APPLIED ECONOMICS

Quarter 2 – Week 7 & 8

Name: __________________________ Grade & Section: _____________

Evaluate the Viability and Impacts of Business on the Community

Business plays a huge role in the society. It not only takes up the most amount of time in
people lives but it also help create innovations and make important technological advancements. It
makes forward thinkers and dreamers turn visions into reality. Making people lives easier.
Only when companies are profitable can they contribute effectively to society by creating
jobs and economic development. It cannot be assume that companies adopt a responsible business
conduct. However, corporate social responsibility can contribute to the success of business and
betterment of society.
As you go through the lesson you will learn how business affects society. In turn, evaluate
business viability and its effect on the community.

What’s In
In the previous lesson, you have learned about how business and industry affect various socioeconomic
factors. As you start a new lesson about evaluate the viability of the business and impacts of business in the
community, I want you to do an activity. Complete the Concept Map below by giving a viable business during
the time of pandemic and write the qualities of a viable business

Viable Business

What’s New
Now, to understand the lesson about other socio economic factors affecting business and industry and
lastly, business viability and its effect in the community, let us read the lyrics of the famous song of Asin,
legendary Pinoy Rock Band in 1970 entitled “ Masdan Mo ang Kapaligiran”
Wala ka bang napapansin Hindi na masama ang pag-unlad Ang mga duming ating ikinalat sa
Sa iyong mga kapaligiran? At malayu-layo na rin ang ating hangin
Kay dumi na ng hangin narating Sa langit huwag na nating paabutin
Pati na ang mga ilog natin Ngunit masdan mo ang tubig sa Upang kung tayo'y pumanaw man
dagat Sariwang hangin sa langit natin
Dati'y kulay asul ngayo'y naging matitikman
itim

Activity. Think Beyond. Answer the following questions.

1. What is the message of the song?
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2. If you are the owner of a business industry, what can you recommend about the environmental
problem because of industry?
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What is It
This part of the module is the lesson proper. Now, I want you to be ready and we will now begin the
lesson:
Socioeconomic Factors Affecting Business and Industry
Socioeconomic factors are characteristics that define the quality of life in a society. They influence the
behaviours, attitudes, trends, tastes and lifestyles of individuals. In fact, the different class segments of the
society – that is, upper class, middle class, lower class, - are attributable to the socioeconomic factors.
Education, income and occupation are the main parameters of socioeconomic status, according to the American
Psychological Association.
Income
Income is the amount of money individuals earn from their daily economic activities, be it employment,
business or investments. The availability of disposable income (net income after tax) influences spending
habits. Your customers are likely to purchase expensive or luxurious items whenever there is an increase in
their disposable incomes. However, when income is scarce, customers tend to restrict their spending to
essential items.
Education
Education equips members of the society with the skills and knowledge they require to be employed in
different jobs and professions. The standards of education in your society depend on the availability and
accessibility of educational amenities. A society that has a well– educated population flourishes because
individuals are employable in well–paying jobs. Education further determines the availability of skilled
workforce when seeking employees for your small business.
Occupation
Occupation refers to the type of jobs people perform by virtue of their skills, experiences or choices.
You may be self–employed or work as an employee of an individual or organizational entity. The different
types of occupation dictate the income earned by people in the society. High salaried individuals are normally
associated with skilled occupations such as, doctors, engineers, lawyers and accountants. Self – employed
individuals owning successful businesses also generate huge amounts of income. Unskilled occupations such as
menial labor do not pay much. Therefore, the ability of customers to afford the different products you offer in
your business depends on types of their occupation.
Note: It is important to consider the implications of these socioeconomic factors on your small business.
Your decisions should be sensitive to the prevailing economic conditions when pricing and stocking your
business.
Other Factors Affecting Business and Industry
Aside from the different factors mentioned above here under are other factors affecting businesses and industry.
1. Economic Conditions- Before creating business plans or when evaluating existing ones it is important
to ‘scan’ the external environment. Is the environment conductive to business you are going to establish
or there are some problems to be encountered in the future?
2. Social Environment- Social factors relate to pattern of behavior, tastes, and lifestyles. A major
component of this is a change in consumer behavior resulting from changes in fashions and styles. The
age structure of the population also alters over time (currently we have an ageing population). An
understanding of social change gives business a better feel for the future market situation.
3. Government- This is continually updating laws in a wide range of areas, such as consumer protection
legislation, environmental legislation, health and safety and employment law, etc. businesses need to
take a proactive approach and be ahead of these changes, rather than hurriedly making alterations to
products and processes in a reactive way.
4. Economic Changes- These are closely related to social ones. The economy goes through a series of
fluctuations associated with general booms and slumps in economic activity. In a boom nearly changes
that affect business include changes in the interest rate, wage rates, and the rate of inflation (i.e general
level of increase in prices). Businesses will be more encouraged to expand and take risks when
economic conditions are right, e.g. low interest rates and rising demand.
5. Political Changes- These relate to changes in government influence. In recent years these changes have
been particularly significant because as members of the European Union we have to adopt directives
and regulations created by the EU which then become part of the UK law. Political changes are closely
tied up with legal changes.
6. Changes in technology- These have also become particularly significant in the post – millennium
world. This is particularly true in terms of modern communication technologies. The creation of
databases and electronic communications have enabled vast quantities of information to be shared and
quickly distributed in a modern company enabling vast cost reductions, and often improvements in
service.
7. Environmental Factors- The locations of countries influences on the trades that businesses do. Adding
to that, many climatic changes alter the trade of industries and the way consumers react towards a
certain offering that is launched in the market. The environmental factors include geographical location,
the climate, weather and other such factors that are not just limited to climatic conditions.

