Week 1 D2 - Applied Economics PDF

Opening Prayer  Applied Economics  LET’S HAVE A SHORT RECAP! What is economics? What is scarcity? What is opportunity cost? What are the four factors of production?  LEARNING TARGETS: I can understand and know the people behind the definition of economics. I can...

Opening Prayer  Applied Economics  LET’S HAVE A SHORT RECAP! What is economics? What is scarcity? What is opportunity cost? What are the four factors of production?  LEARNING TARGETS: I can understand and know the people behind the definition of economics. I can differentiate economics as social science and applied science in terms of nature and scope. I can explain why economics became a social science and applied science.  Persons Behind the Definition of Economics  ADAM SMITH The father of economics, defined economics as the science of wealth. According to him, economics makes inquiries into the factors that determine the wealth and the growth of the nation. ALFRED MARSHALL A well-known economist, described economics as a study of mankind in the ordinary business of life.  The word "economics" comes from the Greek word oikonomia, which is a combination of the words oikos and nemein: Oikos: Means "household" Nemein: ARISTOTLE Means “management” Gerardo Sicat According to him, economics is “a scientific study which deals with how individuals and society make choices.” PAUL SAMUELSON According to him, economics is “the study of how people and society end up choosing, with or without use of money, to employ scarce resources that could have alternative uses to produce various commodities among various persons and groups in ECONOMICS AS A SOCIAL SCIENCE AND APPLIED SCIENCE  Economics as Social Science Economics is a science because it uses scientific method of inquiry. It organized body of truth, coordinated, arranged and systematized with reference to certain general laws and principles.  Economics as Social Science Economics is generally classified as a social science and uses the scientific method on the basis for its investigation.  Scientific Method Observation Formulation of theories Gathering of data Experimentation Conclusion Generalization FIST TO FIVE!  Economics as an Applied Science The term “applied economics” is believed to have started 200 years ago in the writings of two economists: Jean-Baptiste Say (1767-1832) John Stuart Mill (1806-1873)  Economics as an Applied Science Applied Economics - is the study of economics in relation to real world situations. It is the application of economic principles and theories to real situations, and trying to predict what the outcomes might be.  Economics as an Applied Science Applied Economics - is the study of observing how theories work in practice.  ECONOMETRICS It is the application of statistical and mathematical theories to economics for the purpose of: Testing hypothesis Forecasting future trends  ECONOMETRICS THEORETICAL + APPLIED = ECONOMETRICS  EXAMPLE OF ECONOMETRICS Real life application of econometrics would be to study the hypothesis that as a person’s income increases, spending increases.  I wonder why... I am confused about... I want to know why...  Wrapping Up! Who are the persons who give definition to the word “economics”? Why does economics is classified as social science and applied science? What is econometrics?  Progress Check! I can understand and know the people behind the definition of economics. I can differentiate economics as social science and applied science in terms of nature and scope. I can explain why economics became a social science and applied science. Prepare for a quiz next meeting. :)