The document discusses applied economics, focusing on its historical roots and its importance in analyzing current economic conditions. It highlights concepts such as scarcity, the basic economic problem, and essential economic questions regarding production and resource allocation. Additionally, it emphasizes the application of econometrics in forecasting and decision-making within the realm of limited resources.

1. Applied Economics
AGNES R. RAMO
SHS Teacher II

2. Click icon to add picture
Basic Economic Problems

3. Applied Economics
– The use of this term is believed to have
started nearly 200 years ago, in the
writings of Jean-Baptiste Say (1767-1832)
and John Stuart Mill (1806-1873).
This is the application of economic
principles and theories to the present
economic condition.

4. Applying economic theories to
current economic conditions can
be helpful in the following reasons:
1. It enables the true picture of the situation to
show.
2. It helps determine the steps to be taken to
improve the present economic condition.
3. It helps to avoid the recurrence of a negative
situation or at least minimize the effect.

5. Econometrics
– Application of statistical and
mathematical theories to economics to
test hypothesis and forecast future
trends.
An example of real-life application
of econometrics would be to study the
hypothesis that as a person’s income
increases, spending increases.

6. Scarcity
– is the limited nature of resources.
Resources for an individual includes
time, money and skill.
For a country limited resources
include natural resources, work force or
we call it also as labor force where
most of them work abroad to seek
higher salary to meet financial needs.

7. Other limited resource of a country
is technology.
The lack of technology available
leaves some of our most precious
natural resources useless because we
cannot use them.
These resources are all limited as
compared with our unlimited wants
and needs.

8. Because of this, people and nations
should choose which goods and
services they can avail and which one
they should give up during this
pandemic.
People opted to choose to buy
basic needs necessary for survival.

9. What is the basic economic problem?
Scarcity.
Because of this people and nation must
choose how to use their available resources
efficiently.

10. Every economic system is faced with the following
problems:
1. 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.

11. Every economic system is faced with the following
problems:
2. 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.

12. Every economic system is faced with the following
problems:
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.

13. 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?
– 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.

14. 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.