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Module 4

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APPLIED ECONOMICS

Module 4

Prepared by; Mrs. Briege Mariae I. Arante, LPT


UTILITY FUNCTION
Utility Function- shows the relationship between utility and
consumption.
Utility- is the term used for satisfaction derived from consuming a
Subject Title: APPLIED ECONOMICS good/service.
Grade 12 Total Utility- refers to the combined utility derived from consuming
No. of Hours: 4 hours per week certain units of a good.
Academic Track: ABM & GAS Marginal Utility- refers to the additional utility derived from consuming
  an additional unit of a good.
The Law of Diminishing Marginal Utility- states that as additional
units of a good are consumed, the additional utility derived from each
MODULE 4 additional unit tends to diminish, while keeping consumption of other
goods constant.

SOCIO-ECONOMIC IMPACT STUDY


SIGNIFICANCE OF CONSUMER BEHAVIOR IN BUSINESS

Chapter Objectives: Consumer- is the person who buys the product business offers for sale.

 Identify and explain the various determinants of business and


industry THE PRODUCTION THEORY
 Discuss consumer behavior and relate it to the benefit of
business on consumers Production- refers to the use of economic resources to create goods and
 Describe the role of government in the economy services that will be used to satisfy human wants.
Theory of Production- the analysis of the input-output relationship.
Input- refers to the resources used to produce goods and services.
Output- refers to the product created as a result of the combination of
input in the production process.
THE THEORY OF CONSUMER BEHAVIOR
Production Function- is an equation showing the maximum output of a
Consumer Theory- describes how consumers make decisions on what commodity that a firm can produce per period of time with each set of
to buy. inputs.
Consumption- refers to the use of goods and services to satisfy human
wants directly.

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Production Function is represented in the equation: SOCIO- ECONOMIC IMPACT OF A BUSINESS

 Impact on the consumer


Output= f (input)
 Impact on suppliers and investors
O= f (i)  Impact on the government
 Impact on households
Where O stands for output and I stand for input. To be more specific,
 Impact on the community
output depends on the quantity of land, labor, and capital available.
Thus:

SOCIO- ECONOMIC AND GOVERNMENT IMPACT ON BUSINESS


O= f (Ld, Lb, C)  Government impact on business
 Household impact on business
 Trade and capital movements
Three Forms of Output:  Herfindahl- Hirschman Index (HHI)
 Total Product (TP) - is the combined production of several units
of a given input.
 Marginal Product (MP) – is the additional output produced by
an additional unit of the input and is equal to∆ TP /∆i . FURTHER READING
 Average Product (AP) – refers to the average contribution per
Read Chapter 4: Socio-Economic Impact Study
unit of input and is equal to TP/i.

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Activity 4.1
Experiential Activities:
1. Look for a successful small business in your neighborhood. Interview
the owner, find out the reason for putting up the business, the
problems encountered, and the reasons for its success. (10 points)

2. Identify at least 10 goods that you always consume at home. How


many are imported from our neighbors (e.g., China, Thailand) and
produced locally? Find a locally made consumer goods that complete
with these imports. Find at least five (5), compare their prices and
quality. (20 points)

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