This presentation focuses on applied economics. Emphasis is on knowledge and understanding for the following: 1. Economics as a social science 2. Economics as a study of wealth 3. Economics as a study of making choices 4. Economics as a study of allocation 5. Factors of production 6. Scarcity 7. Choice and decision making 8. Branches of economics

1. INTRODUCTION TO
APPLIED ECONOMICS
Marikriz M. Paulino, MBA
ECONOMICS

2. Economics is the social science that involves the use of
scarce resources to satisfy unlimited wants.
Economics is a social science because it studies human
behavior just like Psychology and Sociology.
Social Science the study of society and how people behave
and influence the world around them.
1.1 Revisiting economics as a social science
=
Of how individuals make choices in allocating scarce
resources to satisfy their unlimited wants.
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3. Scarcity
Choices & Decision Making
Limited
Resources
Unlimited
Wants
All economic questions arise because we want more than we
can get. Our inability to satisfy all our wants is called scarcity.
Because we face scarcity, we must make choices. The choices
we make depend on the incentives we face. An incentive is a
reward that encourages or a penalty that discourages an
action.
Economics as a social science
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4. Economics as a
study of wealth
Economics as a
study of making
choices
Economics as a
study of
allocation
Utilization of
wealth for
production and
consumption
Opportunity cost:
forgone benefits of
an alternative when
making a choice
Allocation of scarce
resources to
answer unlimited
human wants
Definition: Economics
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5. Factors of Production
LIMITED RESOURCES UNLIMITED WANTS
Land Natural resources
Food
Labor
Human resources exerted in the
production of goods and
services.
Clothing
Capital
Man made used in production
of other goods and
services.
Shelter
Entrepreneurship
Helps the business to use its
resources
efficiently and effectively
Security
Society has to respond to this ever expanding and
multiplying human wants in light of limited resources.
Needs - the essentials
of life, such as food
and shelter
Wants - desires for
non-essential items
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6. Scarcity
A condition where there are insufficient resources to satisfy
all the need and wants of a population.
RELATIVE SCARCITY
“When a goods is scarce
compared to its demand”
It occurs not because the good is
scarce and is difficult to obtain but
because of the circumstances that
surround the availability of the good
ABSOLUTE SCARCITY
“When supply is limited”
It explains why there are some
products that are very expensive in
the Philippines
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7. Choice and Decision Making
With the presence of scarcity, there is a need to make
decisions in choosing how to maximize the use of the scarce
resources to satisfy as many wants as possible
What will happen if there is no scarcity?
Opportunity Cost refers to the value of alternative. It holds true
for individuals, businesses, and even a society.
Without it a person does not need to make choices since
he/she can have everything he/she wants.
The price of
everything
would be free
So, there
would be no
necessity for
supply and
demand
There would be no
need for government
intervention to
redistribute scarce
resources
Economic Problem
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8. Branches of Economics
MICROECONOMICS MACROECONOMICS
Studies individual
income/market
Studies national
income/whole economy
Analyzes individual labor
market
Analyzes total employment in
the economy
Studies individual prices Studies overall price level
Analyzes demand and supply
of goods
Analyzes aggregate demand
and aggregate supply
Deals with households and
firms decisions
Deals with aggregate
decisions
vs.
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9. References:
 Raw pictures by Google Image
 Wikipedia
 Series of presentation in Economics
END OF THE SLIDE
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