APPLIED ECONOMICS

Learning Activity Sheets

Quarter 2: Week 4 & 5

SOCIOECONOMIC FACTORS
 APPLIED ECONOMICS

LEARNING ACTIVITY SHEET

Name of Learner: ____________________________ Q2 Wk4 LC1

Section: ____________________________________ Date:
_________________

Background Information for learners:

According to Wikipedia, socioeconomics (also called social economics) is a social science that
studies how economic activity affects and is shaped by social processes. In general, it analyzes
how modern societies progress, stagnate and regress because of their local or regional economy,
or the global economy.
Businesspeople need to adapt to an everchanging market in order to survive. Since consumers
are the heart of the business, they need to look out for socioeconomic factors that influence
consumers to be competitive and successful. These factors are associated with the quality of
life and determine the behaviors, preferences, attitudes and lifestyles of people living within a
society. This lesson takes a look at the socioeconomic factors that affect business and industry.

INCOME – defined as the amount of money a person earned from his or her economic
activities such as employment, business or investments. A consumer’s spending depends on his
or her available income. Income fluctuates as a result of changes in the economy. In the 2008-
2009 economic crisis, many employees lost their jobs because sales and credit facilities were
affected.

EDUCATIONAL LEVEL – Education provides every person the required skills and
knowledge required for employment. Consumers with higher education tend to be skilled and
also have better jobs and income as compared to those without education.

CONSUMER CONFIDENCE – an economic indicator that measures the overall consumer

optimism about the state of the economy. Confident consumers tend to be more willing to spend
money than consumers with low confidence which is good for business. On the other hand, low
confidence may force companies to cut costs and maintain profits.

EMPLOYMENT – This employee-employer relationship is greatly affected by the economy.

When unemployment is low, consumer spending tends to be high, because most people have
income to spend which is good for business and helps drive growth. Conversely, when
unemployment is high, consumer spending tends to be low because unemployed people don’t
have enough excess income to spend.

INTEREST RATES – the amount that a lender charges an individual or business to borrow
money. Higher interest rates reduce consumer spending because it is more expensive for
consumers to take out loans. It also means higher expenses for companies with debts.

INFLATION – the rate at which prices in the economy are increasing. Inflation can increase
business expenses such as rent and cost of materials, which results to an increase in prices of
products and services. Because of this, inflation can reduce the purchasing power of consumers
unless employers increase their wages.

ECONOMIC GROWTH – the economic growth and development of a country can also have
an impact on the social status of its citizens. A positive economic growth may attract more
investors and increase employment rates, which results to increase in spending which is good
for business.

EMERGING FOREIGN MARKETS – Disadvantaged countries have emerged as potential

trading partners, which means the ability to export to nations that have strong buying power.
This opens the door for small business owners to have global customers and foreign investment
opportunities and joint partnerships.

EMERGING DOMESTIC MARKETS – undeveloped economic areas can be a potential

market that can create business opportunities and ultimately shift the economic status in the
area.

DIVERSITY IN THE WORKPLACE – The Philippines has implemented new laws that
require companies to hire persons with disabilities (PWDs). Under the Implementing Rules and
Regulations of the Bureau of Internal Revenue, companies can enjoy incentives when they hire
PWDs.

OCCUPATION – defined as a person’s means of earning a living. People have different types
of jobs. Some are self-employed while most work for others as an employee. Skilled
occupations pay more while unskilled occupations do not pay much. This reality means that
the ability of customers to afford your products or services depends on their occupation.

In conclusion, business owners should be sensitive to these socioeconomic factors, which

should serve as their guide when making decisions in pricing and stocking their business.

LEARNING COMPETENCY WITH CODE

Identify and explain the various socioeconomic factors affecting business and industry.
ABM_AE12II-e-g10

ACTIVITY 1:
Directions: Choose the best answer from the box below. Place the letter of the correct
answer on the space preceding the statement.
___ 1. It refers to the types of jobs people perform by virtue of their skills, experiences or
choices.
___ 2. It analyzes how societies progress, stagnate or regress because of their local or regional
economy, or the global economy.
___ 3. Available disposable income affects ________________.
___ 4. It is the result of changes in the rates of economic growth.
___ 5. Engineers, doctors and teachers are examples of this type of occupation.
___ 6. It is the amount of money a person earned from his or her economic activities such as
employment, business or investments.
___ 7. It is a quality of your target markets that influence your scope of interactions with
customers.
___ 8. It is the rate at which prices in the economy are increasing.
___ 9. It is an economic indicator that measures the overall consumer optimism about the state
of the economy.
___ 10. It is the relationship between two parties where one entity is the employer and the other
is the employee.
A. Consumer confidence D. Income E. G. Literacy levels
B. Consumer spending Income H. Occupation
C. Employment fluctuations I. Skilled occupation
F. Inflation J. Socioeconomics

ACTIVITY 2: RESEARCH
Directions: Write your answers on your notebook.

1. Research on Republic Act (RA) No. 10524. In one paragraph, summarize your findings.
2. Is the law important? Why or why not? Explain your answer clearly and concisely.

