SOCIO-

ECONOMIC
IMPACT
STUDY
Applied Economics
SLP 4
Socioeconomic Impact Study
 Socioeconomic Impact Study
● Socioeconomic Impact Study Si Defined As The Quantitative Evaluation Of The
Utility Of Projects And Public Policies, I.E. Their Creation Of Collective Value Net
Of Costs.

● The Socio-Economic Impact Methodology Is The Most Complete Method. It Is

Scientifically Robust And Continues To Enrich Many Research Fields.
 Socioeconomic Impact Study
Importance Of Socioeconomic Impact Study

● Creating Awareness
Conducting An Sei Study Raises Awareness Among Residents Of The Community. It Is
Sometimes Taken For Granted That Members Of The Community Have To Be Informed
Of Any Planned Developments And Be Educated On Any Potential Impact On The
Society.
 Socioeconomic Impact Study

Example: A Business Planning To Build A Factory Might Be Seen As Good In Terms Of

Employment Opportunities And Tax Revenue, But The Actual Operation Of The Plant
May Have Negative Externalities Such As Noise Pollution Or Wastewater That
Potentially Impact The Community.
 Socioeconomic Impact Study
● Acting As Check And Balance
An Sei Study Serves As A Check For The Effectiveness Of Government Programs And
Policies. Conducting An Sei Study Is Similar To An Inspection In Which Policy Makers
Can Gauge Whether The Objectives Of The Project Are Being Met. In The Same Way
That The International Agencies Such As The Un Monitor Involvements And Progress Of
Regional And National Development Programs In Support Of Agreed Sustainable
Development Goals.
 Socioeconomic Impact Study

● Integrating Community Feedback Into Social Developments

Feedback And Reactions From Community Groups Are Indespensable To Administrative
Bodies In Order To Calibrate Ongoing Programs And To Devise More Effective Future
Policies. Through An Sei Study, The Government Can Find Out What Public Service Is
Greatly In Demand In A Certain Community.
 Socioeconomic Impact Study

● Example: An Isolated Community Has No Health Clinics And Sick People Have To
Travel To The Next Town To Consult A Physician, Should The Government Prioritize
Putting Up A Medical Clinic In The Community Or Should It First Make The
Community More Accessible By Constructing Roads? How Much Budget Is Needed
For Both And Which Project Will Benefit More People? Which Project Is More
Favorable In The Long Run?
 Socioeconomic Impact Study
● Vital In Formulating Recommendations On How To Minimize Negative Impacts And
Maximize Positive Business Impacts On The Community

On The Business Side, The Result Of An Sei Study Are Crucial To Developing New
Products And Services. You Have Learned In Earlier Lessons How Consumer
Preferences And Lifestyle Often Change. An Sei Study Helps Organizations Keep Up
With These Changing Social Trends. Example: A Growing Consumer Demand For The
Use Of Organic Materials In Everything From Food To Houses. This Influences Food
Manufacturers And Property Contractors To Come Up With Organic Products And
Services In Order To Capitalize On The Shift In Consumer Preferences And Increase
Their Profitability.
 Learning Objectives
At The en dof This Chapter the Students Should be able to:

● Identify and explain the various determinants of business and industry;

● figure out how these determinants can impact on concerned sectors such as
the consumers, suppliers and investors, the government, households and on
international trade;
● discuss consumer behavior and relate it to the benefit of business on
consumers;
● discuss production theory as basis for coming up with a viable and
profitable business;
● draft a business proposal using the lessons studied in previous chapters;
 Learning Objectives

● analyze and evaluate the viability of a business and its impact on the
community;
● come up with recommendations and strategies on how to minimize a
business' negative impact on society;
● come up with recommendations and strategies on how to maximize a
business' positive impact on society;
● describe the role of government in the economy; 
● and describe the Philippine household as to age and income as a
basis of choosing the target market of a business/product/service.
Lesson 4.1. The Theory of
Consumer Behavior
 The Theory of Consumer Behavior

Consumer Theory describes how consumers make decisions on what to

buy, Consumption refers to the use of goods and services to satisfy
human wants directly.
 THE UTILITY FUNCTION

utility function measures the welfare or satisfaction of a consumer as a

function of the consumption of real goods, such as food or clothing.
Utility function is widely used in rational choice theory to analyze human
behavior.
important measure of utility are: Total utility and Marginal utility

- Total Utility refers to the combine utility derive from consuming

certain units of a good.

- Marginal utility refers to the additional utility derived from

consuming an additional unit of the good.
 Significance of Consumer Behavior in Business

The consumer is the person who buys the product business offers for
sale, It is therefore imperative that we get to please the consumer, so
he/she will buy from us instead of from our competitors and also that
once he buys from us he will be loyal to us and not buy from other sellers
of the same product. Knowing how consumer satisfaction is maximized
will help a business in always keeping the consumer's welfare the
topmost priority.
Lesson 4.2. The Production Theory
 The Production Theory

Production refers to the use of economic resources to create goods and

services that will be used to satisfy human wants.

focus on the behavior of the producer in an attempt to maximize output.

