SENIOR HIGH SCHOOL

Applied Economics
Quarter 2 – Module 9:
Effects of the Various Socio-Economic Factors Affecting Business and
Industry

ABM

What I Need to
Know
This module was designed and written with you in mind. It is here to help you explain the effects
of the various socio-economic factors affecting business and industry.

The scope of this module permits it to be used in many different learning situations. The
language used recognizes the diverse vocabulary level of students. The lessons are arranged to
follow the standard sequence of the course. But the order in which you read them can be changed
to correspond with the textbook you are now using.

The module has one lesson, namely:

Lesson 1: Explain the Effects of the Various Socio-Economic Factors Affecting Business and
Industry

After going through this module, you are expected to:

 identify and explain the effects of the various socio-economic factors affecting business and
industry

What I Know
Choose the letter of the best answer. Write your answer on a separate sheet of
paper.
1. Spending and saving are mutually exclusive which means that if income is fixed, any
change in household’s savings will inversely affect _________________.
a. Inventing c. Producing
b. Spending d. Buying
2. Changes in tax rates can clearly affect net income thus affect household ________________.
a. Investing c. Borrowing
b. Producing d. Spending
3. Businesses need the support of this industry to provide the tools needed to produce
goods/services.
a. Consumer c. Supplier
b. Entrepreneur d. Income
4. A successful business influences the behavior of ______________.
a. Capital c. Consumers
b. Supplier d. Entrepreneur
5. A rise in interest rates stimulate less spending, more __________________.
a. Spending c. Exploring Business
b. Business Transaction d. Savings
6. Distributor of goods and services needed in the operation of the business.

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 a. Entrepreneur c. Consumer
b. Supplier d. None of the above
7. The unemployed spend less because of _________________.
a. Lower personal income c. High income
b. No income d. None of the above
8. Example of web – based business is an _________________.
a. e – Commerce c. Exporting
b. Hotel and Restaurant d. Importing
9. A increase in spending means ___________________.
a. More income c. Personal wealth
b. Economic growth d. All of the above
10.When consumers are likely to respond to promotional advertisements that connect to their
feeling to influence them, then the business _______________________.
a. Encourage customers to look for value
b. Influence consumers emotionally
c. Offer social responsibility
d. Change behavior with customer service
11.When consumers are likely to be influence to switch on your product when it meets their
expectations and get higher value.
a. Encourage customers to look for value
b. Influence consumers emotionally
c. Offer social responsibility
d. Change behavior with customer service
12.When consumers are likely to patronize your products and services when business
contribute to the community by being socially active such as scholarship and tree planting.
a. Encourage customers to look for value
b. Influence consumers emotionally
c. Offer social responsibility
d. Change behavior with customer service
13.When business let customers feel that they are important and give an excellent service
then the business can ______________________.
a. Encourage customers to look for value
b. Influence consumers emotionally
c. Offer social responsibility
d. Change behavior with customer service
14.Below are list that company take into account in choosing the right supplier. Which of the
following does not belong to the group?
a. Quality of products/services provided c. Reliability of Service
b. Customer preference d. Supplier's Reputation
15.Which of the following is not a determinant of spending?
a. Expectations c. Interest Rates
b. Rates of Income Tax d. The Level of Production

Lesson 1
Explain the Effects of the Various Socio-Economic Factors
Affecting Business and Industry

Governments, government agencies, consumers, investors, suppliers and other directly

and indirectly affected by the business are increasingly interested in business’ socio-
economic impact. Some are skeptical, and they want proof that companies are at least
doing no harm. Some are conscientious, and wish to be associated with organizations
which make a positive contribution to society. As you go through lesson, you will
learned about the socio economic factors affecting business and industry.

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 What’s In

In the previous lesson, you have learned about industry and environmental analysis in particular SWOT
Analysis. As you go through the lesson, I want you to do a word search to check if you still remember the
following terms about socio economic factors affecting the business and industry.

