ECONOMICS AS A SOCIAL

SCIENCE
ECONOMICS
- A study that deals with the proper allocation of
scarce resources to satisfy unlimited human
wants.

- It is concerned with the production,

distribution, and consumption of goods and
services.
Social Science

- The study of society and social relationships.

- A branch of science that deals with human
behaviour in it social and cultural aspects.
How is economics related to
social science?
Economics is the study of social behaviour guiding in
the allocation of scarce resources to meet unlimited
needs and desires of the individual members of a
given society.

It deals with the analysis on how members of

society interact with one another on the
creation and utilization of economic
resources.
As a social science, economic deals with the analysis on
how members interact with one another on the creation
and utilization of wealth.
BASIC ECONOMIC QUESTIONS

1. WHAT TO PRODUCE?
2. HOW TO PRODUCE?
3. FOR WHOM TO PRODUCE?
1. What to produce?
-Society must decide what goods and services should be produced
in the economy.
2. How to produce?
-What production method will be used to produce goods and
services.
3. For whom to produce?
- it is about the market for goods.
- For whom will the goods and services be produced? For the
young or old, male or female market, the low-income or high
income groups?
Economic Systems
-The means through which society determines the answer to the basic
economic problems of the entire society.

1. Traditional Economy
-Decisions are based on traditions or beliefs that were upheld over the years.
2. Command Economy
-Decisions are centralized in the government
3. Market Economy-
- The most democratic form of economy.
- Decisions are based on the demand and supply in the market.
What are the economic problems of our society?
Group Activity:

Identify at least one economic problem of our society and

propose a solution by answering the 3 basic economic
questions.
UNLIMITED WANTS ------ LIMITED RESOURCES

SCARCITY

Economic Problems

CHOICE AND DECISION MAKING

 ECONOMICS AS AN APPLIED SCIENCE

Applied Economics is the application of economic theory

and econometrics in specific settings with the goal of
analysing potential outcomes.
Applied economics is the study of economics in relation to real
world situations. It is the application of economic principles and
theories to real situations, and trying to predict what the outcomes
might be.

Science - a systematic knowledge of the *Econometrics-the application of statistical methods to

physical or material world gained through the study of economic data and problems.
observation and experimentation.
Economics has been described as the allocation of resources to meet
human wants. Thus, economics is a science of choosing an activity
from alternative options that will yield the highest benefits to society in
the context of competing uses and opportunity costs.

Opportunity Cost
-The value of the best foregone alternative.
-It is what a person sacrifices when they choose one option over the other.
-The choice that we pursue must be based on the valuation of costs and benefits. This
means that our choice must give us additional benefits that are at least equal to or more
than the additional benefits derived from the foregone alternatives.
We should be able to improve human welfare among
Filipinos through the investigation and analysis of
economic problems
 Basic economic problems confronting the development of the
Philippines in the 21st century.

1. Poverty and Unequal Distribution of Income

2. Demographic changes and its economic implications
3. Low investment in Human Resource Development
4. Weak Infrastructure
5. Pursuing Food Security
6. Slow Adoption of Modern Technology
7. Environmental sustainability and the country’s
development thrust.
 Poverty and Unequal Distribution of Income

Two categories of poverty

1. Absolute poverty
2. Relative poverty

Absolute Poverty- the lack of income to buy the basic food and necessities for
subsistence living. This is measured in terms of poverty threshold and poverty
incidence.

Poverty threshold- the income needed to purchase the minimum nutritional

requirements and other basic necessities for daily survival.

Poverty Incidence- the proportion of households in the country with family income
lower than the poverty threshold or poverty line.
Relative Poverty - refers to the structure on how the national income is being
distributed among households in an economy. The poor households are poor because their
income and other resources are lower than the income and resources of other households.
Poor households from the perspective of relative poverty do not necessarily mean that they
do not have sufficient income to purchase the minimum requirements for daily survival.

Relative poverty is measured by the Lorenz Curve and the Gini Coefficient

Lorenz Curve- shows the share of the various household groups (ranked from the poorest
to the richest) on the national income.

Gini Coefficient- is a measure of income inequality derived from the Lorenz curve.
 Interventions being implemented by various economies including the Philippines in
addressing the problem of poverty.

For absolute poverty, The immediate intervention is to provide free meals, housing, and
adequate clothing. But these measures are temporary and do not provide long term solutions to
the problem. Some economists suggested that there is a need to provide resources including
credit, skills, entrepreneurial training , and cash transfers.

For relative poverty, measures like progressive taxation, income transfers, and other programs
meant to improve the income distribution can be implemented.

For example:
*discounts given to senior citizens in their purchase of goods and services is a program meant to
alleviate the limited income of senior citizens who are mostly retired individuals. *Subsidies and
*grants given to students from poor households so they can enrol in state universities and
colleges.
*Non-payment of income tax below a certain income threshold is another initiative meant to
improve income distribution and mitigate relative poverty.
A Progressive tax is a tax that imposes a lower tax rate on low-income earners
compared to those with higher income.

Income transfer is a money from the government in the form of benefits

(Payments for people who cannot find a job or are too ill to work), subsidies
(Money given to reduce the cost of producing food, product or etc.) paid for
by taxes.

