Applied Economics Notes PDF

Examine the utility and application of Applied Economics to solve economic issues and problems.  Identify basic economic problems...

Examine the utility and application of Applied Economics to solve economic issues and problems.  Identify basic economic problems Discuss the economic challenges faced by individuals and businesses At the end of this lesson, the students shall be able to: Illustrate how applied economics can be used to solve economic problems. Mahatma Gandhi  In a group with 4-5 members, give one (1) economic problem, its causes, consequences as well as its possible solutions. Write your answer in a one (1) whole sheet of paper. Please follow the format below. Economic Problem Causes Consequences Possible solutions ▪ ▪  POVERTY Poverty is pronounced deprivation in well-being. Poverty is the lack of monetary resources to meet one’s needs or the lack of specific good like food, asset, shelter, health, and the like. SOLUTIONS: ✓ Create jobs (government projects, encourage investment) ✓ Raise the minimum wage ✓ Promote pay equity ✓ Properly allocate time and resources (social programs) ✓ Provide access to healthcare ✓ Create micro-financing programs ✓ Provide an adequate social safety net ✓ Increase access to education  SOCIAL INEQUALITY Social inequality refers to disparities and discrepancies in areas such as income, wealth, education, health, nutrition, space, politics and social identity. SOLUTIONS: ✓ Implement progressive income tax ✓ Spend more on public/social services and infrastructure ✓ Increase government ownership of basic utilities  MONOPOLY Monopoly is a market structure characterized by a sole seller in a particular market wherein the business entity may control the supply, compromise the quality of goods and services, and manipulate the price. SOLUTIONS: Since a monopoly does not face competition, only the government may help solve the problem. The government may: ✓ Implement price capping (limiting price increases) ✓ Regulate mergers ✓ Regulate quality of service ✓ Investigate and address abuses  ENVIRONMENTAL ISSUES Environmental issues are harmful effects of human activities (usually economic activities) on the environment. SOLUTIONS: ✓ Use reusable items ✓ Conserve water and energy ✓ Proper waste disposal ✓ Recycle waste ✓ Find clean renewable energy sources  RECESSION Recession is a period of temporary economic decline during which industrial and trade activities are reduced, marked by a fall in GDP in two consecutive quarters (6 to 18 months).  RECESSION SOLUTIONS: ✓ Implement expansionary fiscal policy to expand the money supply in the economy by either: reducing taxes will increase people’s disposal income which later results in increased consumption, increased production, employment and so on.. increasing government spending done by investing or making projects like construction of infrastructures like roads, railways, ports, and the like. These activities will create jobs as well as purchases of the government. Therefore, this will both stimulate production (producers receive payment) and consumption (workers spend salary)  UNEMPLOYMENT Unemployment happens when a lot of people are jobless/cannot find work or are losing jobs. SOLUTIONS: ✓ Create jobs by creating public projects/jobs ✓ Provide employment subsidies to businesses to lower the cost of production ✓ Invite foreign investments ✓ Reduce occupational mobility to easily find new different jobs.  INFLATION Inflation is the consistent increase in the average price level of good and services. The purchasing power of money declines and it lowers living standards. Inflation can be caused by an increase in the cost of production (cost-push inflation), a high rise in demand (demand-pull inflation) or too much money supply in the economy.  INFLATION SOLUTIONS (Too much money supply): ✓ Contractionary Monetary Policy – The central banks controls the money supply in the economy. This can be done by raising bank rates/interests rates, expand open market operations, or increase the reserve requirements of the banks. ✓ Contractionary Fiscal Policy – government reduces its expenditure/spending and raising tax rates to decrease the money supply in the economy.  TRADE DEFICIT Trade deficit occurs when a country’s imports exceeds its exports during a given time period. It is known as a negative balance of trade (BOT). A country may rely heavily in imports due to lacking of efficient capacity to produce its own products due to lack of technology, resources, or skills.  TRADE DEFICIT SOLUTIONS: ✓ Discourage consumption and increase savings. If households and the government reduce their consumption, then the need for imports decline and less foreign borrowing to pay. ✓ Depreciate the exchange rate. Because we use dollar for foreign trade, a weaker peso makes imports more expensive and exports cheaper and trigger the trade balance. Society must decide what goods and services should be produced in the economy. Having decided on the nature of goods that will be produced, the quantity of these goods should also be decided on. This will also involve the proper allocation of scarce resources in relation to the composition of total output of the economy. It is a question on the production method that will be used to produce the goods and services. This refers to the resource mix and technology that will be applied in production. For whom will the goods and services be produced? The young or old, the male or female market, the low-income or the high-income groups? The society has to see whether the resources it owns are being utilized fully or not. In case the resources of the economy are lying idle, it has to find out ways and means to utilize them fully.  Resources are limited in two essential ways: Limited in physical quantity, as in the case of land, which has finite quantity. Limited in use, as in the case of labor and machinery, which can only be used for one purpose at any one time.  ECONOMIC SYSTEMS An economic system is a means by which societies or governments organize and distribute available resources, services, and goods across a geographic region or country.  TRADITIONAL ECONOMY Decisions are based on traditions and practices upheld over the years and passed on from generation to generation. Methods are stagnant and not therefore progressive. Traditional societies exist in primitive and backward civilizations.  COMMAND ECONOMY This is the authoritative system wherein decision-making is centralized in the government or a planning committee. Decisions are imposed on the people who do not have a say in what goods are to be produced. This economy holds dictatorial, socialist and communists nations.  MARKET ECONOMY This is the most democratic form of economic system. Based workings of demand and supply, decisions are made on what goods and services to produce. People’s preferences are reflected in the prices they are willing to pay in the market and are therefore the basis of the producers’ decisions on what goods to produce. KWL Chart Create a KWL chart about economic systems. Give at least three (3) answers. Do this in a ½ crosswise paper. KNOW WANT TO KNOW LEARNED September 12, 2023 SEE YOU NEXT MEETING!