MODULE 2

E-Commerce
EXPECTATIONS
After going through this module, you are expected to: 1. define e-commerce; 2. enumerate
the advantages and disadvantages of e-commerce; and 3. apply business principles, tools, and
techniques in e-commerce.
LESSON
E-Commerce Electronic Commerce (e-commerce, eCommerce) is the exchange of
information or business transactions using any form of electronic communication. E-
commerce operates in all four of the following major market segments: (1) business to
business; (2) business to consumer; (3) consumer to consumer; and (4) consumer to business.
E-commerce is facilitated through the use of electronic devices such as computers,
tablets, and smartphones which may be thought of like a digital version of mail-order catalog
shopping. With e-commerce, businesses may establish a wider market presence by providing
cheaper and more efficient distribution channels for their products or services.
Advantages of E-Commerce
1. Convenience. E-commerce can operate 24 hours a day, seven days a week.
2. Increased selection. Many stores offer a wider array of products online than they carry in
their brick-and-mortar counterparts.
Disadvantages of E-Commerce
1. Limited customer service. If you are going to buy a computer online, you cannot simply
ask an employee to demonstrate a particular model's features in person.
2. Lack of instant gratification. When you buy an item online, you must wait for it to be
shipped to your home or office.
3. Inability to touch the products. Online images do not necessarily convey the whole story
about an item, and so e-commerce purchases can be unsatisfying when the products received
do not match consumer expectations.
E-Commerce in the Philippines
E-Commerce accounts for USD 1. 3 trillion of the world’s economy. eCommerce
allows local businesses to broaden their markets well beyond Philippine shores. Personal e-
commerce can easily be achieved by Filipinos through any of the numerous buys and sell
sites currently available. While businesses can set up their e-commerce facility using their
websites.
With the global pandemic, there is an increase in the demand for e-commerce in the
Philippines. While the younger population embraced online shopping, the need for social
distancing has pushed the cash-centric and face to face shopping culture towards a more
digital one, and this is expected to continue. What is lacking is the proper digital and logistics
infrastructure to truly enable a digital economy. There is a need to upgrade the bandwidth
capacity to service the online market.
Filipinos are prolific users of social media. Estimates this year show that there are 76
million active social media users from the Philippines. Of this number, 75 million are on
Facebook, 12 million on Twitter, and 4 million are LinkedIn users There is good reason to be
optimistic about e-commerce growth in the Philippines.
Kemp and Moey (2019) released a study about e-commerce in the Philippines.
According to their report, Filipinos spent a total of USD 4.7 billion on online purchases in
2018, with more than three-quarters of this amount – USD 3.5 billion – going to online travel
purchases. Online consumer goods purchases totaled just USD 840 million in 2018, with
electronics and physical media accounting for the greatest share within this total.
The market for digital media products in the Philippines is particularly small, with the
country’s internet users spending just USD 286 million across video games, video-on-demand
services like Netflix, digital music streaming and downloads, and subscriptions to digital
news and magazines.
The average Filipino e-commerce shopper spent USD 18 on online consumer goods
purchases in 2018, although it’s worth stressing that this figure doesn’t include travel-related
purchases or spend on digital media.
ACTIVITIES
Activity 1:
Name It! Directions: Name at least five (5) e-commerce businesses that operate in your area
or within Metro Manila.
1. __________________ 4. __________________
2. __________________ 5. __________________
3. __________________

WRAP-UP
To summarize what you have learned in the lesson, answer the following questions:
1. What is e-commerce? 2. What are the advantages and disadvantages of e-commerce?
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________________.
VALUING
Reflect on this!
“Always deliver more than expected.” -Larry Page
Directions: Read each statement carefully. Write T if the statement is correct, otherwise write
F.
____________1. The average Filipino e-commerce shopper spent USD 18 on online
consumer goods purchases in 2018.

____________2. E-Commerce accounts for USD 3 trillion of the world’s economy.

____________3. One of the advantages of e-commerce is inability to touch the products.

____________4. Many stores offer a wider array of products online than they carry in their
brick-and-mortar counterparts.
____________5. E-commerce is facilitated through the use of electronic devices such as
computers, tablets, and smartphones.
MODULE 3

Micro, Small and Medium Enterprises

LESSON
According to the Magna Carta for MSMEs, micro, small, and medium enterprises are
classified based on the worth of the business assets. The microenterprises have a total asset
up to ₱3,000,000. The total assets for small enterprises should range from ₱3,000,001 –
₱15,000,000. For medium enterprises, the total assets are from ₱15,000,0001 –
₱100,000,000. MSMEs help to promote a competitive economic activity, provide
employment and it can reduce poverty in the country.

