o These are the firms or individuals who create and
sell goods and services.
o They can be self-employed people (like a baker
who owns their own shop) or huge multinational
companies.

32. THE ECONOMIC AGENTS/ STAKEHOLDERS:
3. GOVERNMENT / PUBLIC
SECTOR:
o This group tries to maximize the well-being of
society as a whole.
o They interact with consumers and producers
within a specific location, culture, and environment,
shaping the rules of the market.

33. Key Terms to
Understand Economics
Better

34. GOODS
anything used to satisfy your needs and wants.
Intangible Goods
Tangible Goods
a physical object
or product that
can be touch
a product that
cannot be touch, like
insurance policy

35. 1. Consumer Goods:
o These directly satisfy the needs and
wants
of consumers.
o Example: A slice of pizza, a pair of
shoes, a
CLASSIFICATION OF GOODS

36. 2. Capital / Industrial Goods:
o These goods help to produce other
goods or services. They indirectly meet
consumer needs.
o Example: The oven in a bakery (helps
produce bread), a machine in a factory, a
delivery truck.
CLASSIFICATION OF GOODS

37. 3. Essential Goods:
o These are goods consumed to
satisfy the basic needs of people.
o Example: Food, basic clothing,
shelter, clean water.
CLASSIFICATION OF GOODS

38. 4. Economic Goods:
o These goods are useful AND
scarce. Because they are scarce, you
need to pay for them. They have a
"value" and a "price."
CLASSIFICATION OF GOODS

39. 4. Economic Goods:
o Think: If something is so abundant that
everyone can have it without paying (like
fresh air in the countryside), it's "free." But
air-conditioned air is an economic good
because it's limited and costs money to
produce.
CLASSIFICATION OF GOODS

40. 5. Luxury Goods:
o These goods are not necessary for
survival but are highly valued, often by
wealthy individuals.
o Reason for purchase: To show status,
for their high quality, or for their
craftsmanship.
o Example: A designer handbag, a
CLASSIFICATION OF GOODS

42. PICTURE ANALYSIS
THE ECONOMIC
RESOURCES

43. LAND

44. LABOR

45. CAPITAL

46. ENTREPRENEURSHIP

47. FACTORS OF PRODUCTION
1. LAND
2. LABOR
3. CAPITAL
4. ENTREPRENEURSHIP

48. LAND
FACTORS OF PRODUCTION
o This refers to all
natural resources.
Everything from the land
itself to rivers, oceans,
climate, mountains,
mines, and forests are
considered "land" in
economics.

49. LAND
FACTORS OF PRODUCTION
o It's the primary and
natural factor of
production – gifts from
nature.
o Payment for Land:
Rent.

50. LABOR
FACTORS OF PRODUCTION
- This includes all human
effort that contributes to
production, whether it's
physical or mental. It's the
effort, abilities, and skills
workers apply.
- Payment for Labor:
Wage (or salary).

51. CAPITAL
FACTORS OF PRODUCTION
- These are man-made items
used to produce other goods
and services.
- It's a "produced" factor of
production because it's
something we create to help
us create more.

52. CAPITAL
FACTORS OF PRODUCTION
- o Examples: Factories,
machinery, tools, equipment,
raw materials, and even
money used for investment.
- Payment for Capital:
Interest.

53. ENTREPRENEURSHIP
FACTORS OF PRODUCTION
- This is the special ability
to combine the other
three factors (land,
labor, capital) to create
something new or to
transform an idea into a
business.

54. ENTREPRENEURSHIP
FACTORS OF PRODUCTION
- Entrepreneurs are often
innovative and willing to
take risks. They are the
ones who organize and
manage the production
process.
- Payment for
Entrepreneurship:

55. The Big
Challenges:
Scarcity, Choice,
and Opportunity
Cost

56. 1. SCARCITY
Characteristics of Resources
This is the fundamental problem in economics: there's
simply not enough of everything to satisfy all human
wants. Our desires are unlimited, but our resources are
limited.

57. 1. PROBLEMS BECAUSE OF SCARCITY
Characteristics of Resources
Land: Not enough land, natural resources, pollution,
overcrowding.
Labor: Not enough skilled workers, insufficient overall workforce.
Capital: Lack of good equipment/machines, not enough funds.
Entrepreneurship: Not enough training for entrepreneurs,
limited opportunities,
fierce competition for
good ideas.

58. 2. MULTIPLE USAGE
Characteristics of Resources
o Many resources can be used for more than one
purpose.
o Example: A piece of land can be used to grow
coffee, or you could build a factory on it. This forces
us to make a choice!

59. 3. PARTIALLY REPLACEABLE
(SUBSTITUTABLE)
Characteristics of Resources
o Sometimes, one resource can be substituted for
another in production.
o Example: You can replace manual labor with
technology (machines) to do a task.

60. Choice and Decision-Making

61. Choice and Decision-Making
Because of scarcity, we are constantly
forced to make choices. We have to decide
how to use our limited resources in the
best possible way to satisfy as many wants
as we can.

62. Opportunity cost
the value of the next best alternative that you give
up when you make a choice.
• Since resources are scarce, choosing one
thing means you can't have something else. The
opportunity cost is that "something else" you
missed out on.

63. Opportunity cost
It helps us make the smartest decisions by
understanding the true cost of our choices.
Example: If a mother decides to be a full-time
mother instead of returning to her job, the
opportunity cost is the salary she could have
earned. She chose the benefits of full-time
motherhood over the financial benefits of a salary.

64. Importance of Economics in our daily lives
It helps us understand:
How to earn a living
and manage our
personal finances.
How to earn a living
and manage our
personal finances.
o How businesses
make decisions and
maximize profits.
How societies
distribute resources
fairly.

65. Economics: A Social
Science AND an
Applied Science

66. Economics: A Social Science AND an Applied Science
Economics as a Social Science
Focus: It aims to understand human
behavior – how people, families, businesses, and
governments make choices about scarce
resources.
Approach: It uses theories (like supply and
demand) to analyze how economies work.

67. Economics: A Social Science AND an Applied Science
Economics as an Applied Science
Focus: This is about the practical use of economic
theories and tools to solve real-world problems.
• Role: Economists use their knowledge to address
issues like:
o How to reduce unemployment.
o How to stabilize prices (preventing inflation or
deflation).
o How to promote economic growth.
o How to reduce inequality.