Senior High School

Applied Economics
Module 1:
Economics as Social Science
and Applied Science

AIRs - LM
 ABM – APPLIED ECONOMICS
Module 1: Economics as Social Science and Applied Science
Second Edition, 2021

Copyright © 2021
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form
without written permission from the copyright owners.

Development Team of the Module

Author: Renalyn A. Jimenez

Editor: SDO La Union, Learning Resource Quality Assurance Team
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LU_ Applied Economics_Module 1

 SHS

Applied Economics
Module 1:
Economics as Social Science
and Applied Science

LU_ Applied Economics_Module 1

 Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear
learners, can continue your studies and learn while at home. Activities,
questions, directions, exercises, and discussions are carefully stated for you
to understand each lesson.

Each SLM is composed of different parts. Each part shall guide you
step-by-step as you discover and understand the lesson prepared for you.

Pre-tests are provided to measure your prior knowledge on lessons in

each SLM. This will tell you if you need to proceed on completing this module
or if you need to ask your facilitator or your teacher’s assistance for better
understanding of the lesson. At the end of each module, you need to answer
the post-test to self-check your learning. Answer keys are provided for each
activity and test. We trust that you will be honest in using these.

In addition to the material in the main text, Notes to the Teacher are
also provided to our facilitators and parents for strategies and reminders on
how they can best help you on your home-based learning.

Please use this module with care. Do not put unnecessary marks on
any part of this SLM. Use a separate sheet of paper in answering the exercises
and tests. And read the instructions carefully before performing each task.

If you have any questions in using this SLM or any difficulty in

answering the tasks in this module, do not hesitate to consult your teacher
or facilitator.

Thank you.

LU_ Applied Economics_Module 1

 Target

What is Economics?
Economics does not teach man how to get rich, nor does it provide magic
formulas as to what business one should venture into, how to get a job and what
kind of products he should manufacture. Economics simply explains why some
businesses succeed while others do not and why a particular economic event
occurs. This learning module will describe economics as a social science and its
relationship to other sciences.

After going through this module, you are expected to:

Differentiate economics as a social science and applied science in terms of
nature and scope.
(ABM_AE12-Ia-d-1-2)

Subtasks:
1. Define what economics is
2. Identify the concerns and types of economics
3. Demonstrate understanding about the importance of economics in your daily
lives
4. Compare and contrast microeconomics and macroeconomics

LU_ Applied Economics_Module 1

 Jumpstart

F or you to understand the lesson well, do the following activities. Have fun
and good luck!

Activity 1: Arrange Me!

Direction: To further check your knowledge of our topic, arrange the words in
column A and refer your answers to the given clues in column B. Write your answers
on a separate sheet of paper.

A B
1. COEONSICM It is a social science that deals with how
people organize themselves to share
scarce resources in order to produce
goods and services that satisfy the
infinite and multiplying wants and needs
of man.
2. YITSACRC This means that there is shortage of
supply or has limited resources.
3. ACRMOOCEONSCIM It is a branch of economics that studies
the behavior and performance of an
economy as a whole.
4. OICRMOCNEOCISM It is a branch of economics that studies
the individuals and industry’s behavior
in decision making and allocation of
resources.
5. LAINTEESS OODGS A type of good which satisfy the basic
needs of man.

LU_ Applied Economics_Module 1

 Discover

NATURE AND SCOPE OF ECONOMICS

Every man of any distinction makes an economics decision every day. Deciding
on how much to spend and save, the kind of food to buy, the type of school to enroll,
the amount of time for work and leisure, and many more are only some situations
where one applies economics. Thus, it is very important to understand the various
issues and intricacies concerning economics. (Silon et.al 2009)

If you are going to conduct research, you will have different aspects to
consider. For example, you are tasked to you are tasked to research the economic
situation of families in your locality”. You are going to look at the annual income of
these families, including their buying behavior in the market, what specific products
they often purchase, and many more. You might also consider the overall view of
the entire economic system. This will include the causes why these families limit
their spending capabilities, what are the environmental factors that affect their
purchasing power; or what makes them satisfied in their buying behavior. These
approaches will examine the same, but the main points differ from each other.
Similarly, microeconomics and macroeconomics examine the same economy, but
they have distinct perspective. In studying the buying behavior of the people,
macroeconomics is about the particular behavior and spending habits of the
individual which help them understand the overall economic situation on individual
matters, while macroeconomics studies the economic situation of the entire
economy that will help to explain the internal and external environment of the
country as a whole.

