Lesson Outline• Introduction: Explain how economics is part of our lives(10 minutes) • Motivation: Explain how a knowledge of economics and the different economic problems can be important to an entrepreneur (15 minutes) • Instruction Delivery: Discuss the definition of economics and applied economics, define the basic ideas of economics and the nature and uses of business economics (50 min) • Practice: Discuss the present economic problems facing the country(20 min) • Enrichment: Research on the current economic situation and Philippine economic history(Optional) • Evaluation: Accomplish different evaluative tasks (teachers discretion) (25 min) Applied Economics K to 12 BASIC EDUCATION CURRICULUM SENIOR HIGH SCHOOL – ACCOUNTANCY, BUSINESS AND MANAGEMENT (ABM) SPECIALIZED SUBJECT Grade: 12 2nd Semester Subject Title: Applied Economics No. of Hours/ Semester: 80 hours/ semester Objectives/Learning Competencies At the end of the lesson you should be able to: 1. Define basic terms in applied economics 2. Identify the basic economic problems of the country 3. explain how applied economics can be used to solve economic problems Pre-test I. Economics is considered a field of social science. 3. As a science. 4. microeconomics. 2. Economics comes from the Greek word oikonomia which means household chores. True or False: Carefully read each sentence and determine if the sentence is true or if the sentence is false. . 5. macroeconomics and home economics. There are three (3) divisions of Economics. 1. Economics is related to other sciences. Economics is relevant because it is part of everybody’s life. How do you apply economics in your household? . what do you think is the essence of studying economics? b.II. a. As an individual. Answer the following using five (5) sentences and above. Essay. In front of you are candies that you could get and eat. everybody is invited to get candies. Come on. Do not be shy… . .Analyses of the activity • What happened when you were invited to get candies? State your observation. how would you define Economics? ? .Definition of Economics • Using the words I have written on the board. Economics as defined From the Greek words Oikos meaning household and nomos meaning management = household management ECONOMICS The wise production and use of wealth to meet the demands or needs of the people . when to use them and for what purposes. with or without use of money.” • Hall and Loeberman (Macroeconomics: Principles and Applications) “The study of choice under the condition of scarcity” . Resources can be defined as the things people use to make the commodities they want. Today and Tomorrow) “Economics concerns situations in which choices must be made about how to use limited resources.” • Roger Le Roy Miller (Economics.Economics as defined by authors of Economics books • Paul Samuelson (Economics) “the study of how people and society end up choosing. to employ scarce resources that could have alternative uses to produce various commodities among various persons and groups in society. ” .• Bernardo Villegas (Guide to Economics for Filipinos) “A social science that studies and seeks to allocate scarce human and non-human resources among alternatives in order to satisfy unlimited human wants and desires.” • Gerardo Sicat (Economics) “a scientific study which deals with how individuals and society make choices. The 4 factors of production • Unlimited – without limits.Common words among definitions… • Scarcity. • Resources-The labor. infinite • Wants –desires • Needs? .a situation wherein the amount of something available is insufficient to satisfy the desire for it. land and natural resources and entrepreneurship that are used to produce goods and services. capital. • ECONOMICS – is a social science that deals with how people organize themselves in order to allocate scarce resources in order to produce goods and services that will satisfy the unlimited and multiplying wants and needs of man. . Society has to decide what outputs will be produced and in what quantity Basic Economic Questions Society must answer WHAT to produce? (make) HOW MUCH to produce? (quantity) HOW to Produce it? (manufacture) FOR WHOM to Produce? (who gets what) WHO gets to make these? decisions? . Outputs are the different goods and services which come out of production process. Inputs are commodities or services that are used to produce goods and services.Concerns of Economics Economics is concerned with PRODUCTION Production is the use of inputs to produce outputs. Consumption is the ultimate end of economic activity. WHEN THERE IS NO CONSUMPTION. THERE WILL BE NO NEED FOR PRODUCTION AND DISTRIBUTION. .• Economics is concerned with DISTRIBUTION Distribution is the allocation of the total product among members of society. • Economics is concerned with CONSUMPTION Consumption is the use of a good or service. It is related to the problem of for whom goods and services are to be produced. • Economics deals with PUBLIC FINANCE Public Finance is concerned with government expenditures and revenues. Economics studies how the government raises money through taxation and borrowing. firms. the owners of factors Refers to management of income.DIVISIONS OF ECONOMICS ECONOMICS MACROECONOMICS MICROECONOMICS General. business. of productions expenditures. . unemployment. economy as a whole Specific Deals with the economic behavior of Deals with the economic the whole economy or its aggregate behavior of the individual such as government. inflation and the like. units such as consumers. wealth or resources of a nation. Types of Economics 1. Household Economics – most common use of economics is for the family. At this level, anyone who knows the economic principles will be able to improve the running of the household. 2. Business Economics – when a person or group of persons begins to work, they come under the system of business economics in their workplace. In this type, you deal with the rent, salary, profits and others. 3. National Economics – Economic factors of problems affecting the whole nation. Deals with the management of income, expenditures, wealth or resources of a nation. 4. International Economics – The highest stage of economic activities involving the business of one country with other countries like trade, tourism, exchange rates. Is Economics a science? Explain why if “yes” or why not if “no” ? Economics as a Science • Is a science because it is an organized body of truth, coordinated, arranged and systematized with reference to certain general laws and principles.