Number of MSMEs in the Philippines

The 2018 List of Establishments of the Philippine Statistics Authority (PSA) recorded
a total of 1,003,111 business enterprises operating in the country. Of these, 998,342 (99.52%)
are MSMEs and 4,769 (0.48%) are large enterprises. Micro enterprises constitute 88.45%
(887,272) of total MSME establishments, followed by small enterprises at 10.58% (106,175)
and medium enterprises at 0.49% (4,895). The majority of the MSMEs can be found in the
National Capital Region (NCR) with 203,312 (20.36%) business establishments.
The top five (5) industry sectors according to the number of MSMEs in 2018 were: 1.
Wholesale and Retail Trade with 461,765 establishments; 2. Accommodation and Food
Service Activities with 144,535 establishments; 4. Manufacturing with 116,335
establishments; 5. Other Service Activities with 66,162 establishments; and 6. Financial and
Insurance Activities with 46,033 establishments.

Contribution of MSMEs on the Philippine Economy

1. Employment Opportunities
These MSMEs generated a total of 5,714,262 jobs or 63.19% of the country’s total
employment in 2018. The micro-enterprises produced the biggest share (28.86%) closely
followed by small enterprises (27.04%) while medium enterprises were far behind at 7.29%.
Meanwhile, large enterprises generated a total of 3,328,801 jobs or 36.81% of the country’s
overall employment.
2. Exports Contribution of MSMEs
MSMEs account for 25% of the country’s total export revenue. It is also estimated
that 60% of all exporters in the country belong to the MSME category. MSMEs can
contribute in exports through a subcontracting arrangement with large firms, or as suppliers
to exporting companies.
Government Programs to Support MSMEs
1. Barangay Micro Business Enterprise (BMBE) Act or R.A. 9178
It encourages the formation and growth of BMBEs (or micro-enterprises) by granting
them incentives and other benefits (i.e., exemption from income tax, exemption from
minimum wage). As defined in the article, Barangay Micro Business Enterprise refers to any
business entity or enterprise engaged in the production, processing or manufacturing of
products or commodities, including agro-processing, trading, and services, whose total assets
including those arising from loans but exclusive of the land on which the particular business
entity's office, plant and equipment are situated, shall not be more than Three Million Pesos
(P3,000,000.00). It includes also the enterprise engaged in services, excluding those rendered
by anyone, who is duly licensed by the government after having passed a government
licensure exam, in connection with the exercise of one’s profession (e.g., accountant, lawyer,
doctor, etc.)
According to Section 7-8 of the article: “All BMBEs shall be exempt from tax for
income arising from the operations of the enterprise”. “The BMBEs shall be exempt from the
coverage of the Minimum Wage Law, provided, that all employees covered under this Act
shall be entitled to the same benefits given to any regular employee such as social security
and healthcare benefits.”
2. Go Negosyo Act or R.A. 10644
The law seeks to promote “job generation and inclusive growth through the
development of MSMEs” in the country. It promotes “ease of doing business and facilitates
access to services for MSMEs within its jurisdiction” by establishing of Negosyo Centers in
all provinces, cities, and municipalities to promote. Business advisory services through
technology transfer, production and management training, and marketing assistance for
MSMEs. Business registration assistance through the Philippine Business Registry Databank
under the Department of Trade and Industry (DTI). Go Negosyo Act will provide financial
assistance for the development and promotion of MSMEs in priority sectors of the economy
to be sourced from the MSME Development Fund and BMBE Fund.

ACTIVITIES
Activity 1:
Name It! Directions: Name at least five (5) MSMEs that operate in your area or within Metro
Manila.
1. __________________ 4. __________________
2. __________________ 5. __________________
3. __________________
Activity 2:
Directions: Choose the letter of the best answer and write it on a separate sheet of paper.
1. It is a business enterprise that has an asset of less than ₱3,000,000.
A. Micro-Enterprise B. Small Enterprise C. Medium Enterprise D. none of the
above
2. The total assets of the business to be considered as a small enterprise.
A. less than ₱3,000,000 B. ₱3,000,000 – ₱15,000,000
C. ₱15,000,001 – ₱100,000,000 D. more than ₱100,000,000
3. The total assets of the business to be considered as a medium enterprise.
A. less than ₱3,000,000 B. ₱3,000,000 – ₱15,000,000
C. ₱15,000,001 – ₱100,000,000 D. more than ₱100,000,000
4. It encourages the formation and growth of micro-enterprises by granting incentives and
other benefits. A. Microfinance Act B. Go Negosyo Act
C. Barangay Micro Business Enterprise Act D. Microbusiness Opportunity Act
5. It promotes ease of doing business and facilitates access to services for MSMEs through
the Negosyo Centers.
A. Barangay Micro Business Enterprise Act B. Microbusiness Opportunity Act
C. Microfinance Act D. Go Negosyo Act