According to Carnaje 2016, like other social sciences, such as sociology and
political science, economics is trying to understand how people behave and how
they interact within society. It also uses a scientific approach to its investigations.
What makes economics different from the other social sciences? In order to
highlight its distinctions from other social sciences, the following concepts of
economics will be used: Economics is the study of how individuals, business firms,
governments, and societies as a whole make choices under conditions of scarcity.
The special emphasis economists give to choices that scarcity requires us to make-
what we give up when we make those choices- distinguishes economics from the
other social sciences.

LU_ Applied Economics_Module 1

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 demands or needs of the people

Figure 1: Economics as defined

ECONOMICS- is a social science that deals with how individuals organize

themselves in order to distribute scarce resources to create products and services
that meet man's infinite and multiplying desires and needs.

Economics as a Science
• It is a science because, in relation to those general laws and principles,
it is an organized body of facts, orchestrated, structured, and
systematized. (Observation, hypothesis formula)
• Using logic based on a collection of systematic relations, economic
analysis attempts to describe economic events.
• It is social science since individuals or societies and their actions,
unpredictable in nature, are the subject of economics.
RELATIONS OF ECONOMICS TO OTHER SCIENCES

Figure 2: Relations of Economics to other Sciences

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SCOPE OF ECONOMICS
1. Microeconomics (from the Greek word mikros, meaning “small”)
➢ Takes a closer view on the behavior of individual markets work. It focuses on
how individual households, firms and industries make their choices, and the
interaction of such decisions in the particular market.

Example: Determine the price of rice and how much of it is produced and sold. It
would also look at how regulations and taxes affect the price and supply of rice.

2. Macroeconomics (from the Greek word makros, meaning, “Large”)

➢ Deals with the problem of the economy as a whole. It looks at the aggregate
prices, production, and income.

Example: The study of the Philippine economy would analyze the gross national
income and total employment.

ECONOMICS

MICROECONOMICS MACROECONOMICS

Specific General

Deals with economic Deals with economic

behavior of individual problem as a whole
household, firms and such as aggregate
industries prices, production
and distribution

Figure 3 . Microeconomics vs. Macroeconomics

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Concerns of Economics

1. Production- is the use of inputs for generating output.

* Inputs are commodities or services that are used to produce goods and
services.
* Output are the different goods and services which come out of
production process.
*Society has to decide what outputs will be produced and in what quantity

2. Distribution- Distribution is the total product distribution by members of

society. It is linked to the issue of for whom goods and services are to be
produced.
3. Consumption- is the use of products or services. Consumption is the final
conclusion of economic operation.

4. Public finance- is concerned with government spending and revenue.

Economics studies how the government collects money by taxes and its
borrowing.

Types of Economics
1. Household Economics – the family is the most popular example of how
economics work. At this stage, someone who knows the economic principles
would be able to improve the functioning of the household.
2. Business Economics – when an individual or a group of people starts to
work, they are part of the business economy system in their workplace. In
this form, you're dealing with rent, salaries, income, and others.
3. National Economics – Economic factors that influence the country as a
whole. Deals with the control of a nation's revenue, spending, wealth, or
capital.
4. International Economics – The highest stage of economic operation
concerning the industry of one country with other countries such as trade,
tourism, exchange rates.

The Economic Agents/Stakeholders:

1. Consumers - are individuals or companies purchasing goods or services. They

are individuals or other economic organizations making use of a good or service.
In addition, they don't sell on the item they purchased

2. Producers- Firms who produce goods and services. They may be individual
entrepreneurs (self-employed) or large multinational companies.

3. Government/ the public sectors- Attempt to maximize the well-being of society

* The agents interact in a particular territorial, social, natural and/or cultural

framework which determines their relationships within the market

LU_ Applied Economics_Module 1

BASIC TERMS TO BETTER UNDERSTAND ECONOMICS

Goods- anything used to satisfy your needs and wants.

