Applied-Economics 04.15.2024
Applied-Economics 04.15.2024
Applied-Economics 04.15.2024
What I Know. Choose the letter of the best answer. Write your answer
on a separate sheet of paper.
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b. Influence consumers emotionally b. Customer preference
c. Offer social responsibility c. Reliability of Service
d. Change behavior with customer d. Supplier's Reputation
service 15. Which of the following is not a
14. Below are list that company take into determinant of spending?
account in choosing the right supplier. a. Expectations
Which of the following does not belong b. Rates of Income Tax
to the group? c. Interest Rates
a. Quality of products/services d. The Level of Production
provided
What’s New
Socio Economic Factors Affecting the Business and Industry
This lesson will focus on various socio economic impacts on the following sectors such as
consumers, suppliers and households.
How do Socioeconomic Factors Affect Businesses?
Understanding the socio economic factors affecting business will help you make better decisions
about the future and direction of your business. To have an intimate understanding, however, you
will have to understand both external and environmental factors, as well as how their interplay
affects your business.
Socioeconomic factors are, therefore, the social and economic factors that shape and determine the
dynamics a society will experience. These are the factors that affect the behavior of a particular
group, also known as socioeconomic class. Perhaps the most interesting behavior of member of a
socioeconomic class is their behavior as consumers. Different socioeconomic classes will generally
have different priorities, and this will affect how they spent their money.
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Socio Economic Impact of Business- Consumers, Suppliers, and Households
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Factors that Impact Business and Consumer Confidence
With policymakers in the major economics working hard to restore and maintain
confidence levels and shifts in sentiment indicators playing a key role in risk assessments
of investors, it is worthwhile to consider the various influences on this qualitative
economic measure.
Several common factors that have the potential to cause marked shifts in sentiment
includes the following:
1. Changes in interest rates and/ or exchange rates, particularly if they are rapid,
large and unexpected;
2. Swings in the business cycle and associated movements in employment/
unemployment levels and business investment intentions;
3. Shifts in the relative prices of nondiscretionary goods and services, notably
petrol, healthcare, education and utilities prices;
4. Announced policy shifts in the stance of government fiscal policy including
large structural spending cuts or increases/ decreases in taxation rates.
Example: Does it have good cash flow and strong balance sheet?
Example: How much can the supplier comfortably provide and what is its
maximum?
Example: How quickly does the supplier expect payment and method of payment?
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Supplier Management
After agreeing a contract with a supplier it is important to monitor the supplier’s
performance to ensure that they are providing the service that was agreed with them. Some
firms will agree targets known as Key Performance Indicators (KPIs) that suppliers will need
to meet.
Businesses are reliant on suppliers; suppliers provide the tools a business needs to operate.
If a firm manages to negotiate a favorable contract with the right supplier they are likely to
benefit. However, the wrong supplier or unfavorable supplier contract is likely to have a
detrimental effect. If things go wrong with a supplier it may take time to switch suppliers
and even if you do manage to switch suppliers quickly it could take time to recover from the
effects of a poor supplier.
1. Household income – some goods are normal goods while others are inferior, so
increases in income encourage households to shift spending from goods with
a low income elasticity of demand, like food, to those with high income
elasticity of demand, like holidays.
2. Tastes and Fashions – over time spending on certain items that are ‘in
fashion’ increase relative to those that go out of fashion.
3. Taxes and Subsidies – as indirect taxes and subsidies rise and fall,
households will be encouraged or discouraged from spending.
4. Relative Prices – as the prices of certain goods and services rise in relation to
others, household spending will adjust.
Determinants of Spending
The level of spending is determined by a number of factors, including:
Some extra spending is induced by changes in the current level of national income. As
income rise, customers tend to increase their spending on higher income elastic goods and
services, such as luxuries, holidays and leisure goods. When income falls households may
postpone spending on these luxuries until income rise again.
Spending and saving are mutually exclusive, which means that if income is fixed, any
change in household’s savings will inversely affect spending. Many of determinants of
consumption have an inverse effect on saving.
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3. Expectations
If households are confident, and have positive expectations about the future, current
spending can rise. This can lead to economic growth, and re – enforce the positive
expectations.
4. Unemployment
Unemployment has two potential effects on household spending. Firstly, the unemployed
spend less because of their lower personal income, and secondly, unemployment causes
negative expectations, even for those employed, and this can act as a curb on spending and
a stimulus to saving.
Changes in tax can clearly affect disposable, post – tax income, and hence affect household
spending.
6. Interest Rates
By altering the level of saving – a rise in interest rates will stimulate more saving, and less
spending.
By altering the cost of funding existing debts such as mortgages and bank loans. For
example, a rise in interest rates will divert household funds towards the higher loan
payments and away from general spending.
By altering the cost of new credit, and thus encouraging or discouraging household
borrowing. For example, a rise in interest rates will deter new borrows, who may postpone
borrowing until rate fall back.
By altering expectations and confidence. For example, rising interest rates will subdue
confidence and create a ‘wait and see’ attitude by households, who may postpone certain
spending until expectations improve.
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Assessment. Choose the letter of the best answer. Write your answer
on a separate sheet of paper. Use intermediate paper only.
References
Dinio and Villasis 2017: Applied Economics. Rex Bookstore, First Edition.
Leano, Roman D. 2016: Applied Economics for Senior High School. Mindshapers Co., Inc.
Competency Based Curriculum and CBLM 2019.Entrepreneurship
https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-analysis-
methods retrieval date June 10, 2020
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Development Team of the Module
Writers:Cindy M. Ronquillo
Editors:Jane P. Valencia Ed.D, ABM Supervisor
Karina B. Hernandez, Teacher III
Reviewers: Leilane B. Barawid
Illustrator: Name
Layout Artist: Name
Management Team: Name of Regional Director
Name of CLMD Chief
Name of Regional EPS In Charge of LRMS
Name of Regional ADM Coordinator
Name of CID Chief
Name of Division EPS In Charge of LRMS
Name of Division ADM Coordinator