11 SENIOR HIGH SCHOOL

APPLIED ECONOMICS
Quarter 4 – Module 4
Socio-economic Factors Affecting
Business and Industry

NegOr_Q4_AppliedEconomics11_Module4_v2
NegOr_Q4_AppliedEconomics11_Module4_v2
Applied Economics – Grade 11
Alternative Delivery Mode
Quarter 4 – Module 4: Socio-economic Factors Affecting Business and
Industry
Second Edition, 2021

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NegOr_Q4_AppliedEconomics11_Module4_v2
Introductory Message

This Self-Learning Module (SLM) is prepared so that you,

our dear learners, can continue your studies and learn while at
home. Activities, questions, directions, exercises, and
discussions are carefully stated for you to understand each
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Please use this module with care. Do not put unnecessary
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Thank you.

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 I

This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at our own pace and time. You will be enabled to process
the contents of the learning resource while being an active learner.

The module is intended for you to explain the effects of the various socio-economic
factors affecting business and industry.

1 NegOr_Q4_AppliedEconomics11_Module4_v2
 I

Pre-assessment:
Directions: Write True if the statement is correct and False if otherwise. Write your
answer in your activity notebook.
________1. Every business is classified into different industries based on the products they
make.
________2. Business industries cannot be classified by its goods alone.
________3. There are companies which belong to only one industry and provide industry-
specific goods or services, there are also conglomerates which cater to multiple
industries at a time.
________4. Transport is one of the largest types of business industries in the Philippines.
________5. Business principles cannot be applied to the agriculture industry.
________6. Pharmaceutical companies are also using techniques that are widely used in the
business.
________7. Food industries were at stake during the time of pandemic.
________8. The types of industries cannot be anchored to the form of business organization.
________9. The closure of the various business industries during the pandemic gives a great
impact to the economy.
________10. Tourism industries tend to cover up its losses during the pandemic.

’s In

Task 1
Direction: Accomplish this in your notebook.
1. Enumerate at least three business industries present in your locality. State
your observations and list some factors that may affect the business. Follow
the format given.
2.
Business Industry Observations Factors that may affect
the business.

2 NegOr_Q4_AppliedEconomics11_Module4_v2
 ’s New

Task 2

Direction: Arrange the scrambled letters inside the rectangles and write it in the correct box.
Accomplish this in your notebook.

1 S

O
2
C

I
3 O

1. 2.
C C
U U T E I
T S R R R M N
N I F O
E C A O S

3.

S R
P O M

H G
E D
C A
I

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 is it

Socioeconomics

Before we can explain the effects of the various socio-economic factors affecting
business and industry, we must review first the definition of what is socio-economic.

Socio-economics is the social science that studies how economic activity affects and
is shaped by social processes. In general, it analyzes how modern societies progress, stagnate
or regress because of their local or regional economy, or the global economy (Wikipedia,
n.d.). “Socio-economics” is also sometimes used as an umbrella term for various areas of
inquiry. The term “social economics” may refer broadly to the “use of economics in the study
of society” according to Eatwell, Milgate, & Newman, (1987).

The first step to understanding socioeconomic factors is to understand social

economics. This is a specialized branch of economics that concerns itself with studying the
intimate relationship between economics and social behavior. Such things as ethics, social
norms and different social philosophies have an impact on how consumers behave in an
economy and the eventual shape that economy will take. The study of social economics seeks
to predict what kind of results to expect when the society has been changed. It does this by
studying politics, history, and other social sciences. Socioeconomic factors are, therefore, the
social and economic factors that shape and determine the dynamics a society will experience.
These are factors that affect the behavior of a particular group, also known as socioeconomic
class. The most interesting behavior of members of a socioeconomic class is their behavior as
consumers. Different socioeconomic classes will have different priorities, and this will affect
how they spend their money (LaMarco, 2018).

How do socio-economic factors affect businesses?

All business analysis must take into account socioeconomic factors. These factors are
taken into consideration when a corporation makes financial decisions in which money,
goods, and services are all involved in these elements. They have a micro-level impact on
firms, but they have a much larger impact on the overall economy on a macro-level. A
company’s operations, such as the value of its assets, consumer demand, and even taxes, will
all be influenced by the economy, whether it be a local or global economy. It is also
important to note that these various socio-economic factors have different effects on various
sectors in the business industry: Consumers, Suppliers and Investors, Government,
households, and International Trade.

4 NegOr_Q4_AppliedEconomics11_Module4_v2
 All of these socioeconomic factors are taken into account before making financial
decisions especially in terms of buying and selling of consumers, sellers, and businesses to
avoid mistakes.

Why do we need to understand these socio-economic factors?

Understanding the socioeconomic factors affecting business will help you make better
decisions about the future and direction of your business.

Socioeconomic Factors and its effects in Business and industry

Here are the following socioeconomic factors and its effects in business and industry:

Employment

The first socioeconomic factor is employment. Your employment is your job. What
you do for a living? What is the level of employment in a community. It is very evident that
the higher rate of employment would mean higher purchasing power of the people. If the
level of employment is lower then it would mean few numbers of consumers or buyers will
buy your product or services.

