Module 01: Economics as Social Science and Applied Science

I. LEARNING COMPETENCIES
1. Differentiate economics as social science and applied science in terms of nature and
scope.
2. Define basic terms in applied economics.
3. Realize that knowledge on the nature and scope of economics may help get over
crisis.

II. LESSON PRESENTATION

Review
Rearrange the jumbled letters to reveal terms in economics. Description of the terms are
provided as clues.
1. NOCCREMMASCIMOC Studies the economy as a whole.
2. GOLBEGINAINTODS Services rendered by doctors, engineers,
doctors and other professionals.
3. RYGOXUODSLU Limousine, Rolex, yacht, latest iPhone.
4. YTCIRASC Insufficient resources to supply all the desires and
needs of individuals.
5. SUMNOCSER Consume goods and services /offer production
factors.

In this module, you should be able to explain the nature and scope ofeconomics,
determine its fields: the micro and macroeconomics, resourcefully use the different resources
in the production of goods and services, and in the real world, efficiently consume these
finished products.

Nature and Scope of Economics

Let’s say a research on the economicsituation of the families in Metro Manila is to be
conducted. GAS and ABM students may choose to focus on the annual income of families, their
buying behavior and the survey on commonly purchased products. HUMSS students on the
other hand might take a broader view on the entire economic system: what causes families to
limit their spending power, what environmental factors stresses them from purchasing their
needs and wants; or what makes them satisfied in their buying behaviour. Both approaches are
useful and study the same, but the viewpoints are different. In a similar way, both
microeconomics and macroeconomics study the same economy, but each has a different
viewpoint.
Whether you are looking at the buying behaviour of the people in the market orthe
broader economics, the micro and the macro insights should blend with each other. In studying
the buying behaviour of the people, the micro insights about particular behaviour and spending
habits of the people help them understand the overall economic situation on individual
matters, while the macro insights about the overall economic situation on the entire economy
help to explain the internal and external environments, as a whole.
 At present, the whole world suffers from economic crisis due to the COVID 19 Pandemic.
The Philippines, in particular, as still a developing nation, is one of the immensely affected
countries in the world, to say the least the most affected country in Southeast Asia. Wewant to
understand why such situation happens and how this affects the lives of people in the
economy. Someone with poor background in economics may be challenged on understanding
what is really happening in the society. Economics, as a social and applied science will explain
and help you understand what is really happening in the economy.
According to Molina, J. A. & Nadal, G. J I (2020), economics is a SOCIAL SCIENCE
concerned with the explanation and prediction of observed phenomena in the society.
Economics studies the way societies solve the fundamental problems of reconciling the
unlimited desires of individuals with scarcity of resources, susceptible to numerous alternative
uses. Economics is also an APPLIED SCIENCE because it uses the scientific method in its
explanations, which consists of observing reality and presenting questions and problems to
arrive at the formulation of theories and models. As an applied science, it followsa systematic
procedure to solve issues and problems of the society.

The Fields of Economics

Microeconomics and macroeconomics have distinct perspectives on the economy:
Microeconomics - focuses on the behavior of individual economic units and the functioning of
markets. Its perspective focuses on parts of the economy: individuals, firms, and industries.
Macroeconomics - studies the functioning of economics as an aggregate (production,
employment). Its perspective looks at the economy as a whole, focusing on goals like
production, the standard of living, unemployment and inflation. Macroeconomics has two types
of policies for pursuing these goals: monetary policy and fiscal policy.

Image 1.1. Micro vs Macro Economics(Source: DepEdApplied Economics Module by Dela Cruz et al.)

The Economic Agents/Stakeholders

1. Consumers
 Consume goods and services /offer production factors
 Maximize utility
2. Producers
 Produce goods / demand productive factors
 Maximize profit
3. The public sectors
 Attempt to maximize the well-being of society
The agents interact among themselves in a specific territorial, social, natural and/or
cultural framework that determines their relationships – these relationships is called Market.

