APPLIED ECONOMICS REVIEWER

• Economics


  The study of what constitutes rational human behavior in the endeavor to fulfill needs and wants or the study that attempts to explain how an economy operates and how the consumer attempts to maximize his/her wants within limited needs
• Economics


  The study of how people use scarce resources to satisfy their unlimited wants
• Economics


  The efficient allocation of scarce means of production toward satisfying human needs and wants and the science that deals with managing scarce resources
• The Three (3) E's of Economics

  • Efficiency
  • Effectiveness
  • Equity
• Efficiency


  The productivity and proper allocation of economic resources and the relationship between scarce factor input and output of goods and services
• Efficiency


  • These funds can be used to buy the necessary goods and equipment that will aid the government officials in helping the affected families – i.e., boats, life-vest, relief goods, clothing, etc.
• Effectiveness


  The attainment of goals and objectives
• Effectiveness


  • The government needs to properly allocate the capital (monetary resources and capital goods), manpower, and available locations so they can bring the affected families to safety
• Equity


  Justice and fairness
• Equity


  • Everyone must be given sufficient help for the time being
• Economics is a social science because it studies human behavior and how people make decisions to satisfy their unlimited wants by allocating limited resources
• Two (2) Branches of Economics

  • Macroeconomics
  • Microeconomics
• Macroeconomics


  The study of the economic behavior of the economy as a whole, especially the national economy. It focuses on the aggregate flow of goods and resources. It examines the causes of change in the overall flow of money, the overall movement of goods and services, and the general use of resources
• Macroeconomics


  The analysis of employment and income
• Topics discussed in Macroeconomics

  • Gross national product
  • Employment level
  • National income
  • Gross domestic product
  • General price level
  • Economic growth and development
• Microeconomics


  The study of economic behavior in particular markets, such as the market for computers or unskilled labor. It focuses on the economic behavior of people and businesses, deciding what to buy and sell, how much to work and play, and how much to borrow and save. It also studies factors influencing individual economic choices and how markets coordinate decision-makers' choices
• Microeconomics


  The behavior of individual entities – the consumer, the producer, and the resource owner. It is also more focused on how products move from the business to the customer and how resources flow from the resource owner to the business. It is known as the Price Theory – concerned with the process of setting prices of goods
• Topics discussed in Microeconomics

  • Principles and elasticity of demand and supply
  • Individual decision-making
  • Firm's costs and outputs
• Basic Decision Problems

  • Consumption
  • Production
  • Distribution
  • Growth over Time
• Consumption


  A problem that people have to deal with in their day-to-day activities. Having their individual wants, people decide the types of products and services they want to use or consume and the corresponding amount that they should use and buy
• Production


  Producers are generally concerned about the production of goods and services. They determine the consumers' needs, wants, and demands and also decide how to distribute their resources to meet customer demands
• Distribution


  The government primarily addresses it. There must be an appropriate allocation of all resources benefiting all members of society
• Growth over Time


  As societies grow in number, they continue to live on. The problems of choice, consumption, production, and distribution must be perceived in the context of how they will affect future events
• Tools of Economics

  • Logic
  • Mathematics
  • Statistics
• Logic


  A science that deals with sound thinking and reasoning. Facts and evidence should be provided; otherwise, uncertainty will cloud the logic. One could come up with a conclusion with a wise application of logic
• Mathematics


  A science that deals with numbers and operations. It helps economists answer concrete problems involving numbers. To arrive at a conclusion, mathematical equations and operations are used. Among the social sciences, the most quantifiable discipline is economics
• Statistics


  A branch of mathematics that engages with the analysis and interpretation of numerical data. The method of gathering, tabulating, and analyzing data leads to the validity of specific hypotheses. Someone may be able to accept or dismiss (reject) an assumption made on a particular phenomenon
• Economic/Production Resources

  • Land
  • Labor
  • Capital
  • Entrepreneurship
  • Foreign Exchange
• Land


  Categorized as fixed resources – finite, exhaustible, and depletable. It is all that nature freely provides. Rent serves as payment to landowners
• Labor


  The exerted effort of individuals when producing goods and services. It covers a wide variety of abilities, characteristics, and skills. In a nation, the labor supply depends on its population's growth and the percentage of the population willing to join the labor force. Salary or wage is given to an individual in exchange for the rendered labor. Labor is also known as human resources. It reflects the human capital to turn raw or national resources into consumer products. Human capital comprises all able-bodied people capable of working in the nation's economy and offering other individuals or businesses different services
• Capital


  The man-made goods (resources) used when producing other goods and services. It is a form of an asset used mainly as a medium of exchange. Interest is the income that the owner of the capital is earning. Capital signifies the monetary resources businesses use to buy natural resources, land, and other capital goods. Monetary resources move a nation's economy as people purchase and sell resources to people and businesses. Capital also signifies the most important physical assets used in producing products and services by individuals and businesses. The capital stock of a nation depends on its savings level. Savings is part of the person or economy's income, not spent on consumption
• Entrepreneurship


  An economic activity that might earn the entrepreneur a profit or incur a loss. An entrepreneur is an individual that organizes, manages, and assumes business risks, develops a new product or idea, and turns it into a successful business. Having skills in management is necessary to develop, run, and expand the business
• Foreign Exchange


  The dollar and the dollar reserves that the economy has. We use foreign currency, mainly dollars, for international trade and the procurement of raw materials from other nations
• Scarcity


  A condition facing all societies because insufficient productive resources satisfy people's unlimited wants
• Opportunity Cost


  The value of the best-foregone alternative or what is given up when one chooses
• Opportunity Cost


  • The price of one (1) 250ml alcohol is priced at P50, and one (1) 55g instant noodle is priced at P10; therefore, the relative price of one (1) 250ml alcohol bottle is equal to five (5) 55g instant noodles pouches
• No Free Lunch


  The notion of opportunity costs. Decision-making involves trade-offs and suggests that there are no real free offers in society. For instance, the person giving the gift pays for goods and services presented as a gift (free) to individuals. Even if there is no one to shoulder the direct costs, society, as in the case of adverse environmental impacts such as pollution, assumes the responsibility
• Types of Economics

  • Positive Economics
  • Normative Economics
• Positive Economics


  An economic analysis that considers economic conditions 'as they are' or considers economics 'as it is'. Objective and scientific explanations are used in the study of different transactions in the economy
• Positive Statements


  • The country's unemployment rate stayed at 5.3 percent in January 2020, and underemployment hit its lowest level at 14.8 percent in a decade
  • The economy is now experiencing a slowdown because of too much politicking and corruption in the government