Learning Module for Applied Economics

Republic of the Philippines

Department of Education
National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center Arroceros Forest Park
Antonio J. Villegas St. Ermita, Manila

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 Learning Module for Applied Economics

Applied Economics
Contemporary Socio -Economic
Issues Facing the
Filipino Entrepreneurs

Source:https://www.carricka.land.com.au

Quarter 1 Week 6 Module 6

Learning Competency

✓ Analyze the effects of contemporary socio -economic

issues affecting the Filipino Entrepreneurs.

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 Learning Module for Applied Economics

At the end of the sessionꓹ the learner should be able to:

1. analyze the effects of socio-economic issues facing the Filipino Entrepreneurs;

2. perform environmental analysis to help identify and solve economic problems; and 3.
develop skills in solving socio-economic issues that may harm the entrepreneurs and
the entire economy.
Have a good day! Before you equip yourselves with a new set of
knowledge, let us check your understanding about our next topic. Enjoy answering!

BRIEF INTRODUCTION

COVID 19 has been affecting the business world since its occurrence. There
has been economic contraction, corporate revenue losses, liquidity stresses, jobless
people and many more. The pandemic is just one of the many issues and problems
that the economies around the world are suffering nowadays.

The business world is very complex and its complexity creates several issues
and problems that can disturb the growth of the economy. Understanding the
contemporary socio-economic factors and their effects will help entrepreneurs to
recover from economic distresses and regain their positions in the market.

Before we explore further our new lesson, let us read the article below. This is
a “think, learn and challenge” opportunity for you to connect more to the ideas on
the socio-economic impact of the COVID 19 pandemic that attacks the whole world.
Enjoy reading!

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 Learning Module for Applied Economics

Socio Economic Impact of COVID 19

The UN’s Framework for the Immediate

Socio-Economic Response to the COVID 19
Crisis warns that “The COVID 19 pandemic is
far more than a health crisis: it is affecting
societies and econ-omies at their core.
While the impact of the pandemic will vary
from country to country, it will most likely
increase poverty and inequalities.

Without urgent socio-eco-nomic responses, global suffering will escalate,

jeopardizing lives and livelihoods for years to come. Immediate development responses
in this crisis must be undertaken with an eye to the future. Development trajectories
in the long-term will be affected by the choices coun-tries make now and the support
they receive.”

The United Nations has mobilized the full capacity of the UN system thr
country teams serving 162 countries and territories, to support national authorities in
developing public health preparedness and response plans to the COVID
ough its 131
Over the next 12 to 18 months, the
sociocritical components of the UN’s COVID 19 19 crisis.
by WHO, and the Global Humanitarian Response
Plan economic response will be one of three
response, alongside the health response, led
(UNDPhave
Massive production disruptions that started in. China 2020)
led to a lower supply
of goods and services that reduces overall hours worked, leading to lower incomes.
Photo Credits: UNDP China
Source: https://www.undp.org/content/undp/en/home/coronavirus/socio-
economi
c-impact-of-covid-19.html

The entrepreneurs can make strategic management decisions in order to

address socio-economic issues. A strategic management tool to address economic
issues is the PEST analysis. It is a process of evaluating the external socio-
economic issues in a business. It looks at four relevant factors that affect a
business environment: Political, Economic, Social and Technological (PEST) factors.
These factors may significantly affect a business.

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 Learning Module for Applied Economics
Socio-Economic Factors and Their Effects To Entrepreneurs

Most entrepreneurs consider the socio-economic factors in making

necessary financial decisions. Such factors are population size and
growth rate, wealth distribution, social classes, income distribution among
families, lifestyles and buying behaviour, health consciousness, spending habits
on goods and services and many more. These affect businesses on micro and macro
levels of the economy. The stockholders of a business are interested in analyzing
these socio-economic factors as these can significantly affect the business
environments. The firms, therefore, use a tool to analyze the environments called
the “environmental analysis”

Socio-Economic Factors

There are social factors that may affect the entrepreneurs which include:
a) population size and growth rate b) wealth distribution c) social classes d) income
distribution among families e) lifestyles and buying behaviour of the people f) health
consciousness issues g) average disposable income h) attitude towards the
government, work buying habits, ethical concerns, cultural norms and values,
religion and beliefs i) education level j) attitudes towards saving, investing,
retirement, product quality and customer service.

Economic Factors
There are also economic factors that may affect the Filipino Entrepreneurs.
These include: a) economic growth rate b) interest rate c) inflation rate c) exchange
rate d) availability of credit e) spending behaviour f) government budget deficits g)
gross domestic product trends h) unemployment trend i) stock market trends j)
price fluctuations. Let us discuss some of the contemporary socio-economic issues
and their effects to entrepreneurs.

Interest Rates Exchange

Banking Rates
institutions are When exchange
interested of rates fluctuate,
knowing the status they affect the
for interest rates in ability of a
the economy to
company to pay
determine their
its suppliers. This
lending practices; a good information for a
company that relies on debt capital to finance can also affect their profit margin
projects. and the amount of resources they
need to remain financially stable.

