APPLIED ECONOMICS

Grade Level: Grade 11/12

SLA No. 4: Basic Economic Problems of the Country

Subject Code/Number:
Subject Title: Applied Economics
Teacher: Angelica C. Roma

I. Introduction
A solid understanding of economic principles and how they are applied in real-life situations
can serve as significant tools to help address the country’s economic problem. Come and
join me as we tackle about the Basic economic problems in our country.

A. Learning Competencies

 Examine the utility and application of applied economics to solve economic issues and
problems

B. Learning Outcomes

1. Identify the basic economic problems of the country;

2. discuss the causes of economic problems;
3. explain how applied economics can be used to solve economic problems.
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C. Learning Content

Philippines Basic Economic Problems

The Philippine economy has grown significantly during president Benigno Simeon
Aquino’s administration. With a growth rate of the country’s Gross Domestic Product of
6.8% in 2012, improving to 7.2% in 2013, and slowing down to 6.1% in 2014, these rates are
an improvement of past rates preceding President’s Aquino’s term. It is also higher than its
Asian neighbors such as Malaysia, Thailand, South Korea, Hongkong, India and Indonesia(CIA
World Factbook 2013)

Despite this admirable growth, people, especially the poor, have been complaining of
non-inclusive growth. Millions of Filipinos are claiming they experience hunger or still live
below the poverty level.

Economic problem exists because of imbalances of resources and satisfaction of human

needs and wants. Resources are limited to suffice the unlimited desires of the society.
Because of this, all societies are not excused with the economic problem.

Philippines is one of the competitive countries in the world. In the past years, the
economy has been increasing and stable. According to the study of World Bank in 2019, the
Philippine economy remains strong and is projected to grow 5.8% in 2019, before recovering
to 6.1% and 6.2% in 2020 and 2021, respectively.
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Grade Level: Grade 11/12

Filipinos are very proactive to attain these figures. However, there are hindrances to
meet this goal –and these are economic problems. It is hard for the Philippines to fully
eradicate poverty, unemployment and other problems because of the resources.

Unemployment
As per NSCB Resolution No. 15 dated October 20, 2004, unemployed consists of persons
in the labor force who are reported as (1) without work; and (2) currently available for work;
and (3) seeking work or not seeking work because of the belief that no work is available, or
awaiting results of previous job application, or because of temporary illness or disability, bad
weather or waiting for rehire or job recall.
The latest unemployment report posted by Philippine Statistics Authority (PSA) was in
April 2020. According the report, unemployment rate increased to 17.7 percent with 7.3 million
unemployed Filipinos in the labor force in April 2020. This is a record high in the unemployment
rate reflecting the effects of Corona virus disease 2019 (COVID-19) economic shutdown to the
Philippine labor market. Unemployment rate in January 2020 was 5.3 percent, while in April
2019 it was recorded at 5.1 percent. This global pandemic has a great effect not only in our
country but the rest of world. Let’s us find out what are the causes of high unemployment.

Major causes of Unemployment

1. Fictional Unemployment
This type of unemployment is when employees leave their job to find a better one.
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Four Causes of Frictional Unemployment

 One cause of unemployment is voluntarily leaving the workforce. Some of the

unemployed have saved enough money so they can quit unfulfilling jobs. They have the
luxury to search until they find just the right opportunity
 The second cause is when workers relocate. They are unemployed until they find a
position in the new town.
 The third cause is when new workers enter the workforce. This includes students who
graduate from high school, college or any higher degree program. They look for a job
that fits their new skills and qualifications. That is a primary cause of youth
unemployment.
 The fourth cause is when job seekers re-enter the workforce. These are people who
went through a period in their lives when they stopped looking for work. They could
have stopped working to raise children, get married or care for elderly relatives. These
four causes are an unavoidable part of the job search process. The good news is that
frictional unemployment is usually voluntary and short-term.

2. Structural Unemployment
This happens when there is a long-term decline in demand in an industry leading to
fewer jobs as demand for labor falls away. This type of unemployment exists because though
jobs are available, there’s a mismatch between what companies need and what available
APPLIED ECONOMICS
Grade Level: Grade 11/12

workers offer. Technology tends to worsen structural unemployment. Jobs on production line
being replaced by robots e.g. motor manufacturing, online banking and online retailing. Thus,
structural unemployment is long lasting unemployment due to shifts in an economy.

3. Cyclical Unemployment
Cyclical unemployment is the impact of economic recession or expansion on the total
unemployment rate. This is also known as Keynesian unemployment or demands deficient
unemployment. During recession, there’s an increase in unemployment because of business
closures and failures that would result to mass lay-offs. Firms are likely to reduce employment
to cut costs and/or maintain profits this is called “labor shedding” or “down-sizing”.