Basic Terms to Understand Economics

It is essential that you familiarize yourself with the basic terms in studying economics.
This will facilitate your understanding of economic analysis. Specifically you meet GOODS –
which yields to your satisfaction. It is anything used to satisfy your needs and wants.
Tangible Goods– material goods or commodities.
Intangible Goods– when they are in the form of services. Those rendered by doctors,
engineers, doctors and other professionals.
Goods may also be classified according to use:
Consumer Goods– goods for the ultimate Capital Goods or Industrial Goods- used in the
consumption of the consumers. Ex.: production of other goods and services. Ex.:
toothpaste, bath soap, etc. buildings, machinery, equipment.

https://www.brandchannel.com/2012/02/17/why- https://www.wisegeek.com/what-are-capital-goods.htm
consumer-goods-brands-must-think-more-like-retailers/
Essential Goods - used to satisfy the basic Luxury Goods – goods man may do without,
needs of man. Example: foods and medicine. but may give comfort and satisfaction. Ex.,
perfume, cakes; chocolates, expensive cars.

http://www.thehawk.in/must-read/online-services-for-
essential-goods-to-be-allowed-kejriwal133509? https://www.rt.com/business/421604-most-profitable-luxury-
utm_campaign=pubshare&utm_source=facebook&utm_me investments/
dium=246577068688315&utm_content=auto-
link&utm_id=348
Economic Goods – goods that have benefit (utility) to society. Also, economic goods have a
degree of scarcity and therefore an opportunity cost. This is in contrast to a free good (like air,
sea, water) where there is no opportunity cost – but abundance. Ex. air from aircon.
 https://www.mitsubishielectricmalaysia.com/products/air-conditioner-r32/jpseries/
Images 1.2-1.6. Micro vs Macro Economics
Economic Resources or Factors
In the article of Nowaczyk , J (2020) on Identifying the Factors of Production, he defined
economic resources as the factors of production for goods and services. The factors of
production are inputs combinations in the production of goods and services to make an
economic profit for the firms. These factors of production are land, labor, capital, and
entrepreneurship. Resources are limited in nature, but human wants and needs are unlimited,
thus, an efficient allocation of these resources or factors of production is a big challenge for
every economy. Economics also helps the entrepreneurs and the economy to allocate resources
in the production of supplies to meet the demands of the consumers.
Land as a Factor of Production Labor as a Factor of Production
Land - natural resources available to create Labor is the work done by people- education,
supply such as raw materials that comes skills, and motivation and productivity.
from the ground. It can be a nonrenewable Productivity measures how much each hour of
resource; commodities such as oil and gold; worker time produces in output. Workforce
and renewable resource, such as timber. Oil receives wage for his labor.
is a natural resource, but petroleum gas is a
capital good. Farmland is a natural
resource, but a shopping center is a capital
good.

https://ph.asiatatler.com/society/tatler-heroes-filipinos-leading-
the-fight-against-covid-19
https://www.masterclass.com/articles/economics-101-
what-are-factors-of-production
Capital as a Factor of Production Entrepreneurship as a Factor of Production
Capital or capital goods are capital – the Entrepreneurship develops an idea into a
money that companies used to buy business. An entrepreneur combines the other
resources; manmade objects like three factors of production to add to supply.
machinery, equipment, and chemicals that The most successful entrepreneurs are
are used in production. For example, innovative and risk-takers. The income
capital goods include industrialand entrepreneurs earn is profits.
commercial buildings. A commercial aircraft
 is example of a capital good.

https://www.investopedia.com/ask/answers/032615/why-do-
some-economists-consider-entrepreneurship-be-factor-
http://www.thaiautonews.net/new-products/nissan-
production.asp
starts-production-of-new-juke-in-uk/
Images 1.7-1.10. Factors of Production

Characteristics of Resources
1.Scarcity: insufficient resources to supply all the desires and needs of individuals. In the
production of goods and services; there are issues that economics may
encounter: these include: for Land – inadequate land and natural resources;
polluted areas; overcrowded spaces; for Labor – unskilled workforce;
mismatch of jobs; for capital - low quality of equipment/machines;
insufficient fund/capital; and for entrepreneurship – Inadequate training of
entrepreneurs; limited opportunity; scarcity of great ideas but many
competitors in the market.
2.Multiple Use: Resources can have more than one possible use. For example, a plot of land can
be used to plant coffee or to build a factory.
3.Partially Replaceable: one resource can replace another in the production of a good or
service (e.g., replace manual labor with technology).
Scarce resources and unlimited desires → Scarcity
Scarcity and alternative uses → Choice
Choice → Opportunity cost