1. CONSUMER 6. SOCIO ECONOMIC

2. BEHAVIOR 7. INVESTORS
3. SAVINGS 8. SPENDING
4. HOUSEHOLDS 9. INTEREST
5. SUPPLIERS 10. TAXES

R E C D I T I S R O S G N I V A S C E S M C
G N P O M E D S E G A T R O H S S H S E I I
S T N A N K M A C R O E C I N I M H C S X M
K A P L E S C O M M A N D N I M P O R T S O
E D A M C A U I T A L T R T D E O U F L D N
L A B O R M S M A R C I T E V I R S S E R O
G M I C R O E C E N T A X R S C O E I D O C
P I H S R I E N E R P E R E N E C H G S I E
P O S I L I V E E C O N O S I C S O D E V O
N O R P A T I V E E C O N T M I C L P O A I
G D S P E N D I N G E V I T A L E D O O H C
A U S O L U T E S S R O T S E V N I N E E O
S P S U P P L I E R S C O S T R A H I N B S

What’s New

To understand more about the socio economic factors affecting business and industry, Let us read first a part of an
article written by Manny Ayala of Rappler dated April 20,2020.
Entrepreneurs turn up

It is classic entrepreneurial stuff – see a problem and figure out how to solve it, whether or not you have the resources
to do it. Linda Rottenberg, the founder of the non-profit Endeavor, has a great line that describes the situation
neatly: “When economies turn down, entrepreneurs turn up.”

Mind you, these entrepreneurs have all been walloped as hard as the rest. As I write, most are going through
unprecedented declines in their business and are scrambling to conserve cash, reduce expenses and pivot the business to
be ready for the inevitable recovery from this pandemic.

But in the middle of this chaos, they have also been moved to do something concrete to help the country.

Entrepreneurs are defined by how they respond to a crisis, which as the Chinese word for crisis suggests is the co-
existence of danger and opportunity. The great ones are those who find opportunity in the face of danger. The great
ones do right by all the stakeholders they serve: employees, customers, shareholders, suppliers and the communities
they operate in. The great ones rise to the occasion when the moment demands it of them.

In the words of the Count of Monte Cristo – a man who lost everything then gained it back: “Life is a storm, my young
friend. You will bask in the sunlight one moment, be shattered on the rocks the next. What makes you a man is what
you do when that storm comes.”

Below is a list of some of the noteworthy initiatives I have seen in the little Endeavor community in the
Philippines. In the middle of a storm, this is how entrepreneurs rise to the occasion.
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Abetina Valenzuela (Equilife Medical)

Abetina is the founder of Equilife Medical, a company that provides medical services and equipment to ICUs
in hospitals in the Philippines. When COVID-19 started to escalate, Abet and her team scrambled to get all
the critical care equipment at their disposal - such as ventilators - to the hospitals that needed them most. As
with all hospitals they have stepped up their efforts to send their nurses, respiratory therapists and engineers
into the frontline, at ng theigreat personal risk to themselves.

Paul Rivera (Kalibrr)

Paul is the co-founder and CEO of Kalibrr, a technology company that aims to transform how candidates find
jobs and how companies hire talent. Currently, his team is partnering with bld.ai, a technology company
founded by Danny Castonguay. The COVID Sentinel mission is to detect, manage, and defeat
pandemics. The sentinel surveillance system not only aggregates high quality data from public sources, but
also collects targeted data from sources such as sewage testing and patient symptoms tracker apps. This
intelligence is put in the hands of doctors for tactical solutions and researchers for systemic interventions.

(by Manny Ayala published by Rappler on April 4, 2020)

After reading the article, you now have an initial idea about the lesson. But before we begin the lesson,
answer the following:
1. What type of products/services was created during the pandemic?
2. In your opinion, what are the social and economic factors that the business owners considered in
creating their business?

What’s New

Socio Economic Factors Affecting the Business and Industry

This lesson will focus on various socio economic impacts on the following sectors such as consumers,
suppliers and households.

How do Socioeconomic Factors Affect Businesses?

Understanding the socio economic factors affecting business will help you make better decisions about the
future and direction of your business. To have an intimate understanding, however, you will have to
understand both external and environmental factors, as well as how their interplay affects your business.
Socioeconomic factors are, therefore, the social and economic factors that shape and determine the dynamics
a society will experience. These are the factors that affect the behavior of a particular group, also known as
socioeconomic class. Perhaps the most interesting behavior of member of a socioeconomic class is their
behavior as consumers. Different socioeconomic classes will generally have different priorities, and this will
affect how they spent their money.

Socio Economic Impact of Business- Consumers, Suppliers, and Households

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Effect of Business on Consumers
A successful business influences the behavior of consumers to encourage
them to buy its products. The business does this by studying consumer
needs and adopting strategies to persuade as many consumers as possible
that the products have value. You can use several methods to influence
consumers, and you have to know your markets well to get the results you
want.

