MODULE 4

SOCIOECONOMIC IMPACT STUDY

Content Standards
The learners demonstrate an understanding of various socioeconomic impacts of
business on the following sectors: consumer, supplier and investors, government, households,
and international trade.

Performance Standards
The learners shall be able to conduct a socioeconomic impact study on consumers (new
product and services); suppliers; investors (capital, income) government (tax revenues, poverty
alleviation, basic services); households (standard of living, employment) and international trade
(exports and imports of goods and services) leading to options in venturing into a business

Learning Competencies
The learners should be able to:
1. Explain the effects of the various socio-economic factors affecting business
and industry
2. Evaluate the viability and impacts of business on the community

Let’s Take the First Step!

In the previous lesson you have seen how a business company and an industry interact
with external factors, forces, and environments affecting its competitiveness, attractiveness,
profitability and economic opportunity.
In this lesson, you will be focusing on the understanding of the socio-economic factors
affecting business which will help you make better decisions about the future and direction of your
business. You will be able to analyze on the impact of business operations on various sectors as
it interact with its production and selling activities.

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 EXPLORING NEW CONCEPTS

LESSON I – VARIOUS SOCIO-ECONOMIC FACTORS AFFECTING BUSINESS AND

INDUSTRY

1. What are the socioeconomic factors and how these affect businesses and industry in
general?
Business has to pass through various socioeconomic factors and has to be affected
by such factors in its will of making money or profit by producing or buying and selling
products in the form goods and services.
Socio-economic factors include all transactions that the business has to interact with
comprising land, labor, capital, and technology. Business could not operate without a rented
or owned real estate. It could not function without employing laborers, and providing
investment.
Furthermore, Socio-economic factors are considerations about how the business
itself operates from within taking into account the capital, capacity of business, the sources
or suppliers, the product to be produced, and the services to be offered, among others.
Socio-economic Factors Affecting Business also includes the practice of consumer in
using new products and services. If households are experiencing poverty alleviation due to
employment opportunities adding more to their income, there is a great tendency for them
to spend more money in the market place demanding new products and services. Thus,
businesses are doing well in the process producing sustainable employment in return or even
expansion of the same business or opening up another form of business catering not just the
basic needs but somehow luxurious wants of consumers.
The impact of the availability of raw materials or supply for business is another thing
that affects business. It is necessary to determine the investors’ needed capital and
expected income. If raw materials needed for supply become scarce there is a tendency for
business to increase the price employing the law of demand and supply to insure returns of
investment.
In a larger industry it may include the government intervention on taxes or its policy
on investment, and the import export dollar transactions that the business maybe dealing
with. If the policies of the government are favorable to foreign trade and relations, then outside
contacts and influence will be promoted but if government adopts “nationalistic” policies, then
it will close the country to foreign influence which in turn affect the viability of local business
and industries.
Other factors affecting business may include the following:
• Payment of Government Taxes
Barangay, Municipal, or City permits, and real estate taxes, are paid in local
government units while value added tax, import-export duties, income taxes are due
to national government. Taxes paid by business enterprise are considered a
component of production cost because it is added to capital outlay of the business in
the operation.

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 • Mode of the International Trade
Some businesses especially the medium and large scale enterprises are
usually affected by the dollar exchange rate in the economic transactions, because it
may directly affect the exports and imports cost of products which in turn may directly
or indirectly affect production cost and the setting of the selling price.

2. How are You Going to Determine the Socio-Economic Status of Consumers as a Factor
Affecting Business or Industry?

Consumer’s Behavior and Its Significance on Business

The determination of the consumer’s behavior and their decisions on what to buy for
consumptions is another factor. Consumptions refer to the use of goods and services to
satisfy the basic needs and wants of consumers. Different socioeconomic classes will
generally have different priorities, and this will affect how consumers spend their money.
As investors ready to use capital for business, you must be able to look for a secured
or feasible consumers. The consumers are the persons who buy the products business offers
for sale. It is therefore imperative that we get to please the consumer, so he/she will buy from
you instead of from your competitors. Once satisfied the buyer would be eventually become
our ”suki” or regular customer.

Determining the Socio-Economic Status of Consumers and Its Effects on Industry

Wherever your small business or big business as an industry is located, there are
going to be socioeconomic factors that affect it, because social class, that is upper class,
middle class, and lower class individual status are attributable to the socioeconomic factors
that determine the success and failure of every business. Be it being an industry (big
business) or a community investment (small or medium size business).
The following are the main parameters of socio-economic status of consumers or buyers:
1. Income – when income is scarce, customers tend to restrict their spending to
essential items;
2. Education/Skills – A society that has it that a well-educated and skilled
population flourishes because individuals are employable in well-paying jobs; and
3. Occupation – refers to the type of jobs people perform by virtue of their skills,
experiences or choice.
A person who may have education or skills has a greater tendency to land a job or
may acquire permanent occupation that generates income. It is therefore important to
consider the implications of these socioeconomic factors on your business decision-making.
Your decisions should be sensitive to the prevailing economic conditions (ex. when pricing
and stocking your business). Consumers have the tendency to avoid expensive items during
periods of economic failure. Moreover, customers in the different social classes have
different tastes and preferences. Be sure not to ignore the consequences of these
socioeconomic parameters in deciding what products you are going to produce or sell.