Transfer payment –a redistribution of income and wealth by means of

government making a payment, without goods and services being received in
return.

As the country makes the most of the opportunities offered by the 21st century,
The Philippines need to reduce absolute poverty significantly and craft a more
equitable distribution of income. Only then can we say that the fruits of
economic prosperity have been shared and growth has been inclusive.
 DEMOGRAPHIC CHANGES AND ITS IMPLICATIONS

Philippine population as of 2019- 108, 116, 615

Rapid population growth will reduce the available land per person and can put a
toll on productivity of the agricultural sector.

-It puts a burden on the government to provide the social services including
education, health and housing to an expanding population.

Rapid population growth can strain the environment as the expansion of people
demands more land for housing and other economic activities.
In optimistic view, Increase in population imply additional consumers and savers
that can expand the economy while additional laborers can be the source of
productivity, creativity, and entrepreneurship.

One of the implications of expanded population is the enlargement of labor force

in the future. If the economy is growing fast, this increase in labor may not be an
issue. But If the economy is NOT growing as fast as the growth of labor force, the
problem of unemployment may ensue.

An expanded labor force set in an environment with limited employment

opportunities in the locality may push people to migrate internally and externally.
 Low Investment in Human Resource Development

Skills training and investment in education can shape human capital of a nation.

The government allots billions of pesos in the provision of education but millions of Filipino
youth are still out of school and have limited education and training.

Even if public provision of basic education is almost free, poor households still incur sacrifices
or opportunity costs as their children are taken away from home chores and farm duties to
attend school.

With low school participation, many of these unschooled children end up with limited
employment skills which in turn can contribute to the problem of unemployment when they
become adults.
 Weak Infrastructure

Inadequate infrastructure of a country has debilitating effects on the individuals,

households, business firms, and economy.

Transportation system- There is no mass transit system in the megacity which

causes serious traffic problem. It makes workers less productive since they spend
their time on the road commuting.

Limited capacity of energy infrastructure- resulted in daily interruptions of

electricity in many regions in the country. It has created a negative impact on
performance of the enterprise and has increased cost of doing business.
The major reason for this inadequate expansion of infrastructure is the
insufficient funds to finance huge costs of constructing these networks.

The construction of these infrastructure projects should be done by government

because their function is to provide public goods and their long gestation period.

Because of limited funds, one of the options open for government is to borrow
from external donors. However, this ability of the government to provide the
financing counterpart is grounded on the ability of the government to raise
revenues through taxation.

Another option for the government is to allow the private sectors engage in the
construction and management of infrastructure projects through a public-private
partnership.
 Pursuing Food Security

With more than 100 million people to feed, the concern of the government is to ensure food
security for all.

The importance of agriculture in our economy emanates from its role as the main supplier of
food grains to the growing population.

A sluggish agriculture may result to unstable society with the spread of poverty while
insufficiency in food may invite inflationary pressures or dependence on imports.
Food self-sufficiency may benefit the millions of rice and corn farmers as well as
traders in the country but at the expense of the consumers and other economic
sectors.

Pursuing food self-sufficiency by securing food grains domestically may result in

high prices for food grains.

Food security implies that the country and its people should have enough
income to purchase food grains at the cheapest price anywhere in the world.
This means that for the country to have enough income it should use its limited
resources efficiently.

Other initiatives that can increase the productivity of the agricultural sectors:

*invest in irrigation facilities

*provide cheap fertilizers and inputs
*construction of farm-to-market roads
*expansion of agricultural programs
 Slow Adoption of Modern Technology

One of the common feature that prevents these economic sectors in realizing their
growth potential is the slow adoption of modern technology in their processes of
production and distribution.

Technology is the manner of processing raw materials or intermediate inputs into

transformed outputs through the use of factor inputs.

In agriculture, many of our farmers are still using the traditional farming techniques
instead of advanced ones because of cheap labor brought about by the surplus of
manpower in the sector.

This stagnation of our manufacturing sector has been attributed to a certain extent to
the limited investment capital equipment.
The country needs efficient and productive services because these industries are strongly
linked with the agricultural and industrial sectors.

With the adoption of modern technology, the agriculture, manufacturing and service sectors
are able to realize their growth potentials. This can be done through opening the economy to
foreign players as shown in the success of electronics and automotive industry and the BPO’s.
 Environmental sustainability and the country’s development thrust

The environment is part of natural resources where we derive income from the utilization of its
wealth. However, excessive use of our natural resources may compromise its ability to provide
income and other benefits in the future.

The capacity of land resources to be productive rests on the proper use of fertilizer and pesticides.
Too much use of commercially manufactured chemicals can reduce the productivity of lands for
crop production.

Overfishing can drastically reduce marine resources that can be harvested in the future.

Excessive logging, accompanied by forest fire and excessive pasturing can reduce our rainforest.
Aside from overutilization of our natural resources, a sustainable environment is
threatened by waste discharges by productive and distributive activities of various
sectors.

Extraction of minerals done by mining industry can have the same environmental
effects similar to excessive logging. It can destroy the productivity of the water
and marine resources nearby as it disposes its wastes.

Similarly, many manufacturing industries including cement and energy generating

plants can pollute rivers and air with the disposal of its wastes.
ACTIVITY:

Analyze and propose solution/s to the economic

problems using the principles of applied economics.