1. Influence Consumers Emotionally

To affect consumers’ behavior, you have to communicate a

message or present consumers with information. Consumers’
are more likely to respond to material that connects on an
emotional level, and surprise combined with repeated episodes
of joy or humor is effective.
2. Encourage Customers to Look for Value
If you solve a common problem for consumers more effectively
than your competitors, or solve it at substantially lower cost,
you can influence consumers to switch to your brand. Your
message emphasizes the higher value consumers get when they
solve their problem using your products. The key is to make
sure your products meet the expectations of consumers.
3. Offer Social Responsibility
To have a more general effect on consumer behavior is to offer
ways of acting in a socially responsible manner. You can
promote your brand as environmentally green and socially
responsible, carrying out corresponding initiatives and
informing your target markets of your action. Consumers who
want to buy from socially active and environmentally
responsible companies respond positively.
4. Change Behavior with Excellent Service
The level of service customers experience when dealing with
your company can have a profound effect on customer
behavior. Customers who experience bad service will not buy
from your company again, and are more likely to share their
negative experiences with friends and online. Your customer
service goal must be to deliver flawless service every time a
customer interacts with your business. The effects on customer
behavior result in a positive reputation for your company and
increased sales over the long term.

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 Factors that Impact Business and Consumer Confidence
With policymakers in the major economics working hard to restore and maintain confidence
levels and shifts in sentiment indicators playing a key role in risk assessments of investors, it
is worthwhile to consider the various influences on this qualitative economic measure.
Several common factors that have the potential to cause marked shifts in sentiment includes
the following:
1. Changes in interest rates and/ or exchange rates, particularly if they are rapid,
large and unexpected;
2. Swings in the business cycle and associated movements in employment/
unemployment levels and business investment intentions;
3. Shifts in the relative prices of nondiscretionary goods and services, notably petrol,
healthcare, education and utilities prices;
4. Announced policy shifts in the stance of government fiscal policy including large
structural spending cuts or increases/ decreases in taxation rates.

Selecting the Right Suppliers

It is important to select suppliers carefully as suppliers can affect the businesses they provide
goods to. If a supplier provides a poor quality product to a firm, it may affect the firm’s
reputation as the firm will need to use the goods or sell them onto their customers. Similarly,
if a supplier provides a slow or poor service, this may slow down the service the business
provides to its customers.
1. Supplier History and Reputation
2. Quality of the Product/Service provided by the Supplier
3. Price Charged by the Supplier and how does this impact on the quality of the
product/service provided by the supplier
4. Financial Strength.
Example: Does it have good cash flow and strong balance sheet?
5. Size of the Supplier and its other Customers.
Example: Does it normally deal with businesses of your size?
6. Capacity of the Supplier
Example: How much can the supplier comfortably provide and what is its maximum?
7. Reliability of the Service
8. Flexibility of the Service
9. Turnaround Times
10.Payment Terms
Example: How quickly does the supplier expect payment and method of payment?
11.Problem Resolution Process

Supplier Management
After agreeing a contract with a supplier it is important to monitor the supplier’s performance to
ensure that they are providing the service that was agreed with them. Some firms will agree targets
known as Key Performance Indicators (KPIs) that suppliers will need to meet.
Businesses are reliant on suppliers; suppliers provide the tools a business needs to operate. If a firm
manages to negotiate a favorable contract with the right supplier they are likely to benefit. However,
the wrong supplier or unfavorable supplier contract is likely to have a detrimental effect. If things go
wrong with a supplier it may take time to switch suppliers and even if you do manage to switch
suppliers quickly it could take time to recover from the effects of a poor supplier.

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Factors Affecting Household Spending
Household spending is the most important part of aggregate demand. It can be broken down into
a number of categories, covering major spending items such as transport, food, fuel, holidays and
clothing.
The pattern of spending changes over time as a result of changes in:
1. Household income – some goods are normal goods while others are inferior, so increases
in income encourage households to shift spending from goods with a low income
elasticity of demand, like food, to those with high income elasticity of demand, like
holidays.
2. Tastes and Fashions – over time spending on certain items that are ‘in fashion’ increase
relative to those that go out of fashion.
3. Taxes and Subsidies – as indirect taxes and subsidies rise and fall, households will be
encouraged or discouraged from spending.
4. Relative Prices – as the prices of certain goods and services rise in relation to others,
household spending will adjust.

