Applied Economics

Viability and Impacts of Business on the Community (Week 11

& Week 12)

What I Know

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

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.
Read the lyrics of the famous song of Asin, legendary Pinoy Rock Band in 1970
entitled “ Masdan Mo ang Kapaligiran “.

Wala ka bang napapansin

Sa iyong mga kapaligiran?
Kay dumi na ng hangin
Pati na ang mga ilog natin

Hindi na masama ang pag-unlad

At malayu-layo na rin ang ating narating
Ngunit masdan mo ang tubig sa dagat
Dati'y kulay asul ngayo'y naging itim

Ang mga duming ating ikinalat sa hangin

Sa langit huwag na nating paabutin
Upang kung tayo'y pumanaw man
Sariwang hangin sa langit natin matitikman
 Activity . Think Beyond. Answer the following questions.
1. What is the message of the song?
________________________________________________________________________
________________________________________________________________________
2. If you are the owner of a business industry, what can you recommend
about the environmental problem because of industry?
________________________________________________________________________
________________________________________________________________________

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 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 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 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.
Impact of Entrepreneurs and Community Development
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)

Activities
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-

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
 Additional Activities

You are now on the last part of the module. Congratulations! You only have one
task left in finishing the module: enrichment activity. You can start now!
COMMUNITY ICONS
Directions. Choose an entrepreneur who is well known for his/her advocacies and write a
report in a short bond paper. Below are guide questions for your reference.
GUIDE QUESTIONS
1. Tell me about yourself?
2. How did the idea of your business came about?
3. How do build a successful business?
4. What is your advocacy? Why is this important?
5. What do you consider your most noteworthy accomplishments? RUBRIC 20 pts
Excellent (5) Very Good (4-3) Good (2) Poor(1-0)
Completeness
Knowledge
Analysis
Writing Skill