Economics As An Applied Science: Lesson 1.2

Economics as an
Applied Science
LESSON 1.2
Applied Economics is the application of economic theory and
econometrics in specific settings with the goal of analyzing
potential outcomes.
• It is typically characterized by the application of the core,
referring to economic theory and econometrics, as a means of
dealing with practical issues in fields that include
demographic, economics, labor economics, business
economics, agricultural economics, development economics,
education economics, health economics, monetary economics,
economics history and many others.
John Neville Keynes is attributed
to be the first to use the phrase
“applied economics” to designate
the application of economic theory
to the interpretation and
explanation of particular economic
phenomena.
Applying economic theory in our lives means
trying to address actual economic issues and be
able to do something about it. The concept of
scarcity and choice should be encourage us as
individuals to help in our own way to provide
solutions to the country’s economic problems
APPLIED ECONOMICS IN RELATION
TO PHILIPPINE ECONOMIC
PROBLEMS
Knowledge of economic theories such as the Law

of Supply and Demand can help analyzing why
prices are high and what the government can do to
help bring down prices
THE PHILIPPINE BASIC ECONOMIC
PROBLEMS
UNEMPLOYMENT is still a main problem of the
Philippine economy despite improvements reported by the
National Statistics office.
POVERTY is another significant socio-economic problem
in the country reported by National Statistics Coordination
Board.
POPULATION GROWTH can be connected to the issue
scarcity.
LEE KUAN YEW
LEE KUAN YEW (1923 – 2015)
He was the first prime minister of Singapore from 1959 to 1990,

making him the longest-serving prime minister in history. During his
long rule, Singapore became the most prosperous nation in Southeast
Asia. He introduced a five- year plan calling for urban renewal and
construction of new public housing, greater rights for women,
educational reform and industrialization. He has left behind a legacy
of an efficiently run of country and as a leader who brought
prosperity unheard of before his tenure, at the cost of a mildly
authoritarian style of government and by imposing discipline among
his people
Demand and Supply in
Relation to the Prices
of Basic Commodities
LESSON 2.2
MARKET EQUILIBRIUM
Equilibrium is a state of balance when demand is equal

to supply. The equality means that the quantity that sellers
are willing to sell is the quantity that buyers are willing to
buy for a price. As a market experience, equilibrium is an
implicit agreement between how much buyers and sellers
are willing to transact. The price at which demand and
supply are equal is the equilibrium price
Market Demand and Supply Curves for Fish in
the Quinta Market for One Week
DETERMINATION OF MARKET
EQUILIBRIUM
Market equilibrium is attained when the quantity demanded is

equal to the quantity applied.
•
Assuming that…
• demand function for Good X is:
• and the supply function for Good X is:
Equilibrium quantity is attained where
•Equilibrium
quantity is 55 since quantity supplied and
quantity demanded are both 55 at the price of 10 Php,
which is the equilibrium price.
APPLICATION OF DEMAND AND
SUPPLY IN RELATION TO HOUSING
SHORTAGE
With close to 100 million Filipinos, limited land area, and shortage of
funds to build houses for all the Filipinos families, the country continues to
suffer from a shortage in mass housing that is expected to reach 6.5 million
units by 2030, Profriends President and CEO Guillermo Choa told
reporters in a briefing in Makati city, ( Danessa O. Rivera, GMA News
October 2, 2014). Housing shortage has been a perennial problem in the
country with accumulated backlog of about 3.92 million units from 2001 to
2011 (Source: Subdivision and Housing Developers Association (SHDA)
Housing in the country is a problem evident because of the rapid
growth of Philippine population, more people will mean a higher
demand for housing. The supply houses is less than the existing
demand for them since more and more Filipinos are added to the
population annually, there is seemingly a lack of government priority
to build homes for the homeless. Filipinos are seen putting up
shanties and makeshift homes in the streets, under bridges, close to
the railroad tracks and near creeks, which proves to be dangerous
since these overflow during typhoons and inundate the areas causing
risk to the lives of the poor who have no other choice as to where
they should live.
Hardly does housing grow faster than population to
decrease the housing backlog. It is the poor who suffer an
increasing backlog of decent housing due to the increasing
population.
There is obviously an excess of demand compared to the supply of housing even among
ordinary Filipino. Buying and owning one’s home is always the dream of every Filipino
family but it is expensive to build a house in the country. Since many Filipinos are middle-
or low- income earners. They cannot afford the high cost of housing prices of real estate
and construction materials are even on the rise although with a significant decrease in
January 2014.
The ideal situation is at the point where the demand and supply curves intersect,
otherwise, called market equilibrium. The government can intervene by setting rent control
that is equivalent to a price celling. It indicates that homeowners cannot set the rent higher
than the price celling set by the government. However if price celling us set below this
equilibrium point, homeowners will be demotivated to rent out their property such that
supply will decrease and this will result in an excess of demand over the supply of housing,
making it even more difficult for people to buy their own houses.
Real estate loans are hard to come by for middle- and low- income earners and
has a long process of application. In addition, banks need to charge high interest
rate that is a burden on the borrower. An additional difficulty is that interest on
loans is usually high and even if the first year interest rates are low, these rates are
subject to an upward adjustment usually on the second year and onward depending
on market rates.
The option for those who cannot afford to buy houses is to rent them from the
owners paying on a monthly basis, but there are laws on rent such as the one
sponsored by former Senator Joey Lina that end to protect and favor he renters.
This has led to reluctance on the part of the owners to rent out their property, thus,
further limiting housing opportunities for the Filipino.

Rent control is a type of intervention that affects prices. Rent control is
equivalent to the setting of a price celling on the rent.

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Economics As An Applied Science: Lesson 1.2

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Economics as an

Knowledge of economic theories such as the Law

He was the first prime minister of Singapore from 1959 to 1990,

Equilibrium is a state of balance when demand is equal

Market equilibrium is attained when the quantity demanded is

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