Determinants of Spending

The level of spending is determined by a number of factors, including:

1. The current level of National Income

Some extra spending is induced by changes in the current level of national income. As income rise,
customers tend to increase their spending on higher income elastic goods and services, such as
luxuries, holidays and leisure goods. When income falls households may postpone spending on these
luxuries until income rise again.
2. The Level of Savings
Spending and saving are mutually exclusive, which means that if income is fixed, any change in
household’s savings will inversely affect spending. Many of determinants of consumption have an
inverse effect on saving.
3. Expectations
If households are confident, and have positive expectations about the future, current spending can
rise. This can lead to economic growth, and re – enforce the positive expectations.
4. Unemployment
Unemployment has two potential effects on household spending. Firstly, the unemployed spend less
because of their lower personal income, and secondly, unemployment causes negative expectations,
even for those employed, and this can act as a curb on spending and a stimulus to saving.
5. Rates of Income Tax
Changes in tax can clearly affect disposable, post – tax income, and hence affect household spending.
6. Interest Rates
By altering the level of saving – a rise in interest rates will stimulate more saving, and less spending.
By altering the cost of funding existing debts such as mortgages and bank loans. For example, a rise
in interest rates will divert household funds towards the higher loan payments and away from general
spending.
By altering the cost of new credit, and thus encouraging or discouraging household borrowing. For
example, a rise in interest rates will deter new borrows, who may postpone borrowing until rate fall
back.
By altering expectations and confidence. For example, rising interest rates will subdue confidence and
create a ‘wait and see’ attitude by households, who may postpone certain spending until expectations
improve.
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What’s More
Activity 1. Below are logos of companies that are well known in the Philippines. I want you
to choose two (2) companies of your preference and answer the question: As a consumer,
what are the different factors that will make you buy their products or services? Write your
answer in a separate sheet of paper.
10 PT. RUBRIC 10 points- comprehensive and analytical 8-9 points- well written and some includes analysis; 5-7
points-well written but lacks analysis; 2-4 points- weak essay; 1 point Poorly written and lack strength
Activity 2. Fill Me In
Instruction: This activity is called “FILL ME IN”. Your task now is to classify the given descriptions inside the
box to which they necessarily belong. You may indicate your answers by writing on the Separate sheet of paper.

Income business is socially responsible connects emotionally

Subsidies Taxes excellent service

Environmental friendly Prices of Goods Product Value

Taste and Fashion

CONSUMERS’ BEHAVIOR HOUSEHOLDS SPENDING

____________________ ____________________

____________________ SOCIO ____________________

ECONOMIC
____________________ ____________________
IMPACT ON
____________________ BUSINESS ____________________

Additional Activities
Directions. Below are some products of the well-known industries in the Philippines and
to assess what you have learned match the materials needed to produce the given
Product. Draw a line to match Column A and Column B.
Column A. Column B.
1. Jollibee Chicken Joy A. tea, milk, pearl
2. Goldilocks cake B. chicken, spices
3. Selecta Chocolate Ice Cream C. milk, chocolate, freezer
4. Infinitea Milktea D. banana, tomatoes
5. Del Monte catsup E. flour, eggs, butter

MERLY T. IMPERIAL, MM
Subject Teacher
Rosie O. Corot Roehl D. Lacbanes, Ph.
ABM Coordinator SHS Principal I

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 Answer Key

Assessment: What's More What I Know

1. B
1. C
2. D
2. B
3. A
3.C
4. C
4.D
5. B

6. B 5.A

7. A 6.D
8.A 7.B
9. A 8.D
10.B
9.C
11. A
10.C
12. C
11.D
13. D
12.B
14. B

15. D 13.B
14.A
15.A

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References

Dinio and Villasis 2017: Applied Economics. Rex Bookstore, First Edition.
Leano, Roman D. 2016: Applied Economics for Senior High School. Mindshapers Co., Inc.
Competency Based Curriculum and CBLM 2019.Entrepreneurship
https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-analysis-
methods retrieval date June 10, 2020

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 Development Team of the Module
Writers:Cindy M. Ronquillo
Editors:Jane P. Valencia Ed.D, ABM Supervisor
Karina B. Hernandez, Teacher III
Reviewers: Leilane B. Barawid
Illustrator: Name
Layout Artist: Name
Management Team: Name of Regional Director
Name of CLMD Chief
Name of Regional EPS In Charge of LRMS
Name of Regional ADM Coordinator
Name of CID Chief
Name of Division EPS In Charge of LRMS
Name of Division ADM Coordinator