UTILITY AND APPLICATIONS OF APPLIED ECONOMICS (MODULE 2)

Basic economic problem

(Unemployement,poverty,booming population,infrastrucutre)

how to produce?

- is a questins on the production method that will be used to produce goods and services. -this refers to the resource mix and technology that will be applied in production. -the system must select the proper combination of economic resources in producing the right amount of output. -the quality of output must comes firs before the quantity

Gross Domestic Product (GDP)

- the total value of production realized by resident producers in economic territory. -made in the phillipines.

mixed systems

-Countries whose political systems exhibit some democratic and some authoritarian elements. -Also known as dual systems. Sometimes the term is used to describe a market system under strict regulatory control. -Many countries in the West follow a mixed system. Most industries are private, while the rest, comprised primarily of public services, are under the control of the government.

2 measuring the economy

-gross domestic product (GDP) -gross national product (GNP)

for whom to produce?

-is about the market for goods and services. -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? -Something to do with distribution; once the goods are produced, how shall they be distributed?

what to produce and how much?

-society must decide what goods and services should be produced in the economy and determine the quantity of these goods to be produce. - the system must determine the desires of the people and the goods and services must be based on the needs of the consumers. factors to consider; A. availabilty of resources B. physical environment C. customs and traditions of people

GROSS NATIONAL PRODUCT (GNP)

-the total value of income earned by a countrys residents regardless of where the income came from. -made by filipinos.

THREE BASIC ECONOMIC PROBLEM

-what to produce? -how to produce? -for whom to produce?

Four Economic System

1.Traditional economy 2.Command economy 3.Market economy 4.Mixed system

SCIENTIFIC APPROACH IN THE EMPIRICAL TESTING OF ECONOMIC THEORY

This scientific approach involves the ff. steps: 1.State the propositions or condition that are taken as given and do not need further investigation, as the basic starting point of investigation. 2.Observe facts in connection with the activity that you want to theorize. 3.Apply the rules of logic to the observed facts to determine causal relationships between observed factors and to eliminate facts that are unnecessary and irrelevant. 4. Establish a set of principles such that formulated hypotheses may be tested as to whether they are valid or not. 5. Use statistics and econometrics as empirical proof in testing the hypotheses.

BOOMING POPULATION

can be connected with the issue of scarcity.when the population becomes too big ,economic resources may no longer be enough to support the growing population.

POVERTY

is a state of being extremely poor. it is a condition where peoples basic needs for food,clothing and shelter are not being met.

unemployement

is situation where people who are willing and able to work are seeking work but cannt find jobs.

Infrastrusture

the basic facilities,services and installations needed for the operation of a community or society (e.g. roads,transporatations,communication,power)

Basic economic problem (scarcity)

the existence of scarcity creates the basic economic problem faced by every society,rich or poor and how to make the best use of limited productive resources to satisfy human needs and wants.

GNP/GDP: Income Approach

•Account and classify resource uses and contributions that make up the production stages. •GNP would simple (simply) be the sum of all factor payments from the raw material to the final product stage. FROMULA; GNP = GDP + income made by firms/citizens abroad - income earned by foreign firms/nationals.

ECONOMICS AS AN APPLIED SCIENCE

•Applied Economics is the application of economic theory and econometrics in specific setting with the goal of analyzing potential outcomes. •Applying economic theory in our lives means trying to address actual economic issues and do something about

Traditional economy

•Based on traditions and practices upheld over the years and passed on from generation to generation. Methods are stagnant and therefore not progressive. Traditional societies exist in primitive and backward civilizations •Based on goods, services, and work, all of which follow certain established trends. It relies a lot on people, and there is very little division of labor or specialization. •In essence, it is very basic and the most ancient of the four types. •It is commonly found in rural settings in second- and third-world nations, where economic activities are predominantly farming or other traditional income-generating activities.

Economic Systems

•Is the means through which society determines the answers to the basic economic problems mentioned. •is a means by which societies or governments organize and distribute available resources, services, and goods across a geographic region or country. •Regulate factors of production, including capital, labor, physical resources, and entrepreneurs. •Encompasses many institutions, agencies, and other entities.

market economy

•Most democratic form of an economic system. •Based on the working 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. •Based on the concept of free markets; there is very little government interference. The government exercises little control over resources, and it does not interfere with important segments of the economy. Instead, regulation comes from the people and the relationship between supply and demand

POSITIVE ECONOMICS VERSUS NORMATIVE ECONOMICS

•Positive economics deals with "what is" - things that are happening such as the current inflation rate, the number of employed laborers, and the level of the Gross National Product (GNP). Positive economics is an overview of what is happening in the economy that is possibly far from what is ideal. •Normative economics refers to "what should be" - that which embodies the ideal rate of population growth or the most effective tax system. In other words, it focuses on policy formulation that will help to attain the ideal situation

GNP/GDP: Expenditure Approach

•Products are final when they have reached the highest levels of processing in the economy for different uses in the given period. They are household and individual consumption (C), and government expenditure on goods and services including labor (G) and exports (X). •Gross Domestic Product = Consumer Spending + Investor Spending + Government Spending + (Exports - Imports). FORMULA; •GNP=C+I+G+(X-M)

mixed economy

•The Philippines has a mixed economic system that includes a variety of private freedom, combined with centralized economic planning and government regulation. The Philippines is a member of the Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (ASEAN). •Other countries with mixed system: England, France, and India, Canada, US and mostly in Asian Countries which is a member of APEC and ASEAN

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 true in dictatorial, socialist, and communist nations •Also known as planned system, the command economic system is common in communist societies since production decisions are the preserve of the government.

WHY IS ECONOMICS IMPORTANT?

•To budget and properly allocate the use of whatever resources are available. •It will help one understand how to make more rational decisions in spending money, saving part of it, and even investing it. •Enables us to look on how the economy operate, and if leaders are effective in trying to shape up the economy.