Economics as an Applied Science – Comprehensive Study Notes
Context & Framing
Source: Quipper Lesson 1.2 “Economics as an Applied Science” (General Academic Strand / Accountancy–Business–Management).
Main Idea: Economics isn't just theory; it's a practical science that helps societies make decisions, manage limited resources, and aim for progress, development, and fairness.
Example: The Philippines, often called a “tiger economy,” still struggles with poverty. This highlights why its national plan, AmBisyon Natin 2040, focuses on growth that benefits everyone and is sustainable.
Essential Question
“How does studying economics as an applied science help my society?”- This question makes us think critically about policies, what we give up for choices (opportunity costs), and long-term well-being.
Learning Competency (ABM_AE12-1a-d-1)
Define basic terms in applied economics.
Learning Objectives
Define & understand:
The three economic questions.
The four factors of production.
Tell the difference between economic growth and economic development.
Understand the importance of sustainable development and inclusive growth.
Three Fundamental Economic Questions
Why they matter: Because resources are limited (scarcity), individuals and societies must make choices.
These questions guide how every economy uses its resources.
1 What should we produce?
This question decides which goods and services are most important, given limited resources.
It involves making judgments about whose needs are most urgent.
2 How should we produce it?
This is about the methods of production: using mostly people (manual labor), mostly machines (automation), or a mix.
It considers efficiency, impact on the environment, and whether to use more labor or more capital.
3 For whom should we produce it?
This is the distribution question: Should resources be given equally, based on need, or based on who can afford to pay?
It directly relates to fairness and the well-being of society.
All three questions are about how to best use resources to deal with scarcity.
Factors of Production (Macro-level Resources)
These are the broad categories for all the inputs used to produce goods and services.
Land
All natural resources: physical space, raw materials, and energy sources.
Examples: Solar and wind energy, coal, oil, farmland, fisheries, forests.
Labor
Human effort, both physical and mental, used in production.
Examples: A food-delivery courier, a classroom teacher, a bank security guard, a software developer, farm workers.
Capital
Physical capital: Man-made items used in production like machinery, vehicles, tools, and computer hardware.
Human capital: Investments in people's education, training, and health that make them more productive.
Capital is created by production and can be reproduced.
Entrepreneurship
The intellectual skill to combine land, labor, and capital to create new goods or services.
Involves taking risks and innovating.
Examples: CEOs, founders of companies, start-up innovators.
Check-Your-Progress Prompt (Slide 31)
“Provide a unique example for each factor”—This helps students apply what they've learned and think creatively.
Economic Growth
Definition: The overall increase in an economy's size, usually measured by changes in the Gross Domestic Product (GDP).
GDP calculation is often shown as where:
= Consumption (what people spend)
= Investment (what businesses spend)
= Government spending
= Exports (goods sold abroad)
= Imports (goods bought from abroad).
It is a main goal for macroeconomics.
Limitations / Issues:
Money spent on military can increase GDP without improving overall well-being.
The benefits of growth might only go to a small wealthy group, leading to inequality.
GDP doesn't measure happiness, health, or environmental quality directly.
Economic Development
A broader concept that measures improvements in overall well-being, living standards, and quality of life.
Includes indicators beyond just income, such as:
Quality of education.
How many people live in poverty.
Environmental health.
Health and life expectancy (like the UN Human Development Index).
Relationship with growth:
Growth can help development by creating jobs and increasing government funds.
Development can improve even without growth (e.g., better distribution of wealth, policy changes).
Sustainable Development
Classic definition: From the WCED (1987), it's “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
It combines caring for the environment, fairness between generations, and managing resources for the long term.
Applied example: Shifting to renewable energy (like solar) helps preserve natural (Land) resources for future use.
Inclusive Growth
A key goal in the Philippines' Ambisyon 2040 plan.
It means growth that benefits everyone in society, not just the wealthy few.
How it works: Creating many jobs, making sure everyone can access education and health care, and providing social safety nets.
Goal: To reduce poverty and improve living standards for all Filipinos.
Why Study Economics?
It teaches individuals how to evaluate decisions by considering what they give up (their opportunity cost), not just the explicit money spent.
It helps people form well-informed opinions on government policies and personal choices.
It improves decision-making for individuals, communities, and future generations.
Classroom Activities & Prompts
“Let’s Connect” slides: A group activity to visualize and research economic growth indicators.
Start with initial ideas, then research and create new images reflecting actual metrics (like GDP, employment).
Discussion questions follow: What is growth? What are its signs? How is it measured?
“Try This!” hand-signal game: Students classify resources by their factor of production using hand signals.
“Challenge Yourself” question: Identify a threat to sustainable development other than environmental issues (e.g., political instability, inequality) and discuss it.
Numerical / Statistical References
GDP is the main measure for growth.
The lesson doesn't give specific numbers, but it discusses:
How wealth can be concentrated among a few.
How poverty rates indicate development issues.
Students are encouraged to look up concrete figures from sources like the Philippine Statistics Authority (PSA) or the World Bank.
Ethical, Philosophical & Practical Implications
Ethical: The “for whom” question in economics touches on fairness and justice in resource distribution.
Philosophical: Sustainable development involves our responsibility to future generations.
Practical: How policies (like taxes, social programs) directly influence whether growth is shared by everyone.
Connections to Foundational Principles & Previous Lessons
Builds on basic ideas of scarcity and choice previously learned in economics.
Extends these ideas to a larger scale (macroeconomics): connecting how individual resource choices add up to national development plans.
Potential Exam / Review Questions
Explain the difference between land and capital, using examples that might overlap (e.g., a farm tractor is capital, but the farmland is land).
Why can GDP growth happen at the same time as high poverty rates?
Name at least three policies that encourage inclusive growth.
Discuss one non-environmental threat to sustainable development and suggest a way to fix it.
Wrap-Up (Key Takeaways)
The three economic questions guide what, how, and for whom goods are produced.
The four factors of production—land, labor, capital, and entrepreneurship—must be used efficiently.
Economic growth (more GDP) is not the same as economic development (better well-being); development needs broader measures.
Sustainable and inclusive growth are vital modern policy goals, as seen in the Philippines' Ambisyon 2040.
Studying economics improves critical thinking and helps people participate effectively in society.