Business Viability and Its Impacts on the Community

The goal of community sustainability is to establish local economies that are economically viable,
environmentally sound and socially responsive. Achieving this goal requires participation from all sectors
of the community, both to determine community needs and to identify and implement innovative and
appropriate solutions. Business sustainability is a goal for most enterprises. Sustainability in business
generally addresses two main categories which are the effect business has on the environment and the effect
business has on society. Sustainability focuses on meeting the needs of the present without compromising
the ability of future generations to meet their needs. The concept of sustainability is composed of three
pillars: economic, environmental, and social—also known informally as profits, planet, and people.
As a micro business owner, making the case for a sustainable business is simple. An environmentally
friendly business can be a profitable one. It can easily done by attracting green conscious consumers and
publicity, create value for employees, customers and public, reduce energy use and improve public health.
Viability is defined as the ability to survive. In a business sense, that ability to survive is ultimately
linked to financial performance and position.
 A business is viable where either: it is returning a profit that is sufficient to provide a return to the
business owner while also meeting its commitments to business creditors; it has sufficient cash resources to
sustain itself through a period when it is not returning a profit.
A viable business has great effects to the community. Some of this are:
1. It provides community jobs in the business sector;
2. It produces taxable income for the community from both the business establishment and the
workers,
3. Government continuously makes improvement in the community infrastructures such as
bridges, roads, sewers, water or electric to entice other business to invest in the community;
4. It helps in the establishment of better schools, more business and even more jobs for its
citizens.
5. It leads to improved business services to the community;
6. It improves community life.

The economic contributions to the societies in which business operate are significant. These
include payments to host governments in the form of taxes and royalties, which in turn directly support
long – term regional and national development, including public services and infrastructure. Business
provides broader economic contributions to society through salaries, procurement and community
investment.
Across the globe, businesses expect resource companies to maintain strong ethical standards.
This includes strong anti–corruption measures, as well as transparent disclosure around interactions
with governments, including lobbying and the payment of taxes and royalties.
There are also strong societal expectations around the need for business to respect human rights.
This recognizes that many companies are in a position to potentially undermine or support the human
rights of their community of interest. In this context, companies are expected to carry out human rights
due diligence in order to better understand and manage their potential and actual negative human rights
impacts.
HERFINDAHL – HIRSCHMAN INDEX (HHI)
As a final note to help guide the proponents of a business proposal in choosing what type of industry to enter,
the use of the Herfindahl – Hirschman Index – HHI would be useful since it helps the proponent identify
markets are highly competitive and saturated and those markets with high market concentration.
The HHI is a commonly accepted measure of market concentration. It is calculated by squaring the
market share of each firm competing in a market, and then summing the resulting numbers. Market share is
equal to the Revenue of the Firm/Revenue of the Industry and is actually a percentage. However, the whole
numbers of the market share are used to compute the HHI.
The HHI number can range from close to zero to 10,000. The HHI is expressed as
HHI = MS² of Firm 1 + MS² of Firm 2 + MS² of Firm 3….. + MS² of Firm n.
The closer a market is to being a monopoly, the higher the market’s concentration (and the lower its
competition). If, for example, there was only one firm in an industry, that firm would have 100% market share,
and the HHI would equal 10,000 (100²), nearly 0% market share, and the HHI would be close to zero,
indicating nearly perfect competition. This means the market is highly competitive and is characterized by the
existence of numerous competitors.
Results of the HHI would indicate the following:
 HHI below 100 indicates a highly competitive market.
 HHI below 1000 indicates an unconcentrated market.
 HHI between 1000 to 1800 indicates moderate market concentration.
  HHI greater than 1800 indicates high market concentration.

