SENIOR HIGH SCHOOL

Applied Economics
Viability and Impacts of
Business on the Community
The module has one lesson, namely:
Lesson 1: Evaluate the Viability and Impacts of Business on the Community

After going through this module, you are expected to:

identify and explain the effects of the various socio-economic factors affecting
business and industry; and
identify and evaluate the viability and impacts of business in the community.

PRE ASSESSMENT
Choose the letter of the best answer. Write the chosen letter on a separate sheet of paper.

1. The amount of money individuals earn from their daily economic activities,
be it employment, business or investments:
a. Income c. Wage
b. Salary d. All of the above
2. This is the goal of most enterprise which is to be environmentally sound and
socially responsible
a. Flexibility c. Sustainability
b. Profitability d. Viability
3. It is defined as the ability to survive which linked to financial performance.
a. Flexibility c. Stability
b. Durability d. Viability
4. This relates to changes in government influence means _______________.
a. Economic Change c. Environmental Change
b. Political Change d. Government
5. They are the key contributor to innovation and product development.
a. Entrepreneurs c. Importer
b. Exporter d. Supplier
6. This includes geographical location, the climate, weather and other factors
that affect industry.
a. Environmental Factor c. Government
b. Political Change d. Changes in Technology
7. A viable business has great effects to the community; which of the following
statement is not true?
a. It provides jobs to the community
b. It produces taxable income
c. It does not provide opportunities for the people in services such as
social welfare
d. It improves community life
8. The creation of new technology in terms of databases and electronic
communications allowed vast quantities of information to be shared and
quickly distributed enabled the company to reduce cost and improve service,
this is the effects on business in terms of:
a. Environmental Factor c. Government
b. Political Change d. Changes in Technology
9. Across the globe, businesses expect companies to maintain strong
_________________.
a. Ethical Standards c. Norms and Rules
b. Mode of Conduct d. Regulations
10. This factors affecting industry includes social relate to 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 produces taxable income to for the community
c. It does not helps in the improvement of community life
d. It does not support long term social development
12. Viability is defined as the ability to survive. In the business sense, that
ability to survive is not 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 False; the second statement is True
13. Refers to the type of jobs people 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 are affected through regulations and policies set by
______________.
a. Consumer c. Supplier
b. Government d. Households
 Lesson Evaluate the Viability and
1 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.

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–e mployed 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.
Impact of Entrepreneurs and Community Development

Business entrepreneurs play a critical role in the development of the

economy as this is the key contributor to innovativeness and product
improvement. It is one of the important ingredients to the creation of new
employments and in the building of communities in ways of offering them
jobs. By contributing to local charities, taking part in local business,
investing in projects in communities and creating and participating in
different networks in entrepreneurship, they buildup robust communities
which contribute to the community development. Governments should
develop policies which will enhance entrepreneurship by understanding the
critical difference existing between small business owners and
entrepreneurship. At the same time, a misconception about entrepreneurs
and where entrepreneurs can be found can also help the local people to
create the right picture of entrepreneurship and thus become aggressive and
contribute to economic development.

Recommendations in Maximizing Positive Impact to Community

Most businesses in the country have responsibilities to our community. It is
their social obligations to help the community through:

1. Divert a proportion of revenues to good and worthy causes for community

development and outreach programs;
 2. Find creative ways to improve the life of the firms’ employees and the
community;
3. Establishment of linkage between business and community to thresh out
some problems regarding social and environmental issues and
consultations;
4. Establishment of scholarship grants to poor but deserving students in
the community;
5. Help build customer attraction, satisfaction and loyalty, at a time when
customers are increasingly exercising their right to choose;
6. Reduce risks of negative publicity, boycotts and tarnished public image,
7. Improve product image, brand name and reputation.
Minimizing the Negative Impact on Business
There are many factors that will influence the holistic perceptions of a
negative impact and will influence the customer toward or away from a
purchase or engagement. For most businesses, aspiring for a perfect score is
simply a utopian dream, and even if it is possible it may not be desirable as
having a perfect score.

But if a business believes its product or service is suffering the

consequences of negative online reviews, and consumer feedback, there are
several actions that will help minimize the impact and correct a trend of
reduced sales or customer engagements.
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)
Activity 1: Matching Type

Directions: 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 the effects of business and industry on the following socioeconomic

factors?

1. Education-

2. Income-

3. Occupation-
PERFORMANCE TASK

Since this is you last module on Applied Economics, you are give a task to
apply what you have learned. Please read the instructions carefully.

APPLICATION. Research on business opportunities. Look for a business where the

industry is not yet saturated with so many firms. You can apply the Herfindahl –
Hirschman Index discussed in the chapter. Once you have identified a business,
prepare a simple Business Proposal.

The BUSINESS PROPOSAL should include the following:

a. Introduction/Company background
b. Vision Statements
c. A description of the good or service to be offered;
d. Target market of your product
e. Proposed location and reason for the choice of this location;
f. Long – term objectives of the business;
g. Estimated capital requirements;
h. Sources of the capital;
i. Form of business organization: Sole proprietorship, Partnership, or
Corporation
j. Suggested pricing for the product or service;
k. Mode of promotion or advertising used;
l. Technical requirements: Machines, Building, Tools needed; and
m. Socio economic Impact: Positive Effects of the Project and Negative Effects of
the Project.

RUBRIC FOR SCORING

Excellent- Very Good Good Poor
5 4-3 2 1-0
Introductory Elements
Vision
Statements/Objectives
Business Description
Products/Services
Marketing
Industry Analysis
Technical
Requirement
Socio Economic
Impact
Writing Skills
POST 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
 Assessment: What's More What I Know
1. A 1. E 1. A
2. C
2. G
2. D
3. J
3. D 4. H 3.D
4. B
5. I
4.A
6. F
5. A 7. D 5.A
6. A
8. C
6.C
9. B
7. C 10. A 7.D
8. D 8.B
9. A 9.A
10.D 10.D
11. D 11.B
12. C 12.A
13. C 13.C
14. D 14.D
15. B 15.B

References:
Dinio and Villasis 2017: Applied Economics. Rex Bookstore, First
Edition.
Leano, Roman D. 2016: Applied Economics for Senior High School.
Mindshapers Co., Inc.
https://en.wikipedia.org/wiki/Asin_(band)