Applied Economics

CHAPTER 4
The Socio-Economic
Impact Study
 LESSON 4.3
The Socio-Economic
Impact of a Business
Chapter Learning Objectives
• To identify and explain the various determinants
of business and industry
• To figure out how these determinants can have
an impact on concerned sectors such as the
consumers, suppliers and investors, the
government, households and on international
trade
• To discuss consumer behavior and relate it to
the benefit of business on consumers
Chapter Learning Objectives
• To discuss production theory as basis for
coming up with a viable and profitable business
• To draft a business proposal using the lessons
studied in previous chapters
• To analyze and evaluate the viability of a
business and its impact on the community
• To come up with recommendations and
strategies on how to minimize a business’
negative impact on society
Chapter Learning Objectives
• To describe the role of government in the
economy
• To describe the Philippine household as to age
and income as a basis of choosing the target
market of a business/product/service
 Terms to Remember in
Chapter 4
• Consumption • Output
• Consumer theory • Fixed input
• Utility • Variable input
• Utility function • Production function
• Total utility • Total Product (TP)
• Marginal utility • Marginal Product (MP)
• The Law of Diminishing • Average Product (AP)
Marginal Utility • The Law of Diminishing
• Production Marginal Returns
• Input • The Herfindahl-
Hirschman Index (HHI)
 Impact on the Consumer
 A new business means new products or services are available
to the buyers, giving them more choices.
 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.
 As long as a new business can provide new goods and
services, 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
his/her money, then this business will have a negative impact
on the market.
 Impact on Suppliers and Investors

 A new business will provide opportunities for suppliers and

investors. Many suppliers will now get a chance to sell to the
newly established business, which means income for them.

 Demand for the goods provided by the suppliers will increase.

These suppliers will now need to produce more of them and
they will need to hire more workers who will earn wages from
being employed.

 More capital will be needed to invest in the production of

goods, generating income for the economy.
 Impact on the Government
 The government will benefit from the establishment of new
businesses through revenues earned on fees collected from
them and on taxes imposed on the incomes of these
businesses.
 Employees hired by these businesses also have to pay
personal income taxes to the Bureau of Internal Revenue
(BIR). For employed workers, these taxes are regularly
withheld by their employers and remitted to the BIR.
 Tax revenues fuel development because they are used by the
government for national activities and for budget allocations for
its programs.
 Impact on Households

 New businesses mean employment opportunities for

Filipinos. Those who have jobs but are earning low-wages
may find better paying jobs with the new companies.
Unemployed workers looking for work may have the
chance of being employed by these companies.

 Acquisition of wealth and assets can now follow both for

the business owners and the employees they hire.
 Impact on the Community

 Corporate Social Responsibility (CSR) has become a

growing trend among businesses today. As a result of
this, corporations and even small businesses have
increased their focus on the so-called “giving-back-to-
the-community” projects including providing
scholarships to poor but deserving students, allocating
budgets for housing for low-income families, and
environmental protection.