III. SUMMARY OF LESSON

 Economics as a Social Science is concerned with the explanation and prediction of observed
phenomena in the society. Economics as an Applied Science uses the scientific method in its
explanations.
 Microeconomics focuses on the behavior of individual economic units and the functioning
of markets. Macroeconomics studies the functioning of economics as an aggregate
(production, employment). Its perspective looks at the economy as a whole.
 The economic agents/stakeholders are the consumers, producers and the public sector.
 Tangible goods are material goods or commodities while intangible goods are in the form of
services.
 Goods may also be classified according to use such as: consumers goods, capital goods or
industrial goods, essential goods, luxury goods and economic goods.
 The economic resources or factors of production are land, labor, capital and
entrepreneurship.
 The characteristics of resources are scarcity, multiple use and partially replaceable.

IV. ENGAGEMENT ACTIVITY

A. Classification of Goods
Direction: Pick the goods and classify them accordingly.
Your mother went to the mall to shop goods. She purchased the following goods:
Canned goods; bread; sacks of rice; meat; vegetables; toothpaste; bath soaps; perfumes; wrist
watch; aircon to ventilate her store and coffee maker for her store. (2 pts. each correct good
classification)
Consumer Goods Luxury Goods

Industrial Goods Economic Goods

Essential Goods

B. Resources of Production
Direction: The diagram represents the economic resources in the production of goods and
services of the ABM Computer Shop located in Manila.
1) Identify each resource. (1 pt. each)
2) Give an example of each resource that the computer shop needs for the production of its
services. (1 pt. each)
Choices are provided below.
Choices for No. 1: Entrepreneurship; Land; Capital; Labor
Choices for No. 2: Manpower; space; great ideas to innovate; computers

C. The Field of Economics

DirectionCategorize the characteristics of microeconomics and macroeconomics using the
diagram below. (2 pts. each)

V. ENRICHMENT
Question: Having learned about the nature and scope of economics, the fields of economics,
the economic agents/stakeholders, the classifications of goods, and the economic resources in
this module; what things have you realized you should do/practice in order for you and your
family to successfully live through and recover from this pandemic crisis? Answer in 7-10
sentences. (10 pts.; 7 - Quality of Ideas, 3 - Organization of Ideas)
VI. EVALUATION
A. Picture Analysis
Direction: Determine what resource of production each element on the picture. (2 pts. each)

Image by Brianna Gilmartin © The Balance 2019

(https://www.thebalance.com/factors-of-production-the-4-types-and-who-owns-them-4045262)

B. Identification
Direction: Determine what factor of production for each scenario. (3 pts. each)
1.The ABM Manufacturing Co. hired a
gardener. He uses alawn mower for
landscaping. Which factor of production would
you consider this machine?

https://www.popularmechanics.com/home/lawn-
garden/how-to/a24355/how-to-winterize-your-lawn-mower/
2. The owner of the company withdrew cash
for the salaries of the employees. Which factor
of production would you consider cash on
hand?

https://www.breakingviews.com/considered-view/manila-
sleepwalks-towards-inflationary-trouble/
3. The top manager of the firm said “the great
ideas, concepts and emotional determination
of a person to produce something that
consumers want to buy” is very important for
the company. What factor of production
describes the ability to create great ideas?

https://www.shrm.org/resourcesandtools/hr-
topics/organizational-and-employee-development/pages/3-
challenges-new-managers-face-and-how-training-can-
help.aspx
4. The farmers planted pineapple cuttings in
the vacant area located in their locality. Which
factor of production would you consider a
pineapple plantation?

