MODULE 5 - FOURTH QUARTER TOPIC: VIABILITY AND IMPACTS OF BUSINESS

APPLIED ECONOMICS ON THE COMMUNITY

OVERVIEW:

Business plays a huge role in the society. It not only takes up the most
amount of time in people lives but it also helps 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 assumed 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.
CONTENT STANDARD: Demonstrates understanding of … various socioeconomic
impacts of business on the following sectors: consumer, supplier and investors,
government,
households, and international trade.
PERFORMANCE STANDARD: Learners should be able… conduct a socioeconomic
impact study on consumers (new product and services); suppliers; investors (capital,
income) government (tax revenues, poverty alleviation, basic services); households
(standard of living, employment) and international trade (exports and imports of goods and
services) leading to options in venturing into a business.
LEARNING COMPETENCY:
 identify and explain the effects of the various socio-economic factors affecting
business and industry.
 Various Socio-economic Factors
CONTENT: Affecting Business and Industry

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 does not pay much. Therefore, the ability of customers to afford the
different products you offer in your business depends on types of their occupation.
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