Applied Economics - Quarter 1 - Module 1

Applied Economics - Quarter 1 - Module 1: Nature and Scope of Economics

• This module covers the nature and scope of economics as a social science and as an applied science.
• Economics is derived from the Greek word "oikonomia" meaning household management.
• Key conditions for household management are limited resources and unlimited wants/needs.
• Economics is a social science that studies how societies allocate resources to meet needs and wants.
• It includes factors like production, distribution, and consumption of goods and services.
• Economics uses the scientific method, through observation, hypotheses, testing, and analysis, to understand and solve societal problems.
• Applied economics applies economic theories and principles to solve real-world problems.
• Econometrics uses statistical and mathematical tools to test hypotheses and forecast trends in economics.
• Economic theories include various concepts like consumerism, Keynesianism, liberalism, Malthusianism, and monetarism.

Lesson 1: Nature of Economics

• Economics focuses on the scarcity problem of limited resources and unlimited wants and needs.
• It analyzes the human behavior to solve the scarcity problem with a scientific approach.
• Economics studies the production, distribution, and consumption of goods and services, as well as how individuals and societies organize themselves.
• It includes the study of how resources are allocated, exchanged, and used efficiently.

Lesson 2: Utility and Application of Applied Economics to Solve Economic Issues and Problems

• Applied economics is the practical application of economic theories and concepts to real-world situations.
• It focuses on solving real-world problems using economic tools.
• The examination of the issue entails identification of the problem, data collection, making an educated guess of a result (hypothesis), testing the hypothesis, and analysis of results.
• Economic Issues and problems faced include market behavior, pricing, production, distribution, and consumption of goods and services.

Lesson 3: Market Supply

• Market supply is the total quantity of a good or service all producers are willing to provide at a given price over a certain time.
• The law of supply describes a direct relationship between price and quantity supplied.
• Factors that affect market supply include prices of related goods, conditions of production, expectations of sellers, input costs, number of suppliers, and government policies.

Lesson 4: Market Demand

• Market demand is the sum of the demands of all consumers for a good or service at a particular price at a given point in time.
• The law of demand describes an indirect (inverse) relationship between the price of a good or service and the quantity demanded.
• Factors that affect market demand include prices of related goods, current income of buyers, tastes and preferences of buyers, expectations of buyers on future income and wealth, and number of buyers.

Lesson 5: Market Equilibrium

• Market equilibrium is the state when supply and demand in a market are equal.
• Equilibrium price is the price at which quantity supplied equals quantity demanded.
• Equilibrium quantity is the quantity at which supply and demand intersect.
• Market equilibrium is the point where neither buyers nor sellers want to change the price or quantities.

Lesson 6: Implications of Market Pricing on Economic Decision

• Market pricing is important as it determines the profit margin on products.
• Pricing is also a key decision making aspect after product manufacturing and influences consumer buying decisions.
• There are several different types of market pricing like premium pricing, penetration pricing, economy pricing, price skimming, psychological pricing, bundle pricing, and so on
• Prices are essential to producers' decisions about product quantity, cost of materials, and cost of labor.
• Prices affect the decision making process of consumers based on the products' values and needs.

Lesson 7: Market Structure

• Market structure refers to the characteristics of a market, including the number and size of firms, type of goods offered, and barriers to entry.
• Perfect competition has many small firms offering similar products, with no barriers to entry.
• Monopoly has one large firm with total control of the market, facing high barriers to entry.
• Monopolistic competition has many small firms offering differentiated products, with low barriers to entry.
• Oligopoly has a few large firms offering slightly differentiated products, and high barriers to entry.

Lesson 8: Contemporary Economic Issues Affecting Filipino Entrepreneurs

• This lesson examines contemporary economic issues affecting Filipino entrepreneurs, like capital, investment, interest rate, labor, wages, unemployment, minimum wage policy, taxes, and rental costs.