Education

Education is the knowledge, skill, and understanding that one gets from attending
school, college, or university.

Education provides every person in a society the required skills and knowledge for
employment in different jobs. The higher the education a person have will also have a higher
chance of getting a good job with a better salary, thus increasing the purchasing power and
will be an advantage to business and industry.

Income

Income is defined as the amount of money a person earned from his / her
employment, business, or investments. A consumer spending depends on his/her available
disposable income. For example, when a consumer receives luxurious items, he/she wants
and not necessarily need. On the other hand, when the consumer’s income becomes scarce,
he / she tends to spend on what is only essential.

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Interest Rates

“Interest rates are everywhere, and they are set by a variety of individuals. For good
reason, banking institutions are fascinated with knowing what the current state of interest
rates in the economy is. It's how they make their financing decisions. It's also useful
information for a company that uses debt capital to finance large-scale projects”, according to
LaMarco (2018).

Exchange Rates

This is a slightly more nuanced topic than that of interest rates. At the heart of it,
exchange rates are a critical consideration for every company that imports or exports a variety
of goods and services. When exchange rates fluctuate, it has an impact on a company’s
ability to pay its international suppliers in a satisfactory manner. This might have an impact
on the company’s profit margin as well as the quantity of resources it needs to stay afloat.

This will also affect the purchasing power of those consumers who are dependent on
their family members who are working outside of the country or Overseas Filipino Worker
(OFW). Lowering exchange rates particularly US dollar, will reduce their purchasing power
and will increase if its exchange rates rise.

Inflation and Recession

Inflation is the rate at which prices of products in the economy are increasing. Rising
cost are likely to force businesses to raise prices on other products and services to keep the
pace with inflation and maintain profits. Inflation can reduce purchasing power of consumers
unless employers increase wages based on the level of inflation.

Recession is a much more serious problem than inflation. When an economy

experiences a recession, people' attitudes toward their purchase decisions are likely to shift.
This may compel businesses to lower their prices in order to stay afloat. A period of negative
growth is defined as a recession. In this condition, the economy's overall levels of activity are
declining. Rising unemployment, asset price declines, and commodity price declines all
contribute to poor consumer confidence in the economy during a recession.

How can we overcome these socioeconomic factors

There is no doubt that society is continually changing, these socioeconomic factors

have significant effects towards decision making in business and industry. To overcome these
socioeconomic factors, companies often focus these changes in depth. And to do so,
environmental analysis such as PEST and PESTLE analysis are used.

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Environmental Analysis

“An environmental analysis, or environmental scanning, is a strategic tool you can use
to find all internal and external elements that may affect an organization’s performance.
Internal components indicate the business’s strengths and weaknesses, while the external
components indicate the opportunities and threats outside the organization. An environment
analysis considers trends and high-level factors, such as interest rates, and how they might
change a company's business. These reviews can help companies assess market attractiveness
and create better strategies for the future.” (Indeed Editorial Team, 2021).

“A subset of environmental analysis is the PEST analysis, or some of its variants,

such as the PESTLE analysis. This is a form of analysis that looks at four relevant factors that
affect a business environment, and these – Political, Economic, Social and Technological
factors – create the acronym “PEST.” There are other variations, such as PESTLE, which
includes Legal and Environmental factors. However, the four factors in PEST analysis are the
main economic factors that affect a business” (Bush, 2016).

“PESTLE analysis is one of the most popular tools used in business analysis, and for
good reason! It can tell you all about the circumstances that an individual, product, or
organization finds itself in, which can help in making decisions and understanding its current
(or future) position in the market”, according to Bush (2016).

How do I use PESTLE analysis?

Bush stated that “if you want to conduct a PESTLE analysis, the first step in doing so
is deciding what product, organization, or idea you want to analyze. Then, assuming it’s a
business that you want to analyze, you should fully explore all of its facets to identify any
external factors which are playing a part in how it operates and performs. Finally, you should
attempt to categorize each of the factors.”

He also added, “not to worry if one category has more entries than another, or if some
factors do not entirely fit into any category. This can happen depending on the nature of the
business that you are analyzing.”

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 ’s More

Task 3

Direction: List down at least three socioeconomic factors which you think may have affected
the business in your locality. Briefly explain why and how it affected the business in your
area. Accomplish this in your notebook.

I Have Learned

Task 4: Let us reflect and realize...

Direction: In your notebook, complete the following statements.

1. I have learned that

______________________________________________________________________
______________________________________________________________________.

2. I have realized that

______________________________________________________________________
______________________________________________________________________.

2. I will apply what I have learned

______________________________________________________________________
______________________________________________________________________.

8 NegOr_Q4_AppliedEconomics11_Module4_v2
 I Can Do

Task 5: Activity: Newspaper Feed...

Directions: Look for a picture or an article pertaining to the present situation that our country
is facing. Cut and paste it inside the box and answer the following questions
below. Accomplish this in your answer sheet.