The theory of production is an analysis of the input-output relationship.
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.
 SIGNIFICANCE OF PRODUCTION THEORY IN
BUSINESS
As we already learned, a business is engaged in providing goods and
services to customers with the goal of making 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 proprietor to be aware of the
production behavior that will maximize output within limited quantities
of output available to him/her. This in turn will help maximize profits for
the enterprise.
Lesson 4.3. Socio-Economic Impact
of a Business
 Socio-Economic Impact of a Business

A new business, especially one that is innovative and focused on

bringing some new product or service to the market, is always welcome
to the consumer who is looking value for his money. If the new business
is selling a product that has close substitutes in the market, then the
owner of the business will try his best to win the consumers away from
the existing sellers by offering something that will benefit the buyers
 Socio-Economic Impact of a Business

How can the new business accomplish this? One good way is to innovate
the product; come up with new features that are not found in the existing
competing goods. This can be in the form of a better appearance, a new
feature or ingredient or a new convenient way of making the product
available.
 Socio-Economic Impact of a Business

A new business therefore means new products or services available to the

buyers, giving them more choices. Since the new seller will try to attract
buyers, another strategy that could be adopted is to improve the quality
of the good making it a notch higher than those already being
sold in the market. Although this may mean high prices for better quality
goods, this could cater to a market that is more after quality than low
price. Initially, as a business starts, the seller may make the product
available at introductory prices lower than the other substitutes in the
market, This will definitely be an advantage to the price conscious buyers
who have limited budgets.
 Socio-Economic Impact of a Business

As long as a new business can provide new goods and services, the better
quality of goods and more options, the consumer can benefit from it. But
if a business comes up with a low-quality good and does not provide the
consumer value for its money, then this business will have a negative
impact on the market.
 Socio-Economic Impact of a Business

CONSUMERS AND HOUSEHOLDS

Consumers are directly impacted by the products and services of business because they are
the end users. Consumption is driven by social trends as much as personal preferences.
Business that seek to promote more sustainable alternatives to co existing products and
services may change consumer behavior like shifting to LED-powered gadgets and
appliances because of its cost-effectiveness and the creation of awareness of the importance
of energy. Growth in the business sector creates employment, and employment provides a
means to households. While an increase in employment is a positive indicator of economic
growth, it does not translate to improvement of standard of living. Sustainable development
driven by business also considers the rise in household income to measure the standard of
living.
 Socio-Economic Impact of a Business

SUPPLIERS AND INVESTORS

How companies generally run their businesses influences investors. For public companies,
the desirability of a business is mirrored by its stock price. A stock value, on the other hand,
is influenced by a lot of factors such as operational excellence, innovative products, service
and growth to name a few. A desirable company attracts more investments through an
increase in demand for the company’s stocks. Equity increases capital, which the company
can use for capital expenditures such as business expansion and large-scale business
developments. Earnings per share (EPS) can be calculated based on the company’s financial
statements. Additionally, corporate social responsibility and a company’s commitment to
sustainable development are also now considered by investors in assessing desirability of a
stock.
 Socio-Economic Impact of a Business

SUPPLIERS AND INVESTORS

While businesses understand and support the idea of inclusive growth, a
challenge for firms is the costs associated with it. The costs of conducting a
socioeconomic study are not limited to administrative ones such as research,
time, and efoort. They include personnel that need to be deployed and the
necessary facilities. Additionally, solutions that take into account social needs and
feedback typically drive up the expenses of organizations. Thus, small-scale
businesses often forgo a socioeconomic study.
 Socio-Economic Impact of a Business

GOVERNMENT
Public institutions are likewise affected by business in ways other than through
taxation and regulation. The government can drive progress and sustainable
development through partnerships with the private sector. The partnerships aim to
address funding issues and t diversify the risks associated with infrastructure
development between the two sectors.
 Socio-Economic Impact of a Business

The Public-Private Partnership Center (PPPC) is the central coordinating and

monitoring agency of all public-private partnership programs in the Philippines.
PPPC aims to support PPP projects through advisory services and technical
assistance

An SEI study examines the extent of government and private sector involvement
in certain developments. Most likely, the concern of consumers is on who will
eventually bear the costs of such projects. Progress and development that are of
greater magnitude in terms of costs are usually implemented in a gradual manner.
Developments done in phases allow more berating room for businesses, investors
and public institutions to find financing.
 Socio-Economic Impact of a Business

INTERNATIONAL TRADE
A startup business normally starts small either in terms of market or product
offering. The business will eventually expand to new markets and increase its
product line. From servicing a small area, successful local businesses enter
foreign markets and get into trade. Similarly, a firm that decides to use
internationally-sourced inputs to satisfy raw material requirements will enter into
a trade that will allow it to import raw materials.
 Socio-Economic Impact of a Business

An SEI study usually examines the relevance of international trade to business

growth and society. For example, a business that sources its raw materials from
the local community is beneficial to the society and its drives other local
businesses. If the firm decided to use imported raw materials, this will hurt the
business of its original local suppliers.