WRAP-UP
To summarize what you have learned in the lesson, answer the following questions:
1. What is micro, small, and medium enterprises? 2. What is the importance of the MSMEs in
the economy?
VALUING
Reflect on this!
“It's always the little things that make big things happen.”
 ― Jeffrey Fry
Activity 3:
Directions: Read each statement carefully. Write T if the statement is correct, otherwise write
F.
____________1. A small enterprise has an asset of less than ₱3,000,000.
____________2. The total assets of the business to be considered as micro-enterprise is at
least ₱5,000,000.
____________3. A medium enterprise has a total assets of more than ₱100,000,000.
____________4. Go Negosyo Act promotes ease of doing business and facilitate access to
services for MSMEs through the Negosyo Centers.
____________5. Barangay Micro Business Enterprise Act encourages the formation and
growth of micro enterprises by granting incentives and other benefits.

MODULE 4

Socioeconomic Factors Affecting

Business and Industry: Consumer
Behavior
LESSON
Consumer Theory
Consumer theory is the study of how people decide to spend their money based on
their individual preferences, and budget constraints. Consumer theory shows how individuals
make choices, subject to how much available income they have to spend, and the prices of
products. Consumption refers to the use of goods and services to satisfy human wants.
Individuals have the freedom to choose between different bundles of goods and
services. Consumer theory seeks to predict their purchasing patterns by making the following
three basic assumptions about human behavior:
1. Utility maximization - Individuals are said to make calculated decisions when shopping,
purchasing products that bring them the greatest benefit known as a maximum utility.
2. Nonsatiation - People are seldom satisfied with one trip to the shops and always want to
consume more.

3. Decreasing marginal utility - Consumers lose satisfaction in a product the more they
consume it.
The Utility Function
A consumer aims to maximize the satisfaction he/she derives from the use of a good
or service. The utility is a term in economics that refers to the total satisfaction received from
consuming a good or service. Economic theories based on rational choice usually assume that
consumers will strive to maximize their utility. The economic utility of a good or service is
important to understand, because it directly influences the demand, and therefore price, of
that good or service. In practice, a consumer's utility is impossible to measure and quantify. In
order easily understand the concept of utility, we shall assume that it is measurable in units,
which is called util. Util is one unit of satisfaction.
The utility function shows the relationship between utility and consumption. In the
equation form, it is U = f(C), which is simply stated as: utility is a function of consumption.
Also, the utility for the consumption of goods X and Y can be expressed as U = f(X,Y). The
important measures of utility are Total Utility and Marginal Utility.
Total Utility refers to the combined utility derived from consuming an additional unit
of a good. Marginal Utility refers to the additional utility derived from consuming an
additional unit of a good.
Law of Diminishing Marginal Utility The Law of Diminishing Marginal Utility
states that, as additional units of goods are consumed, the additional utility derived from each
additional unit tends to diminish. In other words, as a consumer takes more units of a good,
the extra utility or satisfaction that he derives from an extra unit of the good goes on falling.
It should be carefully noted that the marginal utility, and not the total utility, that declines as
the consumption of good increases. The law of diminishing marginal utility means that the
total utility increases but at a decreasing rate.
The law is based upon the fact that the total wants of humans are virtually unlimited,
each single want is satiable. Therefore, as an individual consumes more and more units of
goods, the intensity of his want for that goods declines, to the point that he no longer wants to
consume more goods. When the saturation point is reached, the marginal utility of goods
becomes zero. The zero marginal utility of goods implies that the individual has reached
his/her satisfaction.
Table 1. Hypothetical Utility Schedule for Milk tea
Cups of Milk Tea
Consumption per day Total Utility Marginal utility
1 12 12
2 22 10
3 30 8
4 36 4
5 40 6
6 41 1
7 39 -2
8 34 -5
 Consider Table 1 in which we have presented the total and marginal utilities derived
by a person who consumes milk tea per day. When one cup of milk tea is taken per day, the
total utility derived is 12 units. And because this is the first cup its marginal utility is also 12
utils. With the consumption of 2nd cup per day, the total utility rises to 22 but the marginal
utility falls to 10 utils. It will be seen from the table that as the consumption of milk tea
increases to six cups per day, the marginal utility from the additional cups diminishes (the
total utility is increasing at a diminishing rate).
However, when the cups of tea consumed per day increased to 7, then instead of
giving positive marginal utility, the 7th cup gives negative marginal utility which is equal to -
2. Too many cups of milk tea consumed per day (say more than six for an individual) can
cause acidity and gas trouble. Thus, the extra cups of milk tea beyond 6 cups to a person
gives him disutility, instead of positive satisfaction.

