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Applied Economics
Module 1

Economics as Social and

Applied Science in Terms of
Nature and Scope

JUNE NEIL C. BACLAAN

NAME OF STUDENT
BSHM
PROGRAM
3B
YEAR / SECTION
MA. LEE NEIL A. CAPARO
Faculty

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 OVERVIEW OF THE MODULE

PURPOSE OF THE MODULE

This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.

TITLE AND DESCRIPTION

Applied Economics: This course deals with the basic principles of applied economics, and
its application to contemporary economic issues facing the Filipino entrepreneur such as
prices of commodities, minimum wage, rent, and taxes. It covers an analysis of industries for
identification of potential business opportunities. The main output of the course is the
preparation of a socioeconomic impact study of a business venture.

MODULE GUIDE
This module is divided into five (6) parts, the Introduction, 4As (Activity, Analysis,
Abstraction and Application), Evaluation, and Express as follows
INTRODUCTION. This section gives an overview of the lesson and the
learning outcomes that are expected to be gained at the end of the
lesson.

ACTIVITY. This is an interactive strategy to elicit learner’s prior learning

experience. It serves as a springboard for new learning. It illustrates the
principle that learning starts where the learners are. Carefully structured
activities such as individual or group reflective exercises, group
discussion, self-or group assessment, dyadic or triadic interactions,
puzzles, simulations or role-play, cybernetics exercise, gallery walk and
the like may be created.

ANALYSIS. In this section essential questions are included to serve as

guide for the teacher the teacher in clarifying key understanding about at
hand. Critical points are organized to structure the discussion allowing
the learners to maximize interactions and sharing ideas and opinions
about expected issues. The last questions or points taken should lead
the learners to understand the new concepts or skills that are to be
presented in the next part of the lesson.

ABSTRACTION. This section outlines the key concepts, important skills

that should be enhanced, and the proper attitude that should be
emphasized. This is organized as a lecturette that summarizes the
learning emphasized from the activity, analysis and new inputs in this
part of the lesson
 OVERVIEW OF THE MODULE

APPLICATION. This section of the module in each lesson consolidate

what has been learned and make it relevant.

EVALUATION. This refers to the substantive content of the

curriculum, facts, and information that the students acquire and how
we want students to express or provide evidence of what they know.

SUMMARY. This section gives the summarization of a certain unit.

EXPRESS. This refers to the learners’ reflections which will serve as

feedback after reading and accomplishing all the tasks in a unit.

MODULE OUTCOMES

CO1. Analyze and propose solution/s to the economic problems using the principles
of applied economics

LO1: Differentiate economics as social science and applied science in terms

of nature and scope

MODULE REQUIREMENTS

The requirement of this module is to accomplish all tasks, activities and

assessments.
 KEY TERMS

 Scarcity - insufficiency of resources to meet the wants of consumers and

insufficiency of resources for producers that hamper enough production of goods
and services.

 Economics - is the social science that involves the use of scarce resources to
satisfy unlimited wants. A social science that deals with the production,
distribution, and consumption of goods and services

 Econometrics - is the application of statistical and mathematical theories to

economics for the purpose of testing hypotheses, forecasting future trends, and
the results of econometric are compared and contrasted against real life
examples.

 Macroeconomics - analyzes the entire economy and the issues affecting it.

 Microeconomics - examines the behavior of individual entities such as the

consumer, the producer, and the resource owner or firms within the market.

 Economic Theory - explains economic phenomena, to interpret why and how

the economy behaves and what is the best to solution.

 Applied Science - is the study of observing how theories work in practice. The
discipline may be practiced at macroeconomic or microeconomic levels.

 Social Science - study of society and how people behave and influence the
world around them.
 MODULE PRE-ASSESSMENT

The activity aims to give you a clear understanding of the reason

why people have to practice economics.

Directions: Identify what scarce resource is represented in each

picture. Analyze the supporting sentence of each item and write
MICRO if it belongs to microeconomics and MACRO if it is
macroeconomics. Jumbled word is provided to guide you identify
the scarce resource asked. Write your answers in space
provided below the hint/clue.

OOFD
1. Many people are not able to eat enough in a day
because of the lockdowns during the pandemic. _____

2. People are having a problem on saving money OMNYE

due to Inflation or increase in the price level of
goods and services. ______

3. Global warming has caused water resources in

some areas to run-short of. ERTAW
______

4. Overpopulation and oversupply of the labor force TNEMPLMEYO

have caused many people to be unemployed. ____________
 MODULE PRE-ASSESSMENT

5. Some students in rural areas are having trouble NETINRET AESSCC

doing their work due to lack of internet access. _______________

6. There’s a shortage of school supplies in the LOOHCS SUPPEILS

market of some remote islands due to the
_______________
delayed delivery from the suppliers caused by
restrictions on transportation during the
pandemic.