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 Learning Module for Applied Economics
Recession Economic Sluggishness/Depression
Whenever an economy faces a recession, it has Economic
the potential to change the attitude taken by depression is a
consumers toward their purchasing decisions. severe and long
This may force companies to drop prices to stay term contraction
afloat. in economic
activity. It may rise
in
unemployment
rates and closure of many businesses. Poor
health services will expose the employees on
health risk; and the slowdown in growth
rates of GNP and income throughout the
world can cause the demand and supply
not to grow at similar rates.
Economic Rent Minimum Wage
Can cause to market imperfections and Increase in wage can
lead to the rise of economic rents; it increase in consumer
would not exist if spending capabilities
markets were and the low-income
perfect since workers have a higher
competitive spending capability.
pressures would An increase in
drive down prices. minimum wages could lead to a higher
growth and contribute towards inflation
(higher costs for firms and higher spending
by the workers).
Sources: https://int.search.tb.ask.com/search/AJimage.jhtml http://immages.app.goo.gl/wKV6ff74v4cy
https://int.search.tb.ask.com/search/AJimage.jhtml www.businessleadermagazine com
https://int.search.myway.com/search/AJimage.jhtml

MACRO AND MICRO ECONOMIC ISSUES IN THE ECONOMY

Economics deals with the utility maximization allowing individuals to improve

their economic welfare. However, there are certain issues that may hinder this
objective. We classify these issues according to macro and micro levels.

The chart represents the micro and macro-economic economic issues that
affect the entrepreneurs and the entire economy.

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 Learning Module for Applied Economics

https://www.economicshelp.org/blog/15276/economics/examples-of-economic-problems

ECONOMIC ISSUES: MICRO LEVEL

There are economic issues on the micro level that can harm the entrepreneurs.
Some of these issues are the following:

1. Externalities.
The economic decisions can have external effects on other people
✓ If utility maximizes, it’s a waste of resources for entrepreneurs
✓ Externalities require government intervention. For example, taxes on negative
externalities (e.g. tobacco tax)
✓ Solution to market failure (e.g. taxes), creates its own potential problems,
such as how much to tax? Will there be tax evasion?
2. Environmental Issues
Over-consumption could cause serious problems for future generations ✓
Example, global warming, loss of non-renewable resources.
✓ The price mechanism doesn’t take into account these future costs
✓ Policies to reduce consumption may prove politically unpopular
3. Volatile Prices
✓ A surplus in supply can fall in price which can cause lower revenue ✓
Volatile markets can cause swings in economic fortunes.
4. Inequality of Income Distribution
✓ There is an unfair distribution of resources.
✓ There is a diminishing marginal utility of wealth.
✓ If all wealth is owned by a small percentage of the population, this reduces
general welfare.
ECONOMIC ISSUES: MACRO LEVEL
There are also economic issues on the macro level that can harm the
entrepreneurs. Some of these issues are the following:

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1. High Unemployment Rate
A swing in the business cycle causes high unemployment rate.

✓ A fall in demand for goods during a recession causes the laborers to be

removed from work.
✓ There is an imbalance between demand and supply of workers.
✓ A rapid change in labor markets, for examples, unskilled workers unable
to gain employment in a high tech economy.
✓ Unemployment is a waste of resources which leads to a very high personal
cost, such as low income and feelings of failure.

2 Recession
A recession is a period of negative economic growth and a decline in the
growth rate of the economy.
✓ It worsens problems of inequality and unemployment.
✓ It can create a negative spiral to business
✓ When demand falls, firms lay off workers
✓ May cause shutdown of companies
✓ The unemployed have less money to spend for goods (demand)

3. Inflation
High inflation can be a serious problem if prices rise faster than wages and
nominal interest rates.
✓ A rise in price may decline the wealth of the people
✓ If prices rise faster than wages, spending power will decline.
✓ A rapidly rising prices creates confusion and uncertainty on spending
and demand of goods.
✓ A decrease in quantity demanded due to rapidly rising prices can cause
firms to cut back on investment and spending

4. Exchange Rate Volatility

✓ Exports fall and they can develop a large current account deficit.
✓ The overvalued exchange rate can cause a fall in economic growth.
5. Poverty Cycle
✓ The developing economies may be stuck in a poverty trap.
✓ Low growth and low saving ratios lead to low levels of investment and low
economic growth.
✓ Low growth and poverty cause low savings and investment to continue

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REMEMBER

Socio-economic issues are factors that have negative effects on

economic activity. There are socio-economic factors that can affect the
Filipino entrepreneurs, consumers, suppliers, investors and private and
public sectors. These include:

Social Factors
The social factors include population size and growth rate, wealth
distribution, social class per capita income, lifestyles and health
consciousness, attitude towards government, attitude towards work, buying
habits, ethical concerns, cultural norms and values, religion and beliefs,
education or leaning or training levels, customer’s attitudes towards saving,
investing, retirement, product quality and customer service.

Economic Factors
The economic factors include economic growth rate, interest rate, inflation
rate, and foreign exchange rate, availability of credit, spending behaviour,
government budget deficits, gross domestic product trends, unemployment
trend, stock market trends and price fluctuations.

We also classify these issues according to macro and micro levels. The
following represent the micro and macro-economic issues that affect the
entrepreneurs and the entire economy.

ECONOMIC ISSUES: MICRO You’ve learned a lot from this

LEVEL module. Now let us check your
knowledge by answering the

The micro level economic activities below. Good luck!

issues include
• Externalities
• Environmental issues
• Volatile prices
• Inequality of Income
Distribution

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 Learning Module for Applied Economics
ECONOMIC ISSUES: MACRO LEVEL • Recession
• Inflation
• Exchange Rate
The macro level economic issues include:
Volatility
• High Unemployment • Poverty cycle
Rate

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