ACTIVITIES
Activity 1:
Directions: Choose the letter of the best answer and write it on a separate sheet of paper.
1. It describes how people spend their money based on individual preferences and budget
constraints.
A. Spending Theory B. Consumer Theory
C. Human Choice Theory D. Budget Theory
2. It refers to the use of goods and services to satisfy human wants.
A. consumption B. satisfaction C. utility D. opportunity
3. It refers to the total satisfaction received from consuming a good or service.
A. opportunity B. consumption C. satisfaction D. utility
4. It is the measure of the unit of satisfaction.
A. util B. satis C. happiness D. consumption
5. This law states that as an additional units of goods is consumed, the additional utility
derived from each additional unit tends to diminish.
A. Law of Utility B. Law of Diminishing Utility
C. Law of Diminishing Marginal Utility D. Law of Diminishing Marginal
Returns
RECAP
Directions: Discuss how the government programs support the MSMEs.
1. Barangay Micro Business Enterprise Act

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_____________________________________________________________________
2. Go Negosyo Act

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_____________________________________________________________________
Activity 2:
I am Important
Directions: As a student-consumer, explain your importance to the businesses.
1.
__________________________________________________________________________.

2._________________________________________________________________________.

3._________________________________________________________________________.

4._________________________________________________________________________.

5._________________________________________________________________________.

WRAP-UP
To summarize what you have learned in the lesson, answer the following questions:
1. What is consumer theory?
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
_________________________________________________________________________________.
2. What are the factors affecting business and industry in terms of consumers? 3. What is the
importance of consumer behavior in business?
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________________.
VALUING
Reflect on this!
“Satisfaction is not always the fulfillment of what you want; it is the realization of how
blessed you are for what you have.”
― Anonymous

Directions: Read each statement carefully. Write T if the statement is correct, otherwise write
F.
____________1. The law of diminishing marginal utility means that the total utility increases
but at a decreasing rate.
____________2. Total Utility is defined as the sum of the satisfaction that a person can
receive from the consumption of all units of a specific product.
____________3. Consumers lose satisfaction in a product the more they consume it.
____________4. People are seldom satisfied with one trip to the shops and always want to
consume more.
____________5. Utility function shows how individuals make choices, subject to how much
income they have available to spend, and the prices of goods and services.
MODULE 5

Socioeconomic Factors Affecting

Business and Industry: Production
Theory
LESSON
Production is a process of combining various inputs to produce an output for
consumption. It is the act of creating output in the form of a commodity or a service that
contributes to the utility of individuals. The term input refers to the resources used to produce
goods and services. Output refers to the product created as a result of the combination of
input in the production process.