https://www.pinterest.ph/pin/400257485602520557/

C. Multiple Choice
Directions: Choose the letter of the correct answer. Encircle your answer. (2 pts. each)
1. MrsNenita De Jesus purchased basic goods like vegetables and groceries for the consumption
of her family. These goods are:
a. Consumers goods
b. Capital Goods
c. Luxury Goods
d. Economic Goods
2. Mr. Dennis Elecanal purchased new car as a gift for his father’s birthday. This good is
a. Consumers Good
b. Luxury Good
c. Capital Good
d. Economic Good
3. ABM Computer shop purchased additional 10 units of computer for the business. These
goods are called:
a. Consumers goods
b. Luxury Goods
 c. Capital Goods
d. Economic Goods
4. Which is not considered as tangible good?
a. Cell phone
b. Mask
c. Sack of rice
d. Training service
5. Which is true about Economics as a social science?
a. Scarce resources and limited needs drive choice
b. Economics explains and predicts economic events
c. The scientific method is based on the normative analysis
d. Economic hypotheses lead directly to predictions
6. Which is true on the value of an economic theory in practice? It is determined by
a. how accurate the assumptions are.
b. how well the theory can be represented by a graph.
c. how well the theory can predict or explain.
d. how economical the model is.
7. Which of the following is the study of the aggregate economy studied as a whole?
a. Mathematical economics
b. Econometrics
c. Macroeconomics
d. Microeconomics
8. Business ethics refers to any behavior by businesses that may
a. be illegal.
b. violate social or moral standards.
c. result in the maximization of profits.
d. All of the above.
9. Businesses have responded to incentives for ethical behavior by doing ALL except
a. lobbying for the abolition of laws that require ethical behavior.
b. appointing “ethics officers” to monitor ethical manners of employees.
c. providing training sessions in ethical behavior for employees.
d. establishing codes of ethical behavior for employees.
10. Which of the following is not an economic agent in your locality?
a. Producer
b. Consumer
c. Public Sector
d. None of ABC
VII. RESOURCES
Dela Cruz et al. DepEd Applied Economics Module. Division of City Schools Manila.
https://www.economicshelp.org/blog/11226/concepts/economic-goods-definition-and-examples/#:~:text=An
%20economic%20good%20is%20a,no%20opportunity%20cost%20%E2%80%93%20but%20abundance.
https://www.brandchannel.com/2012/02/17/why-consumer-goods-brands-must-think-more-like-retailers/
https://www.wisegeek.com/what-are-capital-goods.htm
http://www.thehawk.in/must-read/online-services-for-essential-goods-to-be-allowed-kejriwal-133509?
utm_campaign=pubshare&utm_source=facebook&utm_medium=246577068688315&utm_content=auto-
link&utm_id=348
https://www.rt.com/business/421604-most-profitable-luxury-investments/
https://www.mitsubishielectricmalaysia.com/products/air-conditioner-r32/jpseries/
https://www.masterclass.com/articles/economics-101-what-are-factors-of-production
https://ph.asiatatler.com/society/tatler-heroes-filipinos-leading-the-fight-against-covid-19
http://www.thaiautonews.net/new-products/nissan-starts-production-of-new-juke-in-uk/
https://www.investopedia.com/ask/answers/032615/why-do-some-economists-consider-entrepreneurship-be-
factor-production.asp
https://www.thebalance.com/factors-of-production-the-4-types-and-who-owns-them-4045262
https://www.popularmechanics.com/home/lawn-garden/how-to/a24355/how-to-winterize-your-lawn-mower/
https://www.breakingviews.com/considered-view/manila-sleepwalks-towards-inflationary-trouble/
https://www.shrm.org/resourcesandtools/hr-topics/organizational-and-employee-development/pages/3-
challenges-new-managers-face-and-how-training-can-help.aspx
https://www.pinterest.ph/pin/400257485602520557/
https://quizizz.com/admin/quiz/5b7564f0dfd12e00194449b9/factors-of-production
https://www.stagneshs.org/ourpages/auto/2015/4/25/44353125/Unit%201%20Answer%20Key.pdf
https://study.com/academy/practice/quiz-worksheet-four-factors-of-production.html
https://global.oup.com/us/companion.websites/9780199811786/student/chapt1/multiplechoice
https://quizizz.com/admin/quiz/5b7564f0dfd12e00194449b9/factors-of-production