7. Medical practitioners do not have enough LOOHCS SUPPEILS

supplies to protect themselves during the COVID- _______________
19 pandemic.

https://pixers.ca/stickers/blank-sheet-of-paper-41485361
 LEARNING PLAN

INTRODUCTION

Scarcity is the reason why people have to practice economics.

Economics, as a study, is the social science that involves the use of
scarce resources to satisfy unlimited wants.
Economics will help the students understand why there is a need
for everybody, including the government, to budget and properly
allocate the use of whatever resources are available of both agents
Macroeconomics and Microeconomics.
In this module, we will focus economics as social science and
applied science by differentiating it, understanding how an economic
theory puts in application and the importance of econometrics for new
policies.
It covers many different learning situations where you can relate your
personal experiences to different practical scenarios about Applied
Economics.
 LEARNING PLAN

ACTIVITY

Directions: Evaluate the following situations and classify if the situation

considers economics as Social Science or Applied Science. You will be
given a hint of what is meant by social and applied. Write the letter of
your answer in the table provided below.

Social – explain how a particular social group or socioeconomic class

behaves within a society, including their actions as consumers.
Applied - application of economic theory to determine the likely
outcomes associated with various possible courses of action in the real
world

A. Economics students analyze how to maximize the use of available resources to

overcome scarcity
B. Motorists complain of high gasoline prices
C. Philippine congress passed the Value Added Tax Law to strengthen the Philippine tax
system
D. People have no freedom of choice in arriving at decisions on what to buy
E. People always complain about having not enough -- not having enough money to pay
one’s debts, not enough food on the table, not enough income to meet all the family’s
needs.
F. Business understands Laws of supply and demand by combining past sales data and
marketing research regarding their target market and production decisions

As Social Economics As Applied Economics

1. 1.

2. 2.

3. 3.
 LEARNING PLAN

ACTIVITY

Based on the activity found in task 2, can you now define economics as
social science and applied science?

Directions: In the box, identify the sentences that define Economics as

social science and Economics as applied science. Write the letter of
your answer in the table below.

A. the study of society and how people behave and influence the world
around them.
B. is the application of economic theory and econometrics in specific
settings with the goal of analyzing potential outcomes.
C. assesses the relationship between the consumption and production of
goods and services in an environment of finite resources.
D. application of economic principles and theories to real situations and
trying to predict the outcomes.

Economics as Social Science Economics as Applied Science

1. 1.

2. 2.
 LEARNING PLAN

ANALYSIS

Let’s analyze the flow…

As illustrated below, analyze the circular flow of the economy and

answer the following questions

1. By looking at the diagram, do you think there’s an economic interaction between

households and firms? Why or why not?
2. How do households and firms interact with each other in a modern economy?
3. What is the role of the household in an economy?
4. What is the role of a firm in an economy?
5. When each agent doing their role, why do you think scarcity is still present in an
economy?

Note: Write your answer on the answer sheet provided in the next page.
 LEARNING PLAN

1.

2.

3.

4.

5.
 LEARNING PLAN

ABSTRACTION

Everybody goes through a day faced with constraints or limitations: motorists

complain of high gasoline prices, times when people suffer due to a shortage of
chicken in the market, or insufficient allowance for a student who needs to buy books
and school supplies. People always complain about not having enough-not enough
food on the table, not enough money to pay one’s debts, or not enough income to
meet all the family’s needs. This, in effect, is the existence of what we call scarcity,
that is, insufficiency of resources to meet the wants of consumers and insufficiency of
resources for producers that hamper enough production of goods and services

Scarcity is the reason why people have to practice economics. Economics, as

a study, is the social science that involves the use of scarce resources to satisfy
unlimited wants. Part of human behavior is the tendency of man to want to have as
many goods and services as he can. However, his ability to buy goods and services
is limited by his income and purchasing power. It is therefore in this context that man
has to practice economics.

Economics is derived from the ancient Greek word oikonomia—meaning the

management of a family or a household.

Well-known economist Alfred Marshall described economics as a study of

mankind in the ordinary business of life. It examines part of the individual and social
action that is most closely connected with the attainment and use of material
requisites of well-being.