4. Seasonal Unemployment
The concept of seasonal unemployment describes a situation when workers experience
unemployment at certain times of the year when the demand has decreased. Although
unemployment is always problematic, the upside is that seasonal unemployment doesn’t last
eventually, the peak season of a given industry arrives and many workers become employed
once again.

Poverty
Basically, poverty is a condition where people’s basic needs for foods, clothing, and shelter are
not being met. In the final report of Family Income and Expenditure Survey (FIES) in 2018, the poverty
incidence among population, or the proportion of poorv Filipinos whose per capita income is insufficient
to meet their basic food and non-food needs, is now estimated at 16.7 percent. This translates to about
17.7 million Filipinos living in poverty. (PSA, 2020). The poverty incidence has been decreased
throughout the years. This is a good indicator that the economy is really performing.

Major Causes of Poverty

1. Corruption
The World Bank recognizes the harmful effects of corruption. Public sector corruption is
defined as the abuse of public power for private benefit. Corruption refers to preferential access
to public goods and services, gratuitous insuring of public procurement and contracts, illegal
hiring in the public sector, bribery or grafting, abuse of official information, inconsistent
application of rules etc.

2. Education
Poverty is not only a problem of low incomes but it is a multidimensional problem that
includes low access to opportunities for developing human capital and education. Poor
countries increase their poverty level due to lack of training skills, productive knowledge and
transforms human beings into more valuable human capital and education. Poverty levels are
strongly linked to educational attainment. Two-thirds of poor households are headed by people
with only an elementary school education or below. Access to quality education is identified as a
key pathway out of poverty. Without proper training for the respective skills and knowledge in
the work force such as read, write, communicate and be able to choose different alternative
choices in more informed way would lead to low earnings and therefore increase poverty level.

3. Natural and Geographical Characteristics

APPLIED ECONOMICS
Grade Level: Grade 11/12

Many countries are inherently poor due to their geographic characteristics that
predispose them to weak economic growth. In the Philippines, the majority live in rural areas
and work in the agriculture sector. Asian Development Bank (ADB) suggests that there’s a need
of agricultural development for the farmers and fishermen to generate more income. Also
recurrent shocks and exposure to risks such as economic crisis, conflicts, and natural disasters
are the main drivers of the poverty in the country.

4. Ineffective Governance & Government Policies

The ineffective local governance and government policies seem to prevent the
chronically poor from escaping the poverty trap. In time of high inflation, people can’t afford to
buy goods and services that they need. ADB also highlight that there’s a high level of population
growth in the country. Most large families, with six members or more, are having difficulties to
cope with every living. The government needs to put effort in creating jobs, quality and
accessible education, strong macroeconomic policies, and programs to alleviate poverty.

D. Self-Learning Activities
Directions: Choose the letter of the best answer. Write the letter of your answer on a separate sheet
of paper.

1. Which of the following is an economic problem?

a. Poverty v c. Unemployment
b. Traffic jam in Metro Manila d. All of the above
2. What is unemployment?
a. People who are available for work but do not find any jobs.
b. These are the people who have no work.
c. It refers to a person who leave their current job.
d. All of the above
3. Which of the following is NOT TRUE about poverty?
a. It is a condition where people’s basic needs for foods, clothing, and shelter are
not being met.
b. It occurs when people do not enjoy a certain minimum level of living standards
as determined by a government.
c. It is a state which the income for a family/individual is not enough to sustain the
basic food and non-food requirements.
d. None of the above
4. Which of the following is a cause of poverty?
a. Exposure to risk such as natural disasters c. High inflation during crisis
b. Both A and B are correct d. None of the above
5. Which of the following is a cause of unemployment?
a. Due to people moving between jobs
b. Fewer jobs available in the market
c. Both A and B are correct
d. None of the above

Activity 2.
APPLIED ECONOMICS
Grade Level: Grade 11/12

Directions: Identify the following terms in each statement. Write your answer in the space provided.

____________1. It refers to persons in the labor force who are reported as without work and currently
available for work.
____________2. A condition where people’s basic needs for foods, clothing, and shelter are not being
met.
____________3. It is a type of unemployment caused by economic recession or expansion.
____________4. It is an unemployment due to people moving between jobs because of the many
factors.
____________5. It is a report conducted by Philippine Statistics Authority about the poverty incidence of
the country.

E. Assessment
Essay: In a paragraph form answer the following questions comprehensively.

1. “If you were to advise the President of the Philippines on how to cope with the issues on
poverty and unemployment to improve the lives of the Filipino people, what would you tell
him and why?”
2. In what way is applied economics important in tackling economic issues or problems of the
country?
F. References
Applied Economics by Rosemary P. Dinio, PhD and Georgev A Villasis
[Link]
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