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 EVALUATING LEARNED CONCEPTS

ACTIVITY 01

Directions: In continuation of Module 3 Activity 5 – Questions 1 & 2, Make your own evaluation
how these businesses that you enumerated on the previous activity operate. Fill in the information
needed below. Use a separate sheet of paper if necessary.

PRODUCTION OR THE SOCIO-ECONOMIC

NAME & KIND PRODUCTS
SUPPLY CAPABILITIES STATUS OF THEIR
OF BUSINESS SOLD
OF THE BUSINESSES CUSTOMERS.
1.

2.

3.

4.

5.

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 EXPLORING NEW CONCEPTS

LESSON II – VIABILITY OF A BUSINESS AND ITS IMPACT ON THE COMMUNITY

1. Business as a Commitment to Foster Sustainable Economy

Business has to establish relations with the community be it a small or large social
unit where people have something in common, in norms, religion, values, or identity
because it determine the very existence and sustainability of business itself.
Business as a provider of both goods and services is extremely important to the
economy, starting from a community where it emanates and up to the country’s economic
sustainability. Any business must also be concerned with consumer welfare, job creation,
environmental issues, uplifting the quality of people’s lives in a community, and
contributing to the whole economy. The business generated jobs because they need
human resource to produce and sell their goods and services to the consumers. It is also
an opportunity for the entrepreneurs to create solutions from the problems and crisis the
society is facing.
Once you get into business one of the most significant things that you have to do
other than the establishment of employees-employer healthy relationships is to ensure
customers patronage by maintaining or improving your products’ quality and offered
services.
In the business world everything doesn’t always go just right. Problems happen,
big and small. A negative issue can be a major company’s problem, or become an
unexpected opportunity to build positive promotion of products or services by the same
company itself.
Business must also make a relevant impact to the consumer, the supplier and
investors, to our government, and to every household.
We often hear that medium and small size businesses are the engines of job
creation in general. Their value and the role they play in Philippine economy is sometimes
underestimated. But the truth is they have the greater impact on our economy, especially
in communities or localities like the barangays and towns.

2. Establishing the Appropriate Business in the Localities

Small industries contribute to local economies by bringing progress and
improvement to the community in which the business is established. Small industries also
help motivate economic growth by providing employment openings to people who may not
be employable by larger corporations.
But doing local business is not just about making profit but also a way for
community involvement of investors by creating more jobs, increase tax base, provide
product diversity for healthy competition, and in some ways creating a community identity
for tourism and other potentialities in the localities. Hence, small business in the localities
is affecting the income generation of households within those localities which in turn also
have impact in the nation’s economy. Households also enable businesses to tailor
products and services to best suit them as consumers.

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 Successful entrepreneurs start their businesses by determining viable business
model or idea with high community impact potential like choosing the right product to
produce or sell that is innovative and service oriented.
No matter how small or big a business is, to be prosperous, investors must ask the
following question to begin with:
1. How will you get the raw materials or supply?
2. What is the potential market size or demand?
3. Who are your competitors?
4. Who are your target customers?
5. What is your potential selling price?
It is also very important to establish Organizational Control that includes control
in developing rules, guidelines, procedures, limits or other protocols for directing the work
and processes of employees and department of the business by the management.

3. Business Impact in its Operation

a. Impact to the Consumer – bringing some new and innovative products or service
to the market is always welcome to consumers who is looking value for his money.
b. Impact on Suppliers and Investors – businesses provide opportunities for
suppliers and investors that will supply them their needs and which means income
for them. More business means more jobs, more hired workers means more
income, more investment means more production and return of investment, more
income to the economy is leading to economic growth.
c. Impact on the Government – this will benefit from the establishment of new
businesses through revenues earned on fees collected from them and on tax
imposed on the incomes of the business.
d. Impact on Households – businesses mean employment opportunities for the
Filipinos.
e. Impact on the local government’s programs – CSR or the Corporate Social
Responsibility has become a growing trend among businesses today. Small and
big corporations increased focus on projects like scholarships, housing, tree
planting, and other related programs for the communities which are usually
anchored on the Local Government Units (LGU) programs.

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 EVALUATING LEARNED CONCEPTS

ACTIVITY 02

Directions: In continuation of Module 3 Activity 5 – Question number 3, State your plans with the
business that you want to put up. Use a separate sheet of paper. Include the following information:

1. Name of your business;

2. Nature of business;
3. Product offerings;
4. Initial capital; and
5. Your impact to the Consumer, Suppliers and Investors, Government, Households, and
Local Government’s Programs

BIBLIOGRAPHY

Dinio, Rosemary P., Villasis, George A., Applied Economics, Rex Book Store, 2017
Gabay, Bon Kristoffer G., Remotin, Roberto Jr. M, Uy, Edgar Allam M., Pizarro-Uy, Anna Corinna D., Economics, Rex Book
Store 2012
Cervantes, Chalstan P., Mandalupa, Renia E., Applied Economics, 2020

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