*tangible goods- a physical object or product that can be touch
*intangible goods- a product that cannot be touch, like insurance policy

Classification of Goods according EXAMPLES

to use:
1. Consumer goods- those that yield Soda, bread, juices, water, etc.
direct satisfaction to consumers

https://253.smyln.com/

2. Capital/ industrial goods- are Machinery, buildings, equipment

those goods that help to produce other
goods that directly or indirectly meet
consumers ' needs.
https://bl.thgim.com/migration_catalog/sf2qb5-
Heavyequip/alternates/LANDSCAPE_435/Heavyequip

3. Essential goods- goods that are Medicines

consumed to satisfy the basic needs of
man

https://www.pinterest.ph/pin/78158571031742

4. Economic goods-goods that are

useful and scarce; they need to be
paid for their use with value attached
to them and a price. If a good is so
abundant, and it can meet the needs
of all without anyone paying for it,
then that good is free. The air is free,
but the air-conditioned air is an https://www.climamarket.eu/en/wall-split-airconditioner-lg-s09et

economic good.

5. Luxury goods- are goods that are Luxury Car

not necessary, but are highly valued
and linked to people who are affluent
or rich. For several purposes, they are
purchased: to encourage self-worth
and status, or for the product's quality
and craftsmanship.

LU_ Applied Economics_Module 1

 https://carsoid.com/what-are-the-best-
lamborghiniluxury-cars/

Figure 2. Classification of goods

ECONOMIC RESOURCES
➢ Also known as factors of production ➢ Used to produce goods and services

Classification of Resources
1. Land- soil and natural resources found in the wild and not man-made.
Landowners get a lease known as rent.

2. Labor-physical human involvement in production

E.g. Works in building, machine operators, and works in manufacturing,
nurses, lawyers, doctors etc.
*The income received by labors is referred to as Wage.

3. Capital-man-made commodities that are used to manufacture products and

services.
*The capital owner receives an income which is called Interest.

4. Entrepreneurship transforms an idea into a business. In order to add to supply,

an entrepreneur incorporates the other three output factors. Innovation and
risk-takers are the most successful entrepreneurs. Profits are the money
entrepreneurs receive.

Characteristics of Resources:
1. Scarcity- is a condition where there is an insufficient amount of what is
accessible to fulfill the demand for it.
There are problems that economics will face in the development of products and
services: for land – insufficient land and natural resources; contaminated areas;
overcrowded spaces; for labor – unqualified workforce; insufficient workforce; for
capital – low equipment/machines; inadequate fund/capital; and for
entrepreneurship –inadequate training of entrepreneurs; inadequate timely
training; limited opportunity; scarcity of great ideas but many competitors in the
market.

2. Multiple Usage- there can be more than one potential use of resources. A plot
of land can be used, for example, to plant coffee or to build a factory.
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LU_ Applied Economics_Module 1

3. Partially replaceable: in the production of a good or service one resource may
replace another (e.g. replaces manual labor with technology).

Choice and Decision- Making

Opportunity Cost
There is a need for a man to make choices in choosing how to optimize the use
of finite resources to fulfil as many wants as possible due to the existence of
scarcity. For instance, a homemaker who has a monthly budget has to determine
how to use it to pay the rent, buy food, pay tuition fees for children, and buy new
clothes and shoes. If the budget isn't adequate, then some of these items have to be
given up by the homemaker. She has a decision to make. If at the beginning of
school, she chooses not to buy a new shoe for her kids, then this is the option she
gave up on.
When you hear the phrase "opportunity cost," you hear a fancy word for
"tradeoff." There is a trade-off to consider each time you make a choice. You have
to consider what you get as well as what you might give up. The most fundamental
definition of opportunity cost is the cost of the next best thing you might have done
if you hadn't made your first option. The costs of opportunity include both overt
and implicit costs.

