Applied Economics

Quarter 2 – Module 10:

Viability and Impacts of
Business on the Community
(Week 11 & Week 12)
 What I Need to Know

This module was designed for you to be able to learn how to evaluate the viability
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: 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.

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
 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.

What’s In

In the previous lesson, you have learned about how business and industry affects
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 writing the words Viable Business and write the
qualities of a viable business

Viable
Business
 Notes to the Teacher
The teacher should encourage the learners to read books in
Economics. This will help them to easily understand the lesson.

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

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?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
 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.
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)

What’s More

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

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-
 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

What I Can Do

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

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