Because of the presence of scarcity, there is a need for man to make decisions
in choosing how to maximize the use of the scarce resources to satisfy as many
wants as possible. A homemaker who has a monthly budget needs to decide on how
to utilize it to pay the rent, to buy food, to pay the children’s tuition fees, and to buy
new clothes and shoes. If the budget is not enough, then the homemaker has to give
up some of these things. She needs to make a choice. If she decides not to buy new
shoes for her children at the start of the school year, then this is the choice to give up.
 LEARNING PLAN

ABSTRACTION

Figure 2
Economics is defined as the social science that deals with the production,
distribution, and consumption of goods and services. Evolved in the 19th century, the
economic studies have become one of the most significant studies of modern days.
From a small shop to a country, Economics plays a crucial role in the efficient running
of both. No business can flourish without applying the principles of economics. The
study of economics is extensive and varied. The nature and scope of economics
depend upon the interaction of economic agents and how economies work. Let’s
analyze the nature and scope of economics deeply.

Nature of Economics

The nature of economics deals with the question that whether economics falls into
the category of science or arts. Various economists have given their arguments in
favor of science while others have their reservations for arts.
 LEARNING PLAN

ABSTRACTION

Economics is treated as a social science because of the following features:

• It involves a systematic collection of facts and figures.

• Like in science, it is based on the formulation of theories and laws.
• It deals with the cause and effect relationship.

These points validate that the nature of economics is correlated with science. Just
as in science, various economic theories are also based on logical reasoning.

Scope of Economics

Economists use different economic theories to solve various economic problems in

society. Its applicability is very vast. From a small organization to a multinational firm,
economic laws come into play. The scope of economics can be understood under two
subheads: Microeconomics and Macroeconomics.

Economics as a Social Science

Economics is a social science because it studies human behavior just like

psychology and sociology. Social science is, broadly speaking, the study of society and
how people behave and influence the world around them. As a social science,
economics studies how individuals make choices in allocating scarce resources to satisfy
their unlimited wants.

So, to define Economics as a Social Science, it is a science concerned with using

scarce resources to obtain the maximum of the unlimited wants of society

Economics = Social Science

We use real-life scenarios to build models
No scientific experiments! upon, with which assumptions are made
 LEARNING PLAN

ABSTRACTION

Economics is a social science. This means that economics has two important
attributes. Economics studies human activities and constructions in environments with
scarce resources and uses the scientific method and empirical evidence to build its base
of knowledge.

The evaluation of human interactions as it relates to preferences, decision making,

and constraints is a significant foundation of economic theory. The complexity of the
dynamics of human motivation and systems has led to the establishment of assumptions
that form the basis of the theory of consumer and firm behavior, both of which are used
to model circular flow interactions within the economy.

Circular Flow of the Economy

Economics provides an accessible foundation for understanding the complexity of
the interactions in the world. For example, the circular flow diagram displays the
economic framework related to the dynamic interconnectedness of economic agents. In
the graph above the display is limited to households and firms but other depictions of
circular flow incorporate the government and international trading partners.

Economics provides distilled frameworks to analyze complex societal interactions,

as in the case of consumer and firm behavior. An understanding of how wages and
consumption flow between consumers and producers provide agents with an ability to
understand the symbiosis of the relationship rather than fixating on the contentious
components that surface from time to time.
 LEARNING PLAN

ABSTRACTION

By developing an understanding of the foundations of economics, individuals can

become better decision makers with respect to their own lives and maintain a balance
with respect to an externality that has the potential to supplement or deter their plans.
Since economic theories are a basis of decision making and regulatory policy, being
knowledgeable about economics foundations allows an individual to be an active and
aware participant rather than a passive economic agent.

Economics is a social science that assesses the relationship between the

consumption and production of goods and services in an environment of finite resources.
A focus of the subject is how economic agents behave or interact both individually
(microeconomics) and in aggregate (macroeconomics).

Microeconomics examines the behavior of individual entities such as the

consumer, the producer, and the resource owner or firms within the market. It is more
concerned with how goods flow from the business firm to the consumer and how the
resources move from the resource owner to the business firm. It is also concerned with
the process of setting prices of goods that are also known as Price Theory.

Microeconomics examines individual economic activity, industries, and their

interaction. It has the following characteristics:

 Elasticity: It determines the ratio of change in the proportion of one variable to

another variable. For example- the income elasticity of demand, the price
elasticity of demand, the price elasticity of supply, etc.
 Theory of Production: It involves an efficient conversion of input into an
output. For example- packaging, shipping, storing, and manufacturing.
 Cost of Production: With the help of this theory, the object price is evaluated
by the price of resources.
 Monopoly: Under this theory, the dominance of a single entity is studied in a
particular field.
 Oligopoly: It corresponds to the dominance of small entities in a market.
 LEARNING PLAN

ABSTRACTION

Macroeconomics analyzes the entire economy and the issues affecting it.
Primary focus areas are unemployment, inflation, economic growth, and monetary and
fiscal policy. Macroeconomics is about the nature of economic growth, the expansion of
productive capacity, and the growth of national income.