Importance of Economics in our daily lives

In both visible and subtle ways, economics impacts our everyday lives.
Economics frames several decisions that we have to make about employment,
leisure, consumption, and how much to invest from an individual perspective.
Macroeconomic patterns such as inflation, interest rate, and economic growth also
affects our lives.

www.economicshelp.org

LU_ Applied Economics_Module 1

 Figure 4. Importance of Economics

Explore

Direction: Complete the crossword puzzle using the hints belong. Use separate
sheet of paper for your answers.

http://puzzlemaker.discoveryeducation.com/CrissCrossSetupForm.asp

Across
2. A physical object or product that can be touch
3. The family is the most popular example of how economics work.
4. These are individuals or companies purchasing goods or services
5. Physical human involvement in production
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LU_ Applied Economics_Module 1

 7. Is concerned with government spending and revenue.
9. Insufficient amount of what is accessible to fulfill the demand for it.
10. Deals with the problem of the economy as a whole.
Down
1. From the Greek word mikros, meaning “small”
6. Man-made commodities that are used to manufacture products and services.
8. Is the use of inputs for generating output

Assessment 1: Am I right or wrong?!

Direction: Classify the statement if correct or wrong. Write TRUE if correct and
FALSE if wrong then explain or identify the word/s that makes the statement
incorrect. Use separate sheet of paper for your answers.
___________1. Inputs are the different goods and services which come out of
production process.
___________2. Consumption is the use of products or services. Consumption is the
final conclusion of economic operation.
___________3. Business Economics is the highest stage of economic operation
concerning the industry of one country with other countries such as
trade, tourism, exchange rates.
___________4. Producers are firms who produce goods and services. They may be
individual entrepreneurs (self-employed) or large multinational
companies.
___________5. Economics as a science follows the scientific approach in arriving at
conclusions.
___________6. Production is the use of outputs for generating input.
___________7. Output are the different goods and services which come out of
production process.
____________8. Microeconomics is concerned with the performance of the economy as
a whole or its major aggregates.
____________9. Landowners get a lease known as rent.
____________10. Capital goods yields direct satisfaction to consumers.

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Assessment 2: Interpret Me!
Direction: Interpret the picture below. Base your answer from our topic about the
importance of economics in our daily lives. Use separate sheet of paper for your
answer.

Rubric for picture interpretation

4 3 2 1
Made a very Made a complete Made a complete Made an
complete and very and detailed but brief incomplete and
detailed description of the description of the very brief
description of the subject matter subject matter description of the
subject matter and/or elements and/or elements subject matter
and/or elements seen in the picture seen in the picture and/or elements
seen in the seen in the picture
picture

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 Provided a very Provided a Provided an Provided a
complete complete summary incomplete summary but of no
summary of the of the situation summary of the connection the
situation shown shown and the situation shown situation shown
and the people people and objects and the people and the people and
and objects that that appear. and objects that objects that
appear. appear. appear.

Formed a very Formed a Formed a Formed an

reasonable reasonable hypothesis about unreasonable
hypothesis about hypothesis about what is viewed in hypothesis about
what is viewed in what is viewed in the photograph what is viewed in
the photograph the photograph and but unable to the photograph.
and support this support this with support this with
with evidence evidence from the evidence from the
from the photograph. photograph.
photograph.

Deepen

Compare Me!
Direction: To further check your understanding about the topic, write a
comparative essay on microeconomics and macroeconomics. Examine the
difference between the two and give examples to better support your answer.

Rubrics
Ideas Organization Sentence fluency
(4pts.) (3pts.) (2pts.)
The essay is very clear The essay is clear and The essay is unclear
and focused. Very focused. Relevant details and unfocused.
relevant details and and quotes enriched the Irrelevant details and
quotes enriched the
central theme. quotes were used.
central theme.

The organization of The organization of ideas The organization of

ideas is very compelling is compelling and moves ideas is dull and boring
and moves the reader the reader through the
through the text.
text

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 Sentences are very well Sentences are well built, Sentences are built with
built, with very strong with strong and varied weak and repetitive
and varied structure. structure. structure.
Used writing Used writing conventions Used writing
conventions (e.g., (e.g., spelling, conventions (e.g.,
spelling, punctuation, punctuation, spelling, punctuation,
capitalization,
capitalization, grammar, capitalization, grammar,
grammar, usage,
paragraphing) very usage, paragraphing) usage, paragraphing)
effectively to enhance effectively to enhance ineffectively.
readability. readability.

Gauge

Directions. Read and understand each question carefully. Write the letter of
your answer in a separate sheet of paper.