(Observation, Formulation of theories, Gathering of data, Experimentation, Conclusion, Generalization) • Economic analysis seeks to explain economic events using some kind of logic based on a set of systematic relations. • It is a social science because the subject matter of economics is people or societies and their behavior, unpredictable in nature. and depressions. Economics has the power to help us understand these phenomena because they result from the choices we make under the condition of scarcity. famines. epidemics. • To gain self-confidence and become wise decisions makers Mastery of economics will help you to understand how things work in your society thereby “feeling equipped” .Essence/Relevance of Studying Economics • To understand the world better Applying the tools of economics can help you understand global and cataclysmic events such as wars. drug addiction. engineering. law. medicines. violent crime. poverty. But it has also been popular among those planning careers in politics. child abuse. This is for good reason because practitioners in each of these fields often find themselves confronting economic issues. and help us to design new. hunger. It will also explain why previous efforts to solve these problems have failed. more effective solutions. . etc. international relations. • To help prepare for other careers Economics has long been a popular college major for individuals who are intending to work in business. disease.• To achieve social change and contribute to National Development Economics can help us understand the origins of serious social problems such as: unemployment. Scarcity Definition. Paul Samuelson . Growth Definition. Alfred Marshall 3. Wealth Definition.1. Welfare Definition. Lionel Robbins 4. Adam Smith 2. man has given second place . • J. Walker.S Mill.• Father of Economics Adam Smith in his book “ Wealth of Nations 1776” defined economics is the study of wealth. • In this definition wealth is given first place. B. J.B Say.Price all agreed that Economics is concerned with wealth. • Economics criticized as bread and butter science. • Carlyle “ It was a Gospel of gammon and pig science. .” • Carlyle. • Economics is science of ills and not wealth. Ruskin.• Walras in his book Elements of pure economics “wealth definition is unscientific one. Dickens criticized it as dismal science. • Alfred Marshall in his book “Principles of Economic Science-1890” defined Economics is the study of man kind in the ordinary business of life. . and on the other side more important side a part of study of man • He made economics as a science of human welfare. • “Economics is one side a study of wealth. 2. . second place to wealth. First place to man.1. Mainly concerned with the study of man in relation to wealth. 3. It studies man not in isolation but as a member of a social group. ignored immaterial welfare. Definition considered only material welfare. 4. Ex. .1. Not concerned about what is good and what is bad. There are some goods which do not promote human welfare. Economics is neutral between ends. cigarettes. 3. it cannot be measured. Welfare is subjective. Robbins objected to the word material and the idea ‘welfare’. 2. Liquors. Restricted scope of economics –considered only material goods. 4. ” .• Lionel Robbins in his book ‘Nature and Significance of Economic Science-1932 given scarcity definition. • “Economic is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses. 3. Scarce means. . Unlimited wants. Means have alternative uses.1. 2. Robbins included material and non material goods . 2. His definition is universal.1. 3.widens the scope of economics. He made economics a positive science. . . now or in the future. among various persons and groups in society.• Economics Noble prize winner (1970) Paul Samuelson proposes a dynamic definition in his book Economics(1948) • Economics is the study of how people and society end up choosing with or without money to employ scarce productive resources that could have alternative uses to produce various commodities and distribute them for consumption. Economic analysis of the cost and benefits of improving patterns of resources use. Dynamism: The importance of time is brought in the definition. .1. Scarcity : Unlimited wants . Problem of choice: Definition explains problems of choice in the present and the future in dynamic conditions. 5. Wide scope: Economic choice exists not only in a monetary economy but also in a barter economy.scarcity of resources and alternative uses. Economic growth: His definition gave importance to economic growth 4. 3. 2. • J. • Clear and scientific distinction between the two terms made by Ragner Frisch in 1928. .S Mill was the first to use these terms in economics.• The French sociology philosopher Augustine Compte used the terms ‘static and dynamic’ for the first time in social science. ’ which means bringing to a stand still. It means a state of rest or no movement. • Static economy is thus a time less economy where no changes occur. methods of production. where five kinds of changes are conspicuous by their absence. .• The word ‘static’ is derived from the Greek ‘statike. The size of population. • Static is like a snapshot or a ‘still life' painting. the supply of capital. forms of business organization and wants of people. • According to Clark. • Economic dynamics is the running picture of the working of the economy. rates of change. .• Dynamic is the study of change . • Economic dynamics is concerned with time lags. • To study economics. two methods are used: Deductive method Inductive method • Deduction proceeds from general to particular while induction proceeds from particular to general. . It involves the process of reasoning from certain laws or principles which are assumed to be true. It as ‘a priori’ method and also called an abstract and analytical method 5. to analysis of facts. 3.1. Ricardo is regarded as the first economist who applied this method. 2. Ex. This method deduces conclusions from the truths established by other methods. . “Deduction as a descending process” in which we proceed from a general to principle to particular. 4. 6. the law of diminishing returns. It is intellectual method. . The use of mathematics brings exactness. 2. near to reality. 3. 4. This method is simple.1. Universal validity. 