It is the study of an economy as a whole. It explains broad aggregates and their

interactions “top down.” Macroeconomics has the following characteristics:

 Growth: It studies the factors which explain economic growth such as the
increase in output per capita of a country over a long period of time.
 Business Cycle: It advocates the involvement of the central bank and the
government to formulate monetary and fiscal policies to monitor the output
over the business cycle.
 Unemployment: It is measured by the unemployment rate. It is caused by
various factors like rising in wages, a shortfall in vacancies, and more.
 Inflation and Deflation: Inflation corresponds to an increase in the price of a
commodity, while deflation corresponds to a decrease in the price of a
commodity. These indicators are valuable to evaluate the status of the
economy of a country.

Economics as an Applied Science

Applied Economics - is the study of economics in world situations as opposed to

the theory of economics. It is the application of economic principles and theories to real
situations and trying to predict the outcomes.
Put simply; applied economics is the study of observing how theories work in practice.
The discipline may be practiced at macroeconomic or microeconomic levels.

Macroeconomics’ refers the whole aggregate economy, while Microeconomics’

looks at economics at the individual consumer company level.
 LEARNING PLAN

ABSTRACTION

Figure 3. Economic Theory is all about thinking things

up, while Applied Economics is about trying things out
Applied Economics - is the application of economic theory and econometrics in
specific settings with the goal of analyzing potential outcomes. As one of the two sets of
fields of economics (the other set being the core), it is typically characterized by the
application of the core, referring to economic theory and econometrics, as a means of
dealing with practical issues in fields that include demographic economics, labor
economics, business economics, agricultural economics, development economics,
education economics, health economics, monetary economics, economic history, and
many others. John Neville Keynes is attributed to be the first to use the phrase “applied
economics” to designate the application of economic theory to the interpretation and
explanation of particular economic phenomena.
 LEARNING PLAN

ABSTRACTION

What is Econometrics?

Econometrics – is the application of statistical and mathematical theories to

economics for the purpose of:

 Testing hypotheses
 Forecasting future trends
 The results of econometric are compared and contrasted against real life examples.

Part of Econometrics is converting economic

theories into data that policy makers can use

Econometrics Example:

Real life application of econometrics would be to study the hypothesis that as a

person’s income increases, spending increases
 LEARNING PLAN

ABSTRACTION

What is the Importance of Applied Economic Application?

1. Applying economics to a company, household or a country helps sweep aside all

attempts to dress up a situation so that it will appear worse or better than it actually is.
 applied economics becomes a powerful tool to reveal the true and complete
situation in order to come up with things to do

Example:

Applied economics can assess the profits of a certain company. The result can help the
executives to do some strategies in order to boost its sales.

2. Applied economics acts as a mechanism to determine what steps can reasonably be

taken to improve the current economic situation
 to examine each aspect, one can strengthen areas where performance is weak

Example:
 Purchase of goods and services
 Usage of raw materials
 Division of labor within the entity (e.g. firm, company, agency)

3. Applied economics can teach valuable lessons on how to avoid the recurrence of a
negative situation, or at least minimize the impact.
 to review what steps were taken to improve and correct similar situations and
continue good strategies to keep the economy flowing in a correct direction

We should be able to improve human welfare among Filipinos by the investigation

and analysis of economic problems in the real world. Applying economic theory in our
lives means trying to address actual economic issues and be able to do something
about it. The concept of scarcity and choice should encourage us as individuals to help
in our own way to provide solutions to the country’s economic problems.
 LEARNING PLAN

APPLICATION
Task 5: Let’s check your understanding…

Directions. Give what is asked for in each item. Write your answers in
the space provided in every items..

1. Explain briefly and concisely the economic process where it shows why people have
to practice economics by analyzing the flow of the diagram/illustration below.

1.
 LEARNING PLAN

APPLICATION

2. The scope of economics can be understood under two subheads: Microeconomics and
Macroeconomics. Explain in the Venn diagram their differences and similarities.

Micro Macro
 LEARNING PLAN

APPLICATION

3. What is the contribution of econometrics in solving economic issues? Explain the

illustration given below.

3.
 LEARNING PLAN

APPLICATION

4. Explain applied economics application by stating its importance and their examples.
Make use of a diagram to show your explanation. Draw your own diagram in the next
page of this module.
LEARNING PLAN

APPLICATION
 LEARNING PLAN

EVALUATION
Task 1: Let’s prove it now…

Direction: Do what is asked. Write your in the space provided..