The business proponent should therefore seek to enter an industry where HHI is greater than 1800 since the
market is not characterized by too many firms. (Investopedia, LLC 2015)

What’s More
To gain better understanding about the lesson, l want you to answer the activities below:

Activity 1: Matching Type: Choose the letter of the correct answer from the list of words in the box
and write it in blank space provided.

a. HHI f. Socioeconomic Factors

b. Income g. Technology
c. Viability h. Taxes
d. Education i. Entrepreneurs
e. Economic j. Sustainable

_______1. Changes in interest rates, wage rate and inflation rates are example of _____________ changes.
_______2. Smart phone is an example of _________________.
_______3. Business is _________________ when it is economically viable, environmentally sound and
socially responsible.
_______4. Business contributes to government by paying __________.
_______5. Business ______________ are innovators.
_______6. These influence the behaviours, attitudes, trends, tastes and lifestyles of individuals.
_______7. It equips members of society with knowledge, skills to be employed in different jobs.
_______8. It is defined as the ability to survive which linked to financial position.
_______9. The amount of money individuals earn from their work, business or investments
_______10. Commonly accepted measure of market concentration

Activity 2. Essay Questions.(15 pts/ 5 points each) Rubrics: (Focus-3 pts; organization-2pts.) Explain then
effects of business and industry on the following socioeconomic factors? Write at the back of your paper.
1. Education-
2. Income-
3. Occupation-
What I Have Learned

Now, after discussing the lesson. I want you to answer the make a Reflection Paper to test your in
depth understanding about the lesson. Rubric: 12 pts. Reflective Thinking (4-1pt.);Analysis (4-1 pt.); Making
Connections (4-1pt.)

Business Viability and its Impact on the Community

Assessment: Choose the letter of the best answer. Write the chosen letter on a separate sheet of paper.
__________1. Many climatic changes can alter the trade of industries and how customers react towards a certain product
and this is related to ________________________.
a. Environmental Factor c. Government
b. Political Change d. Changes in Technology
__________2. A viable business has great effects to the community; which of the following statements is not true?
a. It provides jobs to the community
b. It produces taxable income
c. It does provide opportunities for the people in services such as social welfare
d. It does not support government by paying taxes.
__________3. Technological advancements enabled business to lessen cost and improve business systems and this is an
example of ____________
a. Environmental Factor c. Government
b. Political Change d. Changes in Technology
__________4. Businesses all over the world are expected to maintain strong _________________.
a. Ethical Standards c. Norms and Rules
b. Mode of Conduct d. Regulations
__________5. The amount of money a person received from their work, business or investments:
a. Income c. Wage
b. Salary d. All of the above
__________6. This is the goal of the business, advocate of positive change in the society.
a. Flexibility c. Sustainability
b. Profitability d. Viability
__________7. It is defined as the ability of the business to survive and stand pressure which linked to financial position.
a.Flexibility c. Stability
b. Durability d. Viability
__________8. This relates to changes in government influence means _______________.
a. Economic Change c. Environmental Change
b. Political Change d. Government
__________9. They are the proponent of innovation and product development.
a. Entrepreneurs c. Importer
b. Exporter d. Supplier
__________10. This factors affecting industry includes social factors such as pattern of behavior, tastes and lifestyles.
a.Environmental Factor c. Government
b. Economic Changes d. Social Environment
__________11. The following are major contributions of business and industry to society. Which of the following
statements is not true?
a. It provides jobs in the community
b. It evades payment of taxes for the community
c. It does not helps in the improvement of community life
d. It does support long term social development
__________12. Viability is defined as the ability to survive. In the business sense, that ability to survive is linked to
financial performance and position.
a. Both statements are True.
b. Both statement are False.
c. The first statement is True; the second statement is False.
d. The first statement is True; the second statement is False
__________13. Refers to a regular activity perform by virtue of their skills, experiences and choices.
a.Blue Collar c. Occupation
b. White Collar d. Profession
__________14. These are characteristics that define the quality of life in a society.
a.Government Factor c. Political Factors
b. Economic Factors d. Socioeconomic Factors
__________15. Business and industries should be flexible enough to withstand the changing rules and policies
regulations and policies set by the ______________.
a.Consumer c. Supplier
b. Government d. Households

APPLIED ECONOMICS
Quarter 2
FINAL OUTPUT

BUSINESS PROPOSAL

The business proposal should include the following:

a. Tittle of Business (Business Name)
b. A description of the good or service to be offered;
c. Target market of your product
d. Proposed location and reason for the choice of this location;
e. Long – term objectives of the business;
f. Estimated capital requirements;
g. Sources of the capital;
h. Suggested pricing for the product or service;
i. Mode of promotion or advertising used;
j. Technical requirements: Machines, Building, Tools needed;

 You can present your output through the following:

PowerPoint Presentation
Hard Copy (Computerized or Hand Written in a short bond paper.)
Video presentation
 For PPT and powerpoint presentation kindly send your output at the following:
a. E-MAIL – clarise.laurel@deped.gov.ph
b. Messenger – Clarise DL