Applied Economics
By : DarkRaven
Revisiting Economics as a Social Science and as an Macroeconomics - deals with the economic behavior of
Applied Science the whole economy or its aggregates such as government,
business, and households.
WHAT IS ECONOMICS?
Microeconomics - deals with the economic behavior of
Economics has been defined in many ways. It comes from individual units such as the consumers, firms, and the
the Greek word “oikanomia” meaning “household owners of the factors of production. Such specific
management.” Economics may appear to be the study of economic units constitute a very small segment of the
complicated tables and charts, statistics and numbers, but, whole economy.
more specifically, it is the study of what constitutes
rational human behavior in the endeavor to fulfill needs DIVISIONS OF ECONOMICS
and wants.
Economics has five major divisions. These divisions are as
To sum it up, economics covers all kinds of topics, but at follows:
the core, it is devoted to understanding how society
allocates its scarce resources. Any country has limited PRODUCTION – This refers to the process of producing or
resources. Since resources are generally scarce and human creating goods needed by the households to satisfy their
wants to tend to be unlimited, economics encounters big needs. The factors of production are called inputs and the
problems. The biggest is that these resources are not goods and services that have been created are called
freely available. At the very core, economics lies the fact of outputs of production.
scarcity. Goods are limited, while wants seem infinite.
Because resources are scarce, we need to study how DISTRIBUTION – This refers to the marketing of goods and
society chooses from the menu of possible goods and services to different economic outlets for allocation to
services, how different commodities are produced and individual consumers. In monetary terms, this is the
prices, and who gets to consume the goods that society allocation of income among persons or households.
produces
THE NATURE OF ECONOMICS EXCHANGE – This is a process of transferring goods and
services to a person or persons in return for something. At
Economics is a Science. Science is a body of systematic present, the medium of exchange used in the market is
knowledge built upon by conscious efforts. Like any other money. This means we can exchange our money for goods
science, its laws and principles are arrived at only after a and services.
long series of observations and experiments.
Economics is concerned with human beings and their CONSUMPTION – This refers to the proper utilization of
behavior. It is interdependent with other sciences like economic goods. However, goods and services could not
Psychology, the science that deals with the development of be utilized unless you pay for them. Hence, we can also say
society; Political science, the science of government. that consumption is spending money for goods and
Economics, like social science, is the study of the relations services to yield direct satisfaction.
between people during the production, distribution, and
consumption of wealth in human society.
PUBLIC FINANCE – This pertains to the activities of the
MACROECONOMICS AND MICROECONOMICS government regarding taxation, borrowings, and
expenditures. It deals with the efficient use and fair
The study of Economics is divided into two branches: distribution of public resources to achieve maximum social
Macroeconomics and Microeconomics. benefits. This means government programs and projects
which are funded by taxes and loans are properly
implemented and managed to generate maximum and
optimum benefits for all members of society.
1
, Applied Economics
By : DarkRaven
Tools of Economics LESSON 1: THE ECONOMIC PROBLEM AND
1. Logic ECONOMIC SYSTEM
2. Mathematics
3. Statistics The Economic Problem
The Economic Resources Economics is always in the news. Newspapers, television,
and the Internet bombard you with information about the
1. Land economy. The media report on economic issues because
2. Labor they are important in people’s lives. People like you want
3. Capital to know the latest about job opportunities, sales at the
4. Entrepreneurs mall, the best cellphone model, and other matters that
5. Foreign Exchange affect your income, spending, and lifestyle. Economics is
concerned with identifying and clarifying the choices one
ECONOMICS AS AN APPLIED SCIENCE faces now and in the future.
As pure science and applied science go hand-in-hand, so The Economic Choices
Economics is also pure as applied science. The scope of
economics means the limits or boundaries of Economics. Economics is about making choices. You make economic
According to Adam Smith and A.C. Pigou, Economics choices every day. You make choices about whether to get
studies the causes of material wealth. They gave a very a part-time job or focus on your studies., buy a
narrow scope to the study of economics by limiting it only secondhand laptop or save for college, take a
to those activities relating to wealth. According to Prof. home-packed lunch to school or buy from a fast-food
Marshall, restaurant. You already know more about economics than
you realize. You bring to the subject a rich personal
"Economics is a study of the economic activities of a man. experience. This experience will help you reinforce your
It is only concerned with the wealth-getting and understanding of the basic needs.
wealth-using activities of a man,"
The Economic Problem - Scarcity creates an economic
APPLIED ECONOMICS problem.
Applied economics is the study of economics concerning Scarcity is the condition facing all societies because there
real-world situations, as opposed to the theory of are not enough productive resources to satisfy people’s
economics. It is the application of economic principles and unlimited wants. Scarcity is the fundamental economic
theories to real situations and trying to predict what the problem of having humans who have wanted and needs in
outcome might be. a world of limited resources.
WHAT IS ECONOMETRICS? Because of the scarcity of resources, every economic
system is faced with the following problems:
Econometrics is the application of statistical and
mathematical theories to economics for testing 1. What Goods and Services will be produced?
hypotheses and forecasting future trends. Econometrics 2. How Will Goods and Services Be Produced?
takes economic models and tests them through statistical 3. For whom shall goods and services be produced?
trials. The results are then compared and contrasted
against real-life examples. Econometrics can be subdivided Essential Question: Allocation
into two major categories: theoretical and applied.
Econometrics uses tools such as frequency distributions, 4. Are the country's resources being utilized, or
probability, and probability distributions, statistical some of them are lying idle and unemployed?
inference, simple and multiple regression 1 analysis, 5. Is the economy's capacity to produce goods
simultaneous equations models, and time series methods. growing or remaining the same over time?
