Applied Economics

• Changes in production costs, such as wages or raw material prices, can affect the supply of a good or service.
• Equilibrium occurs when the quantity demanded equals the quantity supplied at a specific price.
• The main focus of economics is human's choice
• Economics came from the Greek word "oikos" which means household or family and "nomos" or management
• Unified choice


  not an economic goal
• Alfred Marshall 


  defined economics as a study of human as they live and move and think in the ordinary business of life
• economic resources


  composed of natural and man-made resources
• adam smith


  father of classical economics
• Lionel Robbins


  economics is a science which studies human behavior as a relationship
• Applied economics focuses on the application of economic theory.
• economic theory is NOT the only solution to the economic problem.
• economic model

  • empirical representation of economic theory
  • describes the economic situation through equations, graphs, etc.
  • can predict future phenomenon
• positive economics


  uses factual evidence
• normative economics


  based on the subjectivity
• Farming theory of interest rates


  not an economic theory
• macro- and microeconomics can be applied in real-life
• macroeconomics DOES NOT discuss the law of demand and supply
• microeconomics DOES NOT deal with poverty, education, and aggregate production
• agricultural production


  refers to macroeconomics
• profit maximization


  refers to microeconomics
• john maynard keynes


  father of modern economics and macroeconomics
• Economic resources are NOT naturally unlimited
• Money is NOT a fundamental classification of economic resources
• The basic economic questions are: what to produce?; for whom to produce?; how to produce?
• Natural resources includes land, minerals, water, and air
• TRAFFIC IN METRO MANILA will not be addressed by the basic economic questions
• fixed capital includes MACHINERIES, FACTORIES, BUILDINGS, AND EQUIPMENTS
• OPPORTUNITY COST AND TRADE OFF happens when you sacrifice one thing over another
• OPPORTUNITY COST is the option you discarded
• TRADE OFF is the option you picked
• economic systems: TRADITIONAL, COMMAND, MARKET, and MIXED
• BARTER SYSTEM refers to the exchange of goods and services without the use of money. It is an old form of commerce evident in traditional economy
• Production Possibilities Frontier (PPF)


  shows different combinations in producing two goods.
• POVERTY, UNEMPLOYMENT, and TRAFFIC JAM are economic problems
• UNEMPLOYMENT is characterized by the lack of a job or the inability to find a job. It includes people who are available for work but do not find jobs, people who have no work, and persons who leave their current job.
• cyclical unemployment


  also known as keynesian unemployment or demand-deficient employment where unemployment happens due to business closures
• POVERTY is a condition where people's basic needs for foods, clothing, and shelter are not being met.
• Ineffective governance and government policies


  needs to put effort in creating jobs, quality and accessible education, strong macroeconomic policies, and programs to alleviate poverty.
• Exposure to risk such as natural disasters and high inflation during crises are causes of poverty.
• Unemployment happens due to people moving between jobs and fewer jobs available in the market