Week 002 Economics as an Applied Science PDF

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Summary

This course deals with the basic principles of applied economics, and its application to contemporary economic issues facing the Filipino entrepreneur such as prices of commodities, minimum wage, rent, and taxes. It covers an analysis of industries for identification of potential business opportunit...

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Lesson 1.2 Economics as an Applied Science

Learning Objectives: a. Differentiate between economics as a social science and as an applied science b. Identify the basic problems of the Philippine Economy c. Analyse basic economic problems and propose solutions to the problems using the principles of Applied Economics

Applied economics applies the tenants behind economic theories and principles to realworld situations with the desired aim of predicting possible outcomes. The use of applied economics is designed to analytically review potential outcomes without the "noise" associated with explanations that are not backed by numbers. Applied economics can involve the use of case studies and econometrics, which is applying real-world data to statistical models and comparing the results against the theories being tested. We should be able to improve human welfare among Filipinos by investigation and analysis of economic problems in the real world. 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 encourage us as individuals to help in our own way to provide solutions to the country’s economic problems.

Understanding Applied Economics Applied economics is the testing of economic theory to determine if it's relevant in the real world. The study of economics, on the other hand, relies on the interpretation of historical events in its theories. As a result, applied economics can lead to "to do" lists for steps that can be taken to ensure stability in real-world events. Although applied economics uses economic theory and principles, it is itself not a field of economics, such as neoclassical economics, which has to do with consumer satisfaction or the Austrian school, which considers the impact of monetary policy on boom and bust cycles. The use of applied economics may first involve exploring economic theories to develop questions about a circumstance or situation and then draw upon data resources and other frames of reference to form a plausible answer to that question. The idea is to establish a hypothetical outcome based on the ongoing circumstances. Applied Economics Relevancy in the Real World Applied economics can illustrate the potential outcomes of the choices made by individuals. For example, if a consumer desires to own a luxury good but has limited financial resources, an assessment of the cost and long-term impact such a purchase would have on assets can help determine if such an expense is worthwhile. Consumption of wanted goods and their lasting effects can also be framed through applied economics. For example, if an individual wants to eat comfort food, applied economics can be used to present theories and possible outcomes such consumption would have on that person’s attempts to reach certain weight loss goals. Something similar can be done in deciding on college studies and career training. A student may want to focus on courses that appeal to personal hobbies and interests; however, they would also need to assess how such an academic path might affect their professional prospects and future salary opportunities. Through applied economics, and understanding of diminishing returns can be developed. For instance, if a professional takes a job that offers the same bonus-pay to all workers regardless of experience or salary, applied economics can show that the long-term benefits would be limited. If the company paid a $50 bonus at the end of each quarter to each employee, it might have a positive impact on a worker earning a low wage. However, through applied economics, it could show that as the employee gained seniority and a higher salary, the bonus would have less of an impact on the employee's earnings.

APPLIED ECONOMICS IN RELATION TO PHILIPPINE ECONOMIC PROBLEMS Understanding the existence of scarcity can help Economics students analyze how to maximize the use of available resources in order to overcome scarcity. Knowledge of economic theories such as the Law of Supply and Demand can help in analyzing why prices are high and what the government can do to help bring down prices. A solid understanding of economic principles and how they are applied in real life situations can serve as significant to help address the country’s economic problems.

The Philippine’s Basic Economic Problems The Philippines consistently coined as one of the Newly Industrialized Countries has had a fair gain during the latter years under the Arroyo Presidency to the current administration. The government managed foreign debts falling from 58% in 2008 to 47% of total government borrowings. According to the 2012 World Wealth Report, the Philippines was the fastest growing economy in the world in 2010 with a GDP growth of 7.3% driven by the growing business process outsourcing and overseas remittances. The country markedly slipped to 3.6% in 2011 after the government placed less emphasis on exports, as well as spending less on infrastructure. In addition, the disruption of the flow of imports for raw materials as a result from floods in Thailand and the tsunami in Japan have affected the manufacturing sector in the same year. "The Philippines contributed more than $125 million as of end-2011 to the pool of money disbursed by the International Monetary Fund to help address the financial crisis confronting economies in Europe. This was according to the Bangko Sentral ng Pilipinas, which reported Tuesday that the Philippines, which enjoys growing foreign exchange reserves, has made available about $251.5 million to the IMF to finance the assistance program— the Financial Transactions Plan (FTP)—for crisis-stricken countries."

Remarkably the economy grew by 6.68% in 2012. The Philippine Stock Exchange index ended in the year with 5,812.73 points a 32.95% growth from the 4,371.96-finish in 2011.

Though a fast-growing economy, Philippines still needs to address the issues of poverty, unemployment, and poor infrastructure....