___1. What division of Economics deals with the behavior of the individual units
such as consumers, firms, and industries?
A. Macroeconomics B. Macro Market
C. Microeconomics D. Micro Market

___2. Which of the following is a situation wherein the amount of something

available is insufficient to satisfy the desire for it?
A. Resources B. Scarcity C. Unlimited D. Wants

___3. The following are the relations of Economics to Science, EXCEPT what?
A. Literature B. Mathematics C. Natural Science D. Politics

___4. Which of the following Economic Resources is a manmade resource used in

the production of goods and services?
A. Capital B. Labor C. Land D. Money

___5. What is the ultimate end of an economic activity?

A. Consumption B. Distribution
C. Production D. Public Finance

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___6. What type of economics affects the whole nation and deals with the
management of income, expenditures, wealth or resources of a nation?
A. Business Economics B. Household Economics
C. International Economics D. National Economics

___7. Which of the following deals with the economic behavior of the whole
economy?
A. Macroeconomics B. Macro market
C. Microeconomics D. Micro market

___8. Which of the following is the wise production and use of wealth to meet the
demands or needs?
A. Business B. Economics
C. Enterprise D. Output

___9. Which is TRUE about Economics as a social science?

A. Scarce resources and limited needs drive choice
B. Economic hypotheses lead directly to predictions
C. Economics explains and predicts economic events
D. The scientific method is based on the normative analysis

___10. Mr. Jundy Estela purchased a new limited car as a gift to his wife on her
birthday. What classification of good is this?
A. Capital Good B. Consumer Good
C. Economic Good D. Luxury Good

___11. R&J Engineering Works acquired additional equipment for the business.
What type of good is this?
A. Capital Good B. Consumer Good
C. Economic Good D. Luxury Good

___12. Which of the following is an example of intangible good?

A. Cellular phone B. Bags
C. Insurance policy D. Laptop

___13. An old man is working in a manufacturing company for almost 20 yrs. He

is in charge in machine operation and also troubleshooting. What
classification of resource is stated here?

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LU_ Applied Economics_Module 1

 A. Capital B. Labor C. Land D. Production

___14. The physical effort of the manpower to produce the protective

devices of the front liners is described as what factor of
production?
A. Capital B. Labor C. Land D. Product

___15. Which of the following are examples of human necessities?

A. LED TV
B. Laptops and desktop computers
C. Milk tea, ice cream and hamburger
D. Water, and a secured place to live like houses

References
Book:
Rillo, Julia D., Meriam dR. Cervantes, Pamela Ruth M. Pagoso, and Godfrey T.
Dancel. Economics Basic Principles, Applications and Issues. Updated Edition.
VP CHP Series. Metro Manila, Manila: Vibal Publishing House, Inc., 2008.

Silon, Elsa T., Ramon A. Bernardo, and Melani C. Quilloy. Manual for Economics
with Work Exercises. First edition ed. 856 Nicanor Reyes, Sr., Sampaloc,
Manila, Philippines: Rex Bookstore Inc., 2015.

Carnaje, Gideon P. Applied Economics. Quezon City, Philippines: Vibal Publishing

House, Inc., 2016.

Dinio, Rosemary P., and George A. Villasis. Applied Economics. First edition ed.
856 Nicanor Reyes, Sr., Sampaloc, Manila: Rex Bookstore Inc., 2017.

Website:

Nazal, Genny. “Basic Concepts of Economics.” SlideShare,

June 19, 2011. https://www.slideshare.net/GennyNazal/basic-concepts-of-
economics-8357280.

Discovery Education's Puzzlemaker: Create your own cross word puzzles! Accessed
September 21, 2020.
http://puzzlemaker.discoveryeducation.com/CrissCrossSetupForm.asp.

Pettinger, Tejvan, Tlc, Kathrina Llagas, Sheryl, Juliet Nakyazze, Ev:Nathanael Ntabaye,
Suliman Khan, Rachel Frampton, and Alex. “Importance of Economics in Our Daily
Lives.” Economics Help, December 6, 2019.
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 https://www.economicshelp.org/blog/1974/economics/importance-of-economics-
inour-daily-lives/.

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 For inquiries or feedback, please write or call:

Department of Education – SDO La Union

Curriculum Implementation Division
Learning Resource Management Section
Flores St. Catbangen, San Fernando City La Union 2500
Telephone: (072) 607 - 8127
Telefax: (072) 205 - 0046
Email Address:
[email protected]
[email protected]

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LU_ Applied Economics_Module 1