2
By : DarkRaven
Revisiting Economics as a Social Science and as an Macroeconomics - deals with the economic behavior of
Applied Science the whole economy or its aggregates such as government,
business, and households.
WHAT IS ECONOMICS?
Microeconomics - deals with the economic behavior of
Economics has been defined in many ways. It comes from individual units such as the consumers, firms, and the
the Greek word “oikanomia” meaning “household owners of the factors of production. Such specific
management.” Economics may appear to be the study of economic units constitute a very small segment of the
complicated tables and charts, statistics and numbers, but, whole economy.
more specifically, it is the study of what constitutes
rational human behavior in the endeavor to fulfill needs DIVISIONS OF ECONOMICS
and wants.
Economics has five major divisions. These divisions are as
To sum it up, economics covers all kinds of topics, but at follows:
the core, it is devoted to understanding how society
allocates its scarce resources. Any country has limited PRODUCTION – This refers to the process of producing or
resources. Since resources are generally scarce and human creating goods needed by the households to satisfy their
wants to tend to be unlimited, economics encounters big needs. The factors of production are called inputs and the
problems. The biggest is that these resources are not goods and services that have been created are called
freely available. At the very core, economics lies the fact of outputs of production.
scarcity. Goods are limited, while wants seem infinite.
Because resources are scarce, we need to study how DISTRIBUTION – This refers to the marketing of goods and
society chooses from the menu of possible goods and services to different economic outlets for allocation to
services, how different commodities are produced and individual consumers. In monetary terms, this is the
prices, and who gets to consume the goods that society allocation of income among persons or households.
produces
THE NATURE OF ECONOMICS EXCHANGE – This is a process of transferring goods and
services to a person or persons in return for something. At
Economics is a Science. Science is a body of systematic present, the medium of exchange used in the market is
knowledge built upon by conscious efforts. Like any other money. This means we can exchange our money for goods
science, its laws and principles are arrived at only after a and services.
long series of observations and experiments.
Economics is concerned with human beings and their CONSUMPTION – This refers to the proper utilization of
behavior. It is interdependent with other sciences like economic goods. However, goods and services could not
Psychology, the science that deals with the development of be utilized unless you pay for them. Hence, we can also say
society; Political science, the science of government. that consumption is spending money for goods and
Economics, like social science, is the study of the relations services to yield direct satisfaction.
between people during the production, distribution, and
consumption of wealth in human society.
PUBLIC FINANCE – This pertains to the activities of the
MACROECONOMICS AND MICROECONOMICS government regarding taxation, borrowings, and
expenditures. It deals with the efficient use and fair
The study of Economics is divided into two branches: distribution of public resources to achieve maximum social
Macroeconomics and Microeconomics. benefits. This means government programs and projects
which are funded by taxes and loans are properly
implemented and managed to generate maximum and
optimum benefits for all members of society.
1
, Applied Economics
By : DarkRaven
Tools of Economics LESSON 1: THE ECONOMIC PROBLEM AND
1. Logic ECONOMIC SYSTEM
2. Mathematics
3. Statistics The Economic Problem
The Economic Resources Economics is always in the news. Newspapers, television,
and the Internet bombard you with information about the
1. Land economy. The media report on economic issues because
2. Labor they are important in people’s lives. People like you want
3. Capital to know the latest about job opportunities, sales at the
4. Entrepreneurs mall, the best cellphone model, and other matters that
5. Foreign Exchange affect your income, spending, and lifestyle. Economics is
concerned with identifying and clarifying the choices one
ECONOMICS AS AN APPLIED SCIENCE faces now and in the future.
As pure science and applied science go hand-in-hand, so The Economic Choices
Economics is also pure as applied science. The scope of
economics means the limits or boundaries of Economics. Economics is about making choices. You make economic
According to Adam Smith and A.C. Pigou, Economics choices every day. You make choices about whether to get
studies the causes of material wealth. They gave a very a part-time job or focus on your studies., buy a
narrow scope to the study of economics by limiting it only secondhand laptop or save for college, take a
to those activities relating to wealth. According to Prof. home-packed lunch to school or buy from a fast-food
Marshall, restaurant. You already know more about economics than
you realize. You bring to the subject a rich personal
"Economics is a study of the economic activities of a man. experience. This experience will help you reinforce your
It is only concerned with the wealth-getting and understanding of the basic needs.
wealth-using activities of a man,"
The Economic Problem - Scarcity creates an economic
APPLIED ECONOMICS problem.
Applied economics is the study of economics concerning Scarcity is the condition facing all societies because there
real-world situations, as opposed to the theory of are not enough productive resources to satisfy people’s
economics. It is the application of economic principles and unlimited wants. Scarcity is the fundamental economic
theories to real situations and trying to predict what the problem of having humans who have wanted and needs in
outcome might be. a world of limited resources.
WHAT IS ECONOMETRICS? Because of the scarcity of resources, every economic
system is faced with the following problems:
Econometrics is the application of statistical and
mathematical theories to economics for testing 1. What Goods and Services will be produced?
hypotheses and forecasting future trends. Econometrics 2. How Will Goods and Services Be Produced?
takes economic models and tests them through statistical 3. For whom shall goods and services be produced?
trials. The results are then compared and contrasted
against real-life examples. Econometrics can be subdivided Essential Question: Allocation
into two major categories: theoretical and applied.
Econometrics uses tools such as frequency distributions, 4. Are the country's resources being utilized, or
probability, and probability distributions, statistical some of them are lying idle and unemployed?
inference, simple and multiple regression 1 analysis, 5. Is the economy's capacity to produce goods
simultaneous equations models, and time series methods. growing or remaining the same over time?
2