Production Theory
In economics, production theory explains the principles in which the business has to
take decisions on how much of each commodity it sells, how much it produces, and how
much of raw material ie., fixed capital and labor it employs. It defines the relationships
between the price of the commodities and productive factors on one hand, and the quantities
of these commodities and productive factors that are produced on the other hand.
The Production Function is an equation showing the maximum output of a commodity
that a firm can produce per time with each set of inputs. Q = f(i) Where: Q = output and i =
input To be more specific, output depends on the quantity of land, labor, and capital available.
Thus, Q = f(Ld,Lb,C).
Basically, production analysis is concerned with the analysis in which resources such
as land, labor, and capital are employed to produce a firm’s final product. To produce goods,
the basic inputs are classified into two divisions: fixed inputs and variable inputs. Fixed
inputs are resources that remain constant in the short-run. Variable inputs are resources which
can be changed in the short-run or long-run.
The short-run is the period in which at least one factor of production is considered
fixed. Usually, the capital is considered constant in the short-run. In the long-run, all factors
of production are variable, while in the very long-run all factors of production are variable
and research and development are possible. Economic models and theories are not dynamic,
but they are fixed to a period. So, economists based their models on the short-run or long-run.
The difference in these periods is the ability to change the factors of production given the
time. For example, in the short run, it is impossible to set up a new factory, but more
plausible to hire new workers. It shows that in a period, the current output can change with
one factor, while in the long run, you can make any changes.
 Law of Diminishing Marginal Returns If more variable factors of production are
used in a combination with a fixed factor of production, the marginal product, and then the
average product will eventually decline. The law of diminishing marginal returns determines
the behavior of output in the short-run.
The law of diminishing marginal returns is a theory in economics that predicts when
the optimal level of capacity is reached, adding a factor of production will actually result in a
smaller increase in output.
Output produced is measured in three forms:
1. Total Product (TP) - is the combined production of several units of a given input.
Think of a pizza restaurant, with tables, chairs, and ovens (fixed factor of production).
With no workers, the output is zero, with one worker the output is ‘x’ units. The worker takes
orders, makes pizzas, cleans tables, and serves the bill. If there are two workers, the second
worker can do the same work as the first, and the output will be 2x units. They can specialize
and further increase the outputs.
2. Marginal Product - is the additional output produced by an additional unit of the input
and is equal to change in total product/change in input.
For example, when one more chef has added the production increases to x units, and
when the second worker has hired the output increases by more than 2x units. In the above
figure, the output will increase at an increasing rate till L1, hence the marginal product is
rising till L1. Given a fixed input, as the manager of the pizza restaurant adds extra workers,
the total output increases however at a decreasing rate. When the manager of the store hires
more workers, each new worker adding less to the output, and the marginal product begins to
fall from L1 to L2. After the L2, the contribution of newly hired workers is negative. If a
fixed capital, which has a limited capacity, can cater up to 5 workers, hiring more than 5
workers will be useless. No firms will hire beyond L2, where there is too much of labor to a
fixed capital.
3. Average Product – refers to the average contribution per unit of input and is equal to TP/i.
Take note take that if the marginal product is greater than the average product, then
the average product will rise. If the marginal product is less than the average product, then the
average product will drop. If the marginal product is equal to the average product, then the
average product will be at its maximum.

Significance of Production Theory in Business

As we already learned, a business is engaged in providing goods and services to customers to
make profits. Although some businesses are engaged in retailing goods that they bought from
producers, many businesses produce the goods that they sell. It is therefore important for the
business proprietors to be aware of the production behavior that will maximize output within
limited quantities of inputs available. This in turn will help maximize profits for the
enterprise.
ACTIVITIES:
Activity: My Production!
A. Production Function
Directions: Below is the production schedule for Output X with variable labor input.
Compute the marginal product and average product in each labor input.
Production Schedule for Output X with Variable Labor Input
Quantity of Labor Total Marginal Average
Input Product Product Product
1 10
2 22
3 37
4 55
5 69
6 77
7 80
8 81
9 81
10 80

WRAP-UP
To summarize what you have learned in the lesson, answer the following questions:
1. What is production theory?
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________________.

2. What are the factors affecting business and industry in terms of production? 3. What is the
importance of production theory in business?
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________________.

VALUING
Reflect on this!
“Knowledge is our most powerful engine of production.”
― Alfred Marshall
Directions: Choose the letter of the best answer and write it on a separate sheet of paper.
1. It is a process of combining various inputs to produce an output for consumption.
A. Production B. Consumption C. Product D. Consume
2. It refers to the product created as a result of the combination of input in the production
process.
A. input B. output C. material D. none of the above
3. It is an equation that shows the maximum output of a commodity that a firm can produce
per time with each set of inputs.
A. Production Schedule B. Production Function
C. Production Utility D. Production Model
4. It is a period in which at least one factor of production is considered fixed.
A. short-run B. medium-run C. long-run D. infinity-run
5. It is a theory in economics that predicts when the optimal level of capacity is reached,
adding a factor of production will actually result a smaller increase in output.
A. Law of Production B. Law of Diminishing Production
C. Law of Diminishing Marginal Utility D. Law of Diminishing Marginal Returns
Crossword Puzzle
Directions: Find the missing words in the puzzle below. Write your answer in the box.
Across:
1. the relationship between utility and consumption.
6. additional utility from consuming an additional unit.
Down:
2. refers to the use of goods and services
3. measure of satisfaction
4. satisfaction received from consuming a product
5. combined utility from consuming an additional unit
7. study of how people decide to spend their money

Directions: Read each statement carefully. Write T if the statement is correct, otherwise write
F.
____________1. Marginal Product is the change in the total product as a result of changing
the variable factor of production by 1 unit.
____________2. If the marginal product is less than the average product, then the average
product will rise.
____________3. In the long-run, all factors of production are fixed.
____________4. The theory of production explains the principles by which a business firm
decides how much of each commodity that it will produce.
____________5. The average product refers to the average contribution per unit of input.