Econ 0-Mudule 2 (2022-2023)

SAINT JOSEPH COLLEGE, MAASIN, LEYTE
Maasin City, Southern Leyte
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
Module II (Midterm)
For
Econ 0 – Applied Economics
First Semester, AY 2022-2023
Prepared by
Mr. Nilo L. Bia, Jr., MBA

Instructor
ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 1 -

Course Description
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 opportunities. The main output of the course is the
preparation of a socioeconomic impact study of a business venture.
Grading System
Each student shall be assessed on the following:
Pre-Midterm/Pre-Final Examination ------------------------------------ 20%

Midterm/Final Examination ---------------------------------------- 20%
Activities/Oral Examination and Class Participation ----------------- 30%
Quizzes, Exercises, and Assignments ------------------------------------ 30%
TOTAL: 100%
Learning Outcomes
At the end of the semester, the students must be able to:
1. Apply different terms in applied economics and recommend in their own simple ways
on helping
alleviate economic problems;
2. predict the possible outcomes of different situations based on their understanding of
applied economics;
3. Show computations applying the concepts of the law of supply and demand,
quantity, and equilibrium price;
4. Construct a diagram explaining the different market structures and how they can
contribute to contemporary issues;
5. Formulate a SWOT analysis for different business opportunities;
6. Conduct a survey of macro and micro environments affecting local businesses; and
7. Predict the outcomes of a possible business venture based on the different socio-
economic factors that might affect it.
Module 2
APPLIED ECONOMICS
Topic:
Lesson 1: Utility and application of applied economics to solve economic issues and
problems

Lesson
Utility and Application of
Applied Economics to Solve
1 Economic Issues and
Problems
Objectives
At the end of the lesson, you should be able to:
1. Apply the concept of opportunity cost when evaluating options and making economic
decisions
2. Understand marginal analysis cost and benefit
3. Examine the utility and application of applied economics to solve economic issues and
problems
Utility and Application of

Lesson
Applied Economics to Solve
1 Economic Issues and
Problems

As you know, the study of economics is about choices that ate made by individuals and
entities, given that fact that we can never have enough.
Philippines has been encountering different economic problem; the problem on how to make
use of the limited and scarce resources available. Economic problems arise due to unlimited
needs and wants of people with only limited or scare resources available to satisfy them. This
problem on limited resources makes the concept of choice and scarcity fundamental in the
study of economics.
Scarcity signals the need to make choices and, trade-off is usually involved when a choice is
made. Thus, one has to give up something. The best alternative that people forego, or give up,
when making a choice or decision is called opportunity cost.
This lesson helps you understand and examine the utility and application of applied
economics to solve economic issues and problems.
Scarcity is the main economic problem of the country because the limited resources is
not enough to meet the unlimited wants and needs of the people. Because of scarcity, people
make choices and in choosing something means you need to give up something in exchange.
As stated I the principles of economics, “there’s no such thing as free’. Everything has its
price. This concept is called opportunity cost which measures the cost by what is given up in
exchange. It also measures the value of the foregone alternative. An example of opportunity
cost is that, when you choose between watching tv and reading a book, the option you do not
choose is your opportunity cost. So, if you choose to read, your opportunity cost is watching
tv - but if you do not really care about watching tv, your opportunity cost is low.
Trade-off is usually involved when a choice is made. Thus, one has to give up
something. The difference between trade-offs and opportunity cost is that, every time you
make decision, there is probably a list of trade-offs you make. The highest value trade-off is
your opportunity cost.
PRODUCTION POSSIBILITIES FRONTIER
Production Possibilities Frontier is a model for understanding the tradeoffs and

economy must make when dedicating its scarce resources. It illustrates the limits of any
economy’s ability to produce outputs given its economic resources.
The graph is limited to two resources and analyzing the graph can tell you whether the
economy is allocating its resources efficiently or inefficiently. This is because the production
of one commodity can only be increased by sacrificing the production of the other commodity.
Example 1:

The table below shows a production possibility frontier which contains which contains
different combinations of foods and clothing.
A. Graph the Production Possibility Curve
B. Compute for the opportunity cost using the formula

As you have seen in the example above, the production of clothes increases at the
expense of the production of food. The production of one commodity can only be increased by
sacrificing the production of the other commodity. It is also called the production possibility
curve or product transformation curve.
Productive efficiency means resources are being used to maximize production

capabilities

Allocative efficiency means resources are being devoted towards their “best” or
optimal ends
Example 2:
Look at the Production Possibilities Frontier graph below.
In this simplistic island economy, your main resource was your time. You had to make
decisions based on your limited time.
Question 1: What is your opportunity cost of changing from obtaining 3 pineapples to

obtaining 6?
Answer: It would cost you 2 pieces of shelter.
PRODUCTION POSSIBILITIES AND EFFICIENCY
The production possibility frontier will tell you that:
1. The economy is producing efficiently when an economy is performing at any

point along the PPF
2. The PPF curve is usually “bowed out” or curved because not all resources are
perfectly adaptable for producing each product
3. It is not possible to have any point outside the production possibility curve
because of the resource limitation unless the economy grows, introduced new

technology, discovered new resources, or there is an increase in productivity.
MARGINAL ANALYSIS: COST and BENEFIT
 Marginal analysis means going-over a decision on the margin comparing costs of a

little more or a little less.
 Marginal cost is the difference (or change) in cost of a different choice.

Marginal costs sometimes go up and sometimes go down, but to get the clearest view
of your options, you should always try to make decisions based on marginal costs,
rather than total costs.
 Marginal Benefit: the difference (or change) in what you receive from a different
choice. The amount of benefit you receive from a particular good or service is
subjective; you may get more satisfaction or happiness from a particular good or
service than another.
How, then, do you decide on a choice? The answer is that you compare, to the best of
your ability, the marginal benefits with the marginal costs. Marginal analysis is an important
part of economic rationality and good decision-making.

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SAINT JOSEPH COLLEGE, MAASIN, LEYTE

Maasin City, Southern Leyte

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

Mr. Nilo L. Bia, Jr., MBA

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 1 -

Each student shall be assessed on the following:

Pre-Midterm/Pre-Final Examination ------------------------------------ 20%

At the end of the semester, the students must be able to:

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 2 -

At the end of the lesson, you should be able to:

Utility and Application of

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 3 -

PRODUCTION POSSIBILITIES FRONTIER

Production Possibilities Frontier is a model for understanding the tradeoffs and

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 4 -

A. Graph the Production Possibility Curve

B. Compute for the opportunity cost using the formula

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 5 -

Productive efficiency means resources are being used to maximize production

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 6 -

Look at the Production Possibilities Frontier graph below.

Question 1: What is your opportunity cost of changing from obtaining 3 pineapples to

Answer: It would cost you 2 pieces of shelter.

PRODUCTION POSSIBILITIES AND EFFICIENCY

The production possibility frontier will tell you that:

1. The economy is producing efficiently when an economy is performing at any

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 7 -

MARGINAL ANALYSIS: COST and BENEFIT

 Marginal analysis means going-over a decision on the margin comparing costs of a

 Marginal cost is the difference (or change) in cost of a different choice.

ECON 0 – Applied Economics Nilo L. Bia, Jr., MBA Page - 8 -

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