ABM 007 / Applied Economics

Day 16: Differentiating Types of Customers

 CUSTOMER- person who buys the good or services and pays the price thereof. The word
customer is derived from the term “customs” which means “practice”, so the word customer
means the individual or entity who purchases products or services from a seller at regular
intervals.
 TRADE CUSTOMERS- the customers who purchase good in order to add value and resell them.
These include manufacturers, wholesalers, distributors, retailers, etc.
 FINAL CUSTOMERS- they are the customers who purchase it either for their own use or to hand
over it to the final user.

Customers play the most significant part in business. In fact, the customer is the actual boss in a deal
and is responsible for the actually profit for the organization. Customer is the one who uses the
products and services and judges the quality of those products and services. Hence it’s important for
an organization to retain customers or make new customers and flourish business.

TYPES OF CUSTOMERS ACCORDING TO CHARACTERISTIC

Loyal Customers

 Less in numbers but promote more sales and profit.

 These are the ones which are completely satisfied and revisit the organization.

Discount Customers

 Frequent visitors but they are only a part of business when offered with discounts on regular
products and brands or they buy only low cost products.

Impulsive Customers

 They do not have to buy a particular item at the top of their “To Do” list, but come into the store
on a whim
 They will purchase what seems good at the time

Need Based Customers

 These customers are product specific and only tend to buy items only to which they are habitual
or have a specific need for them.

Wandering Customers

 They have no specific need or desire in mind when they come into the store. Rather, they want a
sense of experience and/or community.
CLASSIFICATION OF CUSTOMERS

Existing Customers

 Consists of customers who have purchased or otherwise used an organization’s goods or

services, typically within a designated period of time.

Past Customers

 This group consists of those who have formerly purchased from the organization however, they
have not purchased from the organization within a certain timeframe.

Potential Customers

 Includes those who have yet to purchase but have a need for a product, possessing the financial
means to buy, and having the authority to make a buying decision.

Day 17: Explaining the Importance of Producers in Economy and Differentiating Substitutes

Producers are the group of persons who produce either goods or services for creating satisfaction

AGRICULTURAL (Primary Producers)

 Mainly produce goods related to agriculture and its allied activities.

INDUSTRIAL (Secondary Producers)

 Mainly produce goods related to industry or manufacturing units.

SERVICE (Tertiary Producers)

 To produce both agricultural and industrial goods, various types of services are required. These
services include transport and communication services, banking and insurance services, storage
services, etc.

SUBSTITUTE GOODS- are products that purchasers may interchange because of limitations of supply or
due to price (reasons= supply is limited, price increases)

 Close Substitute Goods (high cross elasticity or demand)- quality or characteristic of original
product is almost the same (different brand name)
 Weak Substitute Goods (low cross elasticity of demand)- alternative, different brand name
 Perfect Substitute Goods (the utility consumers gets from one good is the same as another)-
same benefits (ex: coke & pepsi)

HERE ARE THE IMPORTANT ROLES A PRODUCER HAS TO PLAY

1. Supply of Different Goods and Services- supply comes from the producer side. The producers or
firms supply various goods and services in the market according to the demand of the
consumers. (supplier)
2. Entrepreneurship- producers are also entrepreneurs. They are the main coordinators of all the
factors of production like land, labour, capital, etc. (coordinator)
 3. Optimal Use of Resources- producers are the leading persons, who take the initiatives to utilize
all economic resources, like forest resource, land resource, mineral resource, water resource,
human or labour resource etc optimally or efficiently for the production activities. (lead person)
4. Export Promotion- these producers mainly produce goods services and for export and thus
foreign exchange reserve will increase automatically. (for exportation)
5. Increase in Income and Employments- producers by increasing production from small scale to
large scale increase the income and employment of the society as well as the country. Not only
that, more number of industries will flourish along with the rise in income and employment
opportunities. ((income & job)
6. Rise in Demand for Factors of Production- producer by creating demand of their product in the
market indirectly create derived demand. Thus, with the increase in the demand of a particular
product, the factors of production i.e., land, labor, capital etc., responsible for the production of
the product’s demand will also increase automatically. (factors of production)

IMPORTANT NOTES

 Price elasticity of demand is a measure of how responsive (or flexible) demand for a good or
service is to changes in price.
 If price doesn’t affect demand all that much, then demand is said to be inelastic. On the other
hand, if price has a large effect on demand, then demand is elastic.
 The degree to which on good can be substituted for another is based upon the cross elasticity of
demand, which is a measure of the responsiveness of demand for one good when the price or
another good changes.
 If there is a positive cross elasticity of demand between two products, then when the price of
one of the products increases, demand for other product will increase as consumers switch to
the cheaper product.
 If the price of the one of the products go down, then the demand for the other product will go
down as consumers once again switch to the cheaper product. This is known as the substitution
effect, or the process of switching between goods based on a change in the relative price of
each good.

Day 18: Describing Agribusiness and the Manufacturing Industry

AGRIBUSINESS- refers to agriculture-related activities that put farmers, processors, distributors,

and consumers within a system that produces, processes, transports, markets and distributes
agricultural products. The transformation of agricultural farming into a thriving agribusiness-driven
sector entails acquiring farming technologies, training in more sophisticated farming techniques,
creating stable supply chains, establishing transport and agricultural infrastructure, investing and
research and development and securing a reliable property rights regime.

These activities can contribute not only in diversifying and increasing the value of agribusiness
outputs, but also contribute to the inclusive growth and rural development agenda of the Philippine
government. Because of this, the agribusiness sector is positioned to largely contribute to the industrial
development of the Philippines economy.

