Applied Economics KEM

Applied
Economic
s
What is
Every Economics?
day, we always encounter constraints and
limitations: shortage of money to buy food, high fares
of public vehicles, insufficient supply of vaccines and
etc., especially in these times of pandemic. We are
always challenged with the scarcity of resources.
According to Dr. Dinio from her book, Applied
Economics, Scarcity refers to the gap between the
limited resources that we have and our limitless
wants. There are two types of scarcity: relative and
absolute. Relative Scarcity is when the supply a
certain good does not meet the demand for it.
Absolute Scarcity, on the other hand, is when a good
is naturally limited and there is no possible way to
increase its supply.
What is
Economics
resources?
•Economic resources are the resources
that are used for carrying out
economic activities. Factors of
production are the inputs into the
production process, can be classified
into four types;
Economics resources
Command Economic System
economic system where decision-making is

centralized to a group of planning
committee, usually the government. This
type of system can be observed commonly
on communist and dictatorial societies
where the government exercises full
control over the resources.
Market Economic
Market
System economic system is based on the concept of free
market. This is the most democratic type of economic
system. Decision- making is based on the demand and
supply of a good or service. However, it is mostly theoretical.
In reality, pure market system doesn’t exist because all
countries, no matter how democratic it is, are subjected to a
certain degree of central authority to regulate monopolies
and fair trade.
Mixed System
also known as the dual system. This system is the most
realistic and is the norm globally. It combines the
feature of the market and command systems. It also
takes advantage of the benefits the both has to offer.
The challenge on this system is finding the right
balance between free markets and government
control.
Basic Economic
Problems
What to produce?
Societies must decide what goods and services to
produce to meet their needs and wants. Societies
must also decide the quantities to be produced.
How to produce?
it talks about the production phase to provide the goods
or service. Societies must decide on the optimal
combination of factors of production (land, labor, capital)
necessary for the production.
For whom to produce?
societies must decide who will benefit from the output of its
economic activity and how much can they get. This
refers to the problems of distribution process.
Branches of
Economics
Macroeconomics
focuses on the economy, as a whole. It
tackles broad topics such as growth of a
country’s economy, number of employed,
unemployed and underemployed people,
inflation rate of prices, overall expenses, levels
of imports and exports, and etc.
Macroeconomics answers questions such as
what determines the degree of economic
activity in a country, how many goods and
services a country can actually produce,
what causes the ups and downs of a
Microeconomic
fsocuses more on each individual’s behavior,
patterns and practices such as workers,
households, consumers, firms, businesses
and etc. It focuses on how households
manage their budget, how people decide
whether to work part-time or full-time
job, how a business finances itself, how
prices of a certain good suddenly increase or
decrease, when will firms decide to expand
or close its operation, how consumers
behave and decide on how many goods
and services they will buy, and etc.
Why is Economics
Important?
Why is it right to study Economics?
Well, a basic understanding of
economics makes you a better critical
thinker. You will be able to understand
economic news and articles on
newspapers, television and be able to
evaluate one’s argument on the topic.
You will be more rational and wiser in
spending your money, investing and
saving some of it.
On a larger scale, economics helps
government officials, legislators and leaders
to formulate national plans and projects
that would boost the growth of its country
or nation. As what Paul Samuelson and
Nordhaus said on their book, “Throughout
the world, economists are laboring to
collect data and improve our understanding
of economic trends”. In addition, as they
said, economists are studying to explain a
wide range of activities, ranging from
international to regional issues such as
unemployment rate, inflation rate, and so

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economic system where decision-making is

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