Rubric for Activity 2:

Criteria/ Content Organization Quality of Writing
Points

4 Contains well Content is arranged Virtually no spelling,

developed ideas excellently punctuation or grammatical
errors.

3 Content has adequate There is logical order of Few spelling and punctuation
explanation content errors, minor grammatical
errors,

2 Limited content with Confused or inconsistent A number of spelling,

inadequate explanation arrangement of content punctuation or grammatical
errors.

1 Superficial and/or Minimal control of content So many spelling,

minimal content arrangement punctuation and grammatical
errors that interfere with the
meaning.

Score
TOTAL ____/12

ACTIVITY 3: ESSAY
Directions: Pick one of the socioeconomic factors listed above that you think our country needs
to address so that it can make a positive impact on our economy. Explain your answer clearly
and concisely.

Rubric for Activity 3:

Criteria/ Content Organization Quality of Writing
Points

4 Contains well Content is arranged Virtually no spelling,

developed ideas excellently punctuation or grammatical
errors.

3 Content has adequate There is logical order of Few spelling and punctuation
explanation content errors, minor grammatical
errors,

2 Limited content with Confused or inconsistent A number of spelling,

inadequate explanation arrangement of content punctuation or grammatical
errors.

1 Superficial and/or Minimal control of content So many spelling,

minimal content arrangement punctuation and grammatical
errors that interfere with the
meaning.

Score
TOTAL ____/12
 APPLIED ECONOMICS

LEARNING ACTIVITY SHEET

Name of Learner:____________________________ Grade Level: ________ Section:

___________________________________ Q2 Week 5

Background Information for Learners:

Companies come and go. Some companies start small then grow big. This lesson
focuses on what makes companies successful. Why do some companies fail to survive while
others flourish? In business, when you earn profits and you can sustain your financial
performance over a period of time, you have what is called viability. It means the ability to
survive, which, in a business sense, is linked to financial performance and position.

A business is viable if:

• it gains sufficient profit that not only provides a return to the business owner but also
meets its commitments to its business creditors.
• it has sufficient cash resources to sustain itself through a period when it is not returning
a profit.

VIABILITY IN THE NON-PROFIT SECTOR

The notion of viability is not only applicable in business. Viability is also extended to charities
and organizations in the public sector. Such organizations are viable if they are seen to deliver
social and other value, sufficient to justify adequate funding and support on an ongoing basis.

Public Sector – an operation is viable if it can maintain a decent level of service while retaining
political support.
Charity – there are a lot of charitable institutions and they rely on public support and
donations. These organizations are viable if they can maintain a decent level of service while
retaining voluntary support and funding.
DEFINITION OF TERMS

o Social viability – refers to the viability that offers value that justifies any social

cost.

o Niche viability – refers to the viability in a single specialized environment. o

Sustainability – it refers to the viability into the future

o Time-delimited viability – it is the viability for a defined period, with no

requirement for survival after the period has ended.

EVALUATION OF THE VIABILITY OF A BUSINESS

After you have established your business plan, can you predict whether it will be a
success? How are you going to execute your plan so your business will become profitable and
grow? This is where viability analysis comes in.

Viability Analysis – an analysis that will determine the probability of the project so sustain
itself, grow, meet the objectives of the project and offer the expected returns of the investor
using research, experience and business principles. Make sure you get advice from someone
with expertise in your area of business, as well as all the other issues to consider, such as the
location of the business, competitor based in the area, and the market for your product or
service.

VIABILITY THROUGH THE EYES OF THE FINANCIER

From an investor’s point of view, there are two main viability categories: a)

the business or operational viability and b) the entrepreneurial viability. A.

Operational viability – consists of various components.

1. Technical viability – This refers to the product or service that will be offered.
This will evaluate whether the product will live up to its expected performance. For example,
the claim that a pool chemical can clean a pool within one hour. Does it really live up its
claim?
Will it last? Does it cause eye irritation?
2. Financial viability – This answers questions such as: What investment
amount is required? What levels will the project break even and when? How much profit will
be made? The entrepreneur will use costing exercises, sensitivity analysis, cash flow forecasts
and income statements as tools to answer some of these questions.

3. Market viability – What is the size of the market? What percentage of the
target market needs to be captured to achieve expected turnover levels? Will the product or
service sell? Will they buy it? How will the target market know about the product or service?

4. Legal viability – This refers to contracts and agreements such as leases , buy
and sell agreements, franchise agreements and statutory conformation such as registration for
VAT, as employer, for income tax purposes and UIF.