1. Inadequate data. This method is based on assumptions. 2. Criticized as simply an armchair analysis. . 3. • This method involves the process of reasoning from particular to general. • This method involves four stages: 1. verification.observation 2.generalization 4. . formation of hypothesis 3. • It as an ‘ascending process’. 1. Statistical method. Helps in future inquiries. 2. This method proceeds from particular to general. . 3. it is thus realistic. Dynamic. 1. Time consuming and costly method. 4. . Statistical numbers can be misused and misinterpreted. Probable. 2. 3. Differ from investigator to investigator for the same problem. involves economists taking generally accepted theory and applying those theories to something that is happening in the real world. APPLIED ECONOMICS • Applied Economics . with an eye toward determining what can reasonably be expected to happen next. . 3 Reasons why applying economic theories to current economic conditions can be useful Applied Economics gives us: True Pictures Sound Ideas Valuable Lessons . a household or a country helps to avoid attempts to dress up the situation so that it will appear to be worse or better than it actually is.True Picture Applying economics to the status of the economy of a company. Applied economics is a powerful tool that enables the true and complete picture to emerge. . so that it becomes possible to decide what to do and where to go from the current position. the usage of raw materials and the division of labor within the entity — come into play. Examining each aspect of the current economic condition will often yield sound ideas on ways to maintain aspects that are working at a reasonable rate of efficiency and strengthen areas where the performance is weak. Each element that is relevant to the contemporary mode of operation of the entity — including the purchase and sale of goods and services. .Sound Ideas Applied economics acts as a mechanism to determine what steps can reasonably be taken to improve the current economic situation. Applied economics is all about the application of theory to real-life situations. or at least minimize the impact. . This includes reviewing what steps were taken to improve or correct similar situations and how those strategies can be employed to keep the economy flowing in a direction that will preclude a repeat of the undesired situation.Valuable Lessons Applied economics can teach valuable lessons on how to avoid the recurrence of a negative situation. so the process can help develop an understanding of why a condition took place. it bridges economic theory and economics in practice.BUSINESS ECONOMICS/MANAGERIAL ECONOMICS Business economics (also called managerial economics). Lagrangian calculus (linear). for example through the use of operations research and programming . is a field of applied economics that applies microeconomics analysis to specific business decisions. If there is a unifying theme that runs through most of business economics it is the attempt to optimize business decisions given the firm's objectives and given constraints imposed by scarcity. As such. It draws heavily from quantitative techniques such as regression analysis and correlation. • It is goal oriented and prescriptive – it deals with how decisions should be made by business economists to achieve organizational goals.this implies that it deals with identification of economic choices and allocation of scarce resources.Common features of Business Economics • It is concerned with economic decision making. . analogous to using a road map. a road map abstracts away from non-essential characteristics and concentrates on what is relevant for the task at hand. • It provides a link between microeconomics and decision making – using economic theory. .Common features of Business Economics • It is pragmatic – it deals with those analytic tools which help in improving decisions. in many ways. . • It is concerned with normative micro- economics and not with positive micro economics. • It utilizes an understanding of macro- economics to analyze the external conditions which are relevant to the business.Nature of business economics • It is micro-economics in nature where the unit of study is a firm. . • It is both conceptual and metrical. Business economics provides the necessary conceptual tools to achieve this.Nature of business economics • It concentrates on making economic theory more application oriented. While economic theory tries to solve the complicated theoretical issues. An intelligent application of quantitative techniques to business presupposes careful judgment and thinking about the nature of the particular problem to be solves. business economics tries to introduce complications which the economists ignore by assuming them to be constant. Nature of business economics • It helps in making rational choices. Business economics continues to face the problem of scarcities and. consequently. must continue to make choices. . Business economics is goal-oriented and aims at achieving maximum objectives. Application of business economics . then the next best alternative has been given up. The benefit of the next best alternative which has been sacrificed due to choice of the best alternative is known as the opportunity cost of the best alternative. • When a choice is made in favor of a particular alternative that appears to be most desirable of all the given alternatives. .Opportunity cost • Opportunity cost is the cost of alternative opportunity given. Opportunity cost • For example – "Kobe Bryant" . . Compensation for uncertainty. • The following are reasons behind it – 1. Preference for present consumption.Time value of money • The basic valuation of investment models are based on the concept that ‘money has a time value’ i. . 2.e. 3. P100 received today has higher value than P100 received after 5 years. The re-investment opportunity. . The Development of Philippine Economics Pre- Hispanic PNOY Gov’t Fill in the economic development of the Philippines and the significant policies in each stage. . (RBSI) • Pindyck.com • Gans. • www.Slideshare.Sources: • Manquee book managerial economics.Wikipedia. Rex Bookstore Inc.Google. Rubinfield (2009) Microeconomics 7th ed. Stonecash. Mankiw (2009) Principles of Economics 4th ed.com • www. Dinio. King.com • www. Pearson Prentice Hall . Cengage Learning Australia Pty limited • Pagoso. Villasis (2000) Introductory Microeconomics rev ed.