Similarly, a global business franchise allowed to operate in the domestic market

increases competition but potentially hurt small-scale local businesses.
 Steps In Conducting A
Socioeconomic Impact Study
 Define The Scope Of The Study

● The Size And Scope Of The Study Should Be Defined

● Is It Unique To A Group Or Is It Conducted For Similar Groups In
Various Locations?
● Will The Results Serve As An Experiment For Future Developments
In Other Areas?
 Define The Scope Of The Study

Those Are Just Some Of The Questions That Are Clarified At The
Beginning Of The Study. It Is Necessary To Properly Identify The Social
Groups That Are Potentially Impacted By A Development Or A Project
Because It Will Affect The Components Of The Study. A Study That Is
Conducted On A National Level Will Require A Higher Budget Than
That Targeted For A Small Community Or A Certain Group.
 Define The Scope Of The Study

Example: A Business That Aims To Reduce Traffic And To Develop A

Mode Of Urban Transportation That Runs On Renewable Energy Will
Likely Focus On Respondents In The City, Whereas, An Environmentally
Friendly Product (E.G. Appliance) That Aims To Reduce Energy
Consumption In Households Will Likely Have A Bigger Size In Terms
Of Coverage And Types Of Respondents
 Define The Scope Of The Study

The Organization Conducting An Sei Study Should Identify The Type Of

The Project. Is It A Government-Initiated Development Or A Brainchild
Of The Private Sector? The Instigator Of A Certain Project May
Influence Different Social Reactions.
 Identify The Data Collection Methodology

After Defining The Project Type, Size, And Scope Of An Sei Study, The
Data Collection Tools To Be Used Should Be Identified.

Surveys
- A Popular Method In Gathering Research Data
- Respondents Are Asked A Series Of Relevant Questions
- Often Interchangeably Referred To As Questionnaires Or Questionnaire Surveys
- Questionnaire Survey Is Traditionally Conducted Using Pen And Paper. With Advances In
Technology And The Improved Internet Penetration, Online Surveys Are Now Hugely Popular.
- Surveys Provide A Cost-Effective Way To Reach A Large Number Of Respondents In A given
Time. For Instance, A Number Of Online Platforms Let You Create A Survey Questionnaire For
Free
 Identify The Data Collection Methodology

Poll Question
- A Type Of Survey That Is Limited To A Single Question.
- Questions In This Type Of Survey Maybe Sent Out Through Various Media Such As
Phone, SMS Text, Manual Pen And Paper Or Online.
- Ideal For Questions Answerable By Yes Or No Or For Questions With Given Limited
Choices.
- It Is Efficient And Takes Very Minimal Effort From Respondents.
- The Question, “Do You Find The Information On This Web Page Helpful?” On A Site
Followed By Yes And No Buttons Is An Example Of An Online Poll Question.
 Identify The Data Collection Methodology

Customer Satisfaction Survey

- Is Used In Collecting Data Specifically On Consumer Feedback.
- Provides Valuable Information To Organizations On External
Perceptions Of Their Products Or Services.
- This Kind Of Survey Is Widely Used In The Service Industry Or In
Service Departments Of Businesses Selling Tangible Products.
- Respondents In A Customer Satisfaction Survey Are Typically Less
Conscious Of Their Answers Knowing Their Identities Are Kept
Private.
 Identify The Data Collection Methodology

Customer Satisfaction Survey

- Is Used In Collecting Data Specifically On Consumer Feedback.
- Provides Valuable Information To Organizations On External
Perceptions Of Their Products Or Services.
- This Kind Of Survey Is Widely Used In The Service Industry Or In
Service Departments Of Businesses Selling Tangible Products.
- Respondents In A Customer Satisfaction Survey Are Typically Less
Conscious Of Their Answers Knowing Their Identities Are Kept
Private.
 Analyze The Data And Present The Results

After Identifying The Appropriate Tools And Preparing The Relevant

Materials For The Study, It Is Time To Conduct The Actual Data
Gathering. Afterward, Feedback And Reactions Are Analyzed And
Meaningful Assessments Are Concluded. This Is When You Formulate
Recommendations And Strategies On How To Drive Planned
Developments.
 Analyze The Data And Present The Results

Using The Data From The Various Research Methodologies, You May
Verify Whether There Was A Shift In Demographics. Was There An
Increase Of An Area Due To A Certain Development? Was There
Increased Employment Related To A Certain Develoment? Was There
Increased Employment Related To Certain Development? Was There A
Change In Social Behavior Attributable To Particular Product? These Are
Some Of The Questions That May Be Answered Through The Analysis
Of Data From An Sei Study.