Applied-Economics_1st-QUARTER_PPT_2.pptx

Lesson 2 in applied economics

1. Applied Economics AGNES R. RAMO SHS Teacher II

2. 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: It enables the true picture of the situation to show. It helps determine the steps to be taken to improve the present economic condition. 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: 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.