B. Entrepreneurial viability – Also called the business viability model, it is a generic

framework that assists the entrepreneur in identifying the individual tasks (decisions) in
validating the Business Concept. The dimensions of the Business Viability Model will
validate the business concept by these core dimensions: Market viability; Technical viability;
Business model viability; Management model viability; Economic and financial viability and
Exit strategy viability. Each of these dimensions will contain components which evaluate
individual characteristics of the enterprise business venture’s viability.
1. Market viability 2. Technical viability
• Market environment (size, • Capacity
sustainability potential market, • Availability and quality of
target market) resources (including raw
• Competitors materials and labor)
• Similar products • Supply chain implications
• Pricing • Manufacturing process
• Packaging • Ability to apply IP
• Distribution to markets
• Promotion/advertising

3. Economic and financial viability 4. Management model viability

• Start-up cost • Application of knowledge and
• Working capital skills
 • Operational costs
• Raw materials costs
• Overall profitability
• Break-even point
• Sustainability of market versus
projected revenue
• Ability to generate economic value
5. Business model viability
• Uniqueness of model in terms of
competitive advantage
• Ability of competitor to duplicate
• Ability to create wealth
• Ability to duplicate and delegate
(Example: documentation of tacit
and explicit knowledge)
• Training
• Employee management and
recruitment
• Management of intellectual
property
• Management of risks
• Ability to delegate to staff
• Suitable organizational structure
• Suitability of management and
quality protocols
• Ability to measure business
process
6. Exit strategy viability
• Ability to create wealth from
exit strategy
• Ability to define exit strategy
• Ability to relate exit strategy to
industry model
• Ability to identify potential
buyers and/or strategies
• Ability to create capital assets
• Ability to schedule exit strategy
Figure 1. Dimensions of Business Viability Template
The “Dimensions of Business Viability Template,” as shown in Figure 1, serves as a guide to
support entrepreneurs in developing a suitable business viability weighting framework. The
key characteristics of the template and their application follow:

• Column 1: Dimensions of Viability – defines the core dimension that the business is
assessed against as well as its percentage contribution to the overall decision-making
process.
• Column 2: Measure of Viability – identifies the actual measure (criteria) that will be
examined.
• Column 3: Measuring Weighting – determines the overall contribution of the individual
measure to the cumulative scoring of the dimension. For simplicity of use, this normally
has cumulative scoring out of one hundred.
• Column 4: Weighting Assessment – is used to record the actual score that the researcher
or entrepreneur has assigned. For example, a competitor’s analysis may have a possible
score of 30, but only 25 has been awarded as there are no similar types of business in the
area. This would be described as a strong viability outcome.
• Column 5: Critical Validation – represents the outcome of the overall scoring of the
individual dimension. For example, an overall possible rating of 100 has been assigned to
the Marketing Dimension. There are five individual measures (criteria) that have been
used. Each of the criteria were assigned possible ratings, namely: competitors-30,
similar products-20, pricing-30, packaging-10, distribution to market-10. From research
and analysis, the following scores were awarded:

Criteria POSSIBLE SCORE RATING

Competitors 30 25
Similar products 20 20
Pricing 30 25
Packaging 10 8
Distribution to market 10 8
TOTAL SCORE 100 86/100

Acknowledging that much of the weighting process is reliant on often anecdotal and
judgmental findings, the viability of the Market Dimension in the example can be described
as being strong. In discussing the outcomes of this dimension analysis, strengths and
weaknesses should be raised and this can be determined in relation to what rating they have
been awarded.

Learning Competency with code

Evaluate the viability and impacts of business on the community. ABM_AE12II-e-g-12

ACTIVITY 1:
For item 1-5, write the letter of the choices that correspond to the given statement.
___ 1. It is defined as the ability to survive that is linked to financial performance and position.

___ 2. It refers to viability into the future.

___ 3. It is used to record the actual score that the researcher or entrepreneur has assigned.

___ 4. The viability in a single specialized environment is called ____________________. ___

5. It is the viability for a defined period, with no requirement for survival after the period has
ended.
A. Dimensions of business B. Niche viability C. Sustainability
viability model

D. Time-delimited viability E. Viability F. Entrepreneurship

For items 6-10, write T on the line if you think the statement is TRUE. Write an F on the
line if you think that the statement is FALSE.
___ 6. Public sector organizations and charities are examples of non-for-profit organizations.

___ 7. Weighting assessment represents the outcome of the overall scoring of the individual

validation.

___ 8. Legal viability refers to the ability to measure business processes.

___ 9. The use of the dimensions of business viability model is important for businesses.
___ 10. Pricing is part of the technical viability dimension of the business viability model.
ACTIVITY 2:
Of the six core dimensions of the Business Viability Model, namely Market viability; Technical
viability; Business model viability; Management model viability; Economic and financial
viability and Exit strategy viability, which one for you is the most important? Explain your
answer in not more than 500 words. Write your answer clearly and concisely on your notebook.

Rubric for Activity 2:

Criteria/ Content Organization Understanding
Points

4 Contains well Content is arranged Shows excellent

developed ideas excellently understanding of the concept.

3 Content has adequate There is logical order of Understands the concept.

explanation content

2 Limited content with Confused or inconsistent Minimal understanding of the

inadequate explanation arrangement of content concept

1 Superficial and/or Minimal control of content Attempts but demonstrates

minimal content arrangement no understanding of the
concept.

Score
TOTAL ____/12

Reflection:
Reflect on the following questions. Write your answers on your notebook.
1. What did I learn?
2. Why does this learning matter?
3. In what ways can I use this learning.