1. Why is economics deeply rooted in the concept of scarcity?

2. Why is economics important in everyday life?

 LEARNING PLAN

EVALUATION

3. Why economics considered as social science and applied science?

4. As a student, how does Applied Economics work in your life situation and your family
as a whole?
 LEARNING PLAN

EVALUATION

5. Give at least (1) importance of Applied Economics and explain its contribution to the
consumers or the producers as well.

RUBRICS
Excellent Proficient Developing Poor
Criteria
(4pts) (3pts) (2pts) (1pt)
Information and evidence
are accurate, appropriate,
and integrated effectively

Claims and ideas are

supported and elaborated
Sentence form and word
choice are varied and
appropriate

Creativity/originality is
evident
 LEARNING PLAN

EVALUATION
Task 2. Let’s check it out…
Directions: Read carefully the statements or questions below and
write your answer on the space provided before the number.
I. Classify the following topics. Write MIC if it falls under Microeconomics; MAC
if it falls under Macroeconomics.

1. The inflation rate in the Philippines in the last quarter of 2019 was
4.8%.

2. A P340-billion deficit in the Philippine budget is expected in the year

2021.

3. Prices of Tire Less vehicles are predicted to go up in December.

4. Garlic prices in the past months have risen because producers

hoarded their supplies in their bodega.

5. The unemployment rate has dropped because of the increase in the

number of OFWs.

6. In the past year, Soda Cola was named the fastest selling product in
the market.

7. Rental on land could not be increased by landowners because of

the Rent Control Law.

8. Prices of apples and grapes tend to increase during the Christmas

season.

9. The Philippine economy grew at the rate of 5.8% in 2019.

10. Philippine congress passed the Value Added Tax Law to

strengthen the Philippine tax system.
 LEARNING PLAN

EVALUATION
Task 2. Let’s check it out…
Directions: Multiple Choice: Write only the letter of the correct
answer. Encircle the letter of your choice

1. Is the study that attempts to explain how an economy operates and how the
consumer attempts to maximize his/her wants within limited means.
A. Economics C. scarcity
B. Microeconomics D. Macroeconomics
2. Is a condition where there are insufficient resources to satisfy all the needs and
wants of a population.
A. Scarcity C. insufficiency
B. Economics D. none of the above
3. Economics as because it studies of observing how theories work in practice
A. Social C. psychology
B. Applied D. Scarce
4. Economics as science, because it studies human behavior and how
individuals make choices in allocating scarce resources to satisfy their unlimited
wants.
A. Applied C. social
B. Scarce D. econometrics
5. An applied economics where there is an application of statistical and
mathematical theories to economics for the purpose of testing hypotheses,
forecasting future trends and compare and contrast against real life.
A. Microeconomics C. Economics
B. Macroeconomics D. Econometrics
 LEARNING PLAN

SUMMARY

III. Essay:

Economics, as a study, is the social science that involves the use of scarce
resources to satisfy unlimited wants.
Economics is derived from the ancient Greek word oikonomia—meaning the
management of a family or a household.
Economics is defined as the social science that deals with the production,
distribution, and consumption of goods and services.
The nature of economics deals with the question that whether economics falls
into the category of science or arts. Various economists have given their arguments
in favour of science while others have their reservations for arts.

Economics is treated as a social science because of the following features:

 It involves a systematic collection of facts and figures.
 Like in science, it is based on the formulation of theories and laws.
 It deals with the cause and effect relationship.

Economics is a social science because it studies human behavior just like

psychology and sociology. Social science is, broadly speaking, the study of society
and how people behave and influence the world around them.

Applied Economics is the study of economics in world situations as opposed to the

theory of economics. It is the application of economic principles and theories to real
situations and trying to predict the outcomes.

Econometrics – is the application of statistical and mathematical theories to

economics for the purpose of:

 Testing hypotheses
 Forecasting future trends
 The results of econometric are compared and contrasted against real life
examples.
 LEARNING PLAN

REFERENCES

 Cengage Learning (2017). Applied Economics: An Introduction, Quezon

City: Abiva Publishing House Inc.

 Dinio, R. P. & Villasis, G. A. (2017). Applied Economics. Sampaloc,

Manila, Rex Book Store

 Tereso, T.S. (2016). Applied Economics for Progressive Philippines

Quezon City, The Phoenix Publishing House Inc.,
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MISSION
To advance the
VISION university through
A state university innovative human
leading in research and resource, responsive
innovation for human research, sustainable
empowerment and production and demand-
societal development. driven extension
services.

CORE VALUES
Brilliance, Innovation, Progress, Service, Unity

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