The Philippines is still primarily an agricultural country. Most citizens still live in rural areas and
support themselves through agriculture. The country’s agriculture sector is made up of 4 sub-sectors:
farming, fisheries, livestock and forestry (the latter 2 sectors are very small), which together employ
39.8% of the labor force and contribute 20% of GDP.

THE TOP 5 COMMODITY EXPERTS IN AGRICULTURE (Philippines)

1. Coconut Oil
2. Banana
3. Raw centrifugal sugar
4. Canned pineapple
5. Desiccated coconut

THE TOP 5 COMMODITY IMPORTS IN AGRICULTURE (Philippines)

1. Rice
2. Wheat
3. Cake of soya beans
4. Dry skin low milk
5. Corn

MANUFACTURING

The process of converting raw materials, components, or parts into finished goods that meet a
customer’s expectations or specifications. Manufacturing commonly employs a man-machine set up
with division of labor in a large scale production. The production process consists of inputs, activities and
outputs. This is true for all production systems. They may continuous or intermittent of they may involve
job order, serialized, batched type or mass production.

INPUT

- Men
- Money
- Machine
- Materials
- Information

TRANSFORMATION PROCESS

- Method
- Maintenance
- Product design
- Process planning

OUTPUT

- Quality (products)
- Quality (services)

CONTROL

- Inventory
- Cost
 - Feedback
- Quality

Manufacturing process are the steps through which raw materials are transformed into a final
product. The manufacturing process begins with the creation of the materials from which the design is
made. These materials are then modified through manufacturing processes to become the required part

CLASSIFICATION OF MANUFACTURING PROCESSES

1. Analytical Manufacturing- a process in operations management in which raw materials are

broken into different component parts
2. Synthetic Manufacturing- a process where the finished product will be used as another
component or raw materials to create another product
3. Assembly Manufacturing- it is a most common manufacturing process where all raw materials
will be joint together thru assembly line. Such examples are automotive products and electronic
products.

The country’s main agricultural crops are rice, corn, coconut, sugarcane, bananas, pineapple, coffee,
mangoes, tobacco, and abaca (a banana like plant). Secondary crops include peanut, cassava, camote,
garlic, onion, cabbage, eggplant, calamansi, rubber and cotton.

NOTE

 The Philippines exports its agricultural products around the world, including the United States,
Japan, Europe and ASEAN countries. Major exports products are coconut oil, other coconut
products, fruits and vegetables, bananas, prawns. Other exports include the Cavendish banana,
Cayenne pineapple, tuna, seaweed, and carrageenan.

AGRICULTURE- one of the main pillars of any economy and the ability to sustain a nation’s population
from your own sources keeps people busy with work and puts food on their table without having to beg
borrow or buy from external sources.

According to PSA or Philippine Statistics Authority, the top product of mango is the Ilocos Region, for the
Kalamansi is CALABARZON, for pineapple is the Camarines Norte, for rice is Nueva Ecija, for sugarcane is
the Negros, for peanut is the Cagayan, for banana is Davao Del Norte, for coconut is Davao Oriental, for
corn is Isabela, for sweet potato is Agusan del Sur.

The production process is dependent on the nature of the product or service rendered by the
firm. In effect, it requires flow of production using material process flow. It identifies how products are
manufactured or formed.

MATERIALS PROCESS FLOWS MAY BE CLASSIFIED AS:

 Continuous manufacturing or flow shop- production facilities are arranged as per the sequence
of production operations from the first operations to the finished product. The items are made
to flow through the sequence of operations through materials handling devices such as
conveyors, transfer devices, etc.
  Intermittent manufacturing or job shop- job shop production are characterized by
manufacturing of one or few quantity of products designed and produced as per the
specification of customers within prefixed time and cost.
 Batch manufacturing- it is characterized by the manufacture of limited number of products
produced at regular intervals and stocked awaiting sales.
 Project- project manufacturing is an operation designed to produce large, expensive, specialized
products such as aircraft carriers and submarines, and aerospace products such as passenger
planes, and the space shuttle.

Day 19: Types of Industries; Differentiating Retail and Services and Describing International Trade

RETAILING- a business or person that sells goods to the consumer, as opposed to a wholesaler or
supplier, who normally sell their goods to another business.

TYPES OF RETAILING

 Convenience Store- a 24/7 store in the are

 Sari-sari Store- usually found in the community
 Out-of-Town Superstore- largest stores
 Marketplace- usually sell street foods, clothes

SERVICES- sells services rather than products. It is usually called intangible products

TYPES OF SERVICES

 Consumer services- principal purpose is to provide services to individual consumers who desire
them and can afford to pay for them
 Retail and wholesale services- provides goods for sale to customers. Department stores,
groceries, motor vehicle sales and services.
 Education Services- provide in both public and private school.
 Health services- provide healthcare in hospitals, doctor’s office, and nursing homes
 Transportation and Similar Services- business that diffuse and distribute services are grouped
and transportation and information services.

NOTES

- Retailing offers products for personal or family use only. In contrast, wholesalers offer products,
generally for business purpose which buy more than many for personal consumption.
- Without retailers, consumers would be spending so much time and effort to produce products
they need such as coffee, sugar, soap and clothes.
- Services industries and companies include those industries and companies typically classified
within the service sector whose core product is service, such as hotels, banks, financial services,
health care and school
- Services as products represent a wide range of intangible product offerings the customers value
and pay for in the marketplace. Such products that offer service are computers, mobile phones,
gadgets and razons.
- Basic for trade, specialization, it promote the efficient use of resources like time and
endowments. It pays for a person to specialize and trade even if that person is more productive
than a potential trading partner in all economic activities.