1. What kind of picture/article have you chosen? Describe it briefly.

___________________________________________________________________________
___________________________________________________________________________

2. Does it show any of the socioeconomic factors?

___________________________________________________________________________
___________________________________________________________________________

3. Based on your chosen picture/article, what are its implications to the business world?
Explain shortly.
___________________________________________________________________________
____________________________________________________________________________

Rubrics
Excellent Proficient Developing Poor
(4 pts) (3pts) (2 pts) (1 pt.)
Pictures/articles are accurate,
appropriate, and integrated effectively
Ideas are supported and elaborated
Sentence form and word choice are
varied and appropriate
Creativity/originality is evident

9 NegOr_Q4_AppliedEconomics11_Module4_v2
Test 1.
I. Multiple Choice: Identify what is asked in each item. Write the letter of the correct answer
in your notebook.
1. This is a specialized branch of economics that concerns itself with studying the intimate
relationship between economics and social behavior.
A. socioeconomic
B. economics
C. social science
D. social behavior
2. It relates to the amount of money coming into your bank account.
A. employment
B. education
C. income
D. none of these
3. Which of the following is also good information for a company that relies on debt capital
to finance ambitious projects?
A. interest rates
B. exchange rates
C. growth rate
D. Recession
4. These are important factors to consider for any business involved in importation and
exportation of various goods and services.
A. interest rates
B. exchange rates
C. growth rate
D. Recession
5. This is a special term that refers to the process of looking at the external issues in a
business.
A. ecological analysis
B. environmental analysis
C. ABC analysis
D. All of these
6. Socioeconomic refers to society related economic factors. Among these factors, which of
the following gives positive example like community workers having good support
networks?
A. employment
B. education
C. income
D. none of these

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7. What is your analysis of the given statements below?
Statement I. PEST analysis usually refers to the process of looking at the external
socioeconomic issues of the business.
Statement II. The economy, whether a local economy or a global one, will be the
determining factor in the details associated with the operation of a company, such as the
value of its assets, consumer demand and even taxes.
A. Only Statement 1 is true
B. Both Statements are true
C. Only Statement II is true
D. Both Statements are false
8. Which among the following socioeconomic factors that has the potential to change the
purchasing attitude of customers that might force companies to drop their prices or clear
smaller volumes?
A. interest rates
B. exchange rates
C. inflation rates
D. recession
9. Which of the following does not describe PESTLE analysis?
A. It is one of the most popular tools used in business analysis, and for good reason.
B. It is considered as the other variant of PEST analysis.
C. It is a business analysis technique which considers one group of external factors
that can affect businesses.
D. none of these
10. In using the PESTLE analysis, which is the last step to take?
A. Decide what product, organization, or idea you want to analyze.
B. Explore all the facets of PESTLE analysis to identify any external factors which
are playing a part in how it operates and performs.
C. Attempt to categorize each of the factors.
D. Don’t worry if one category has more entries than another, or if some factors don’t
entirely fit into any category.

11 NegOr_Q4_AppliedEconomics11_Module4_v2
Test II. Essay. (5 points)
Direction: Explain the effects of the various socio-economic factors affecting business and
industry. Cite at least three.

CRITERIA Not there At Not Yet Proficient Advanced

All There (3 points) 5 points)
(1 point) (2 points)
Development Ideas not Poorly Developing ideas; Well-
of Ideas evident developed sometimes stimulates developed
(whole task) ideas discussion ideas;
introduce new
ideas, and
stimulates
discussion
Evidence of Critical Poorly Beginning of critical Clear evidence
Critical thinking not developed thinking, has of critical
Thinking evident critical introduced facts rather thinking-
(per item) thinking than address issues application.
Arguments are
well
supported.
Clarity Answers are Answers are Answers are Answers well-
(whole task) unintelligible not clear in understandable, articulated and
or not the discussion but some evident
present thought is
present

Reflection

Complete the following statements. Write your answers in your activity notebook.

1. Why is it important to know the effect of socioeconomic factors that might affect the
business and the industry?
___________________________________________________________________
___________________________________________________________________.
2. Do these effects present in your locality? Explain
___________________________________________________________________
___________________________________________________________________.

12 NegOr_Q4_AppliedEconomics11_Module4_v2
NegOr_Q4_AppliedEconomics11_Module4_v2 13
PRE-ASSESSMENT:
1. True
2. True
3. True
4. True
5. False
6. True
7. True
8. False
9. True
10. True
ASSESSMENT
Test I.
1. A
2. C
3. A
4. B
5. B
6. A
7. C
8. D
9. C
10. D
Test II.
Answer may vary
References

Wikipedia. What is Socioeconomics? n.d. Accessed on February 25, 2021.

[Link]

LaMarco, Nicky. The Socioeconomic Factors Affecting Small Business. 2018. Accessed on
February 25, 2021. [Link]
[Link]

Indeed Editorial Team. What Is an Environmental Analysis? (With Purpose and Steps). 2021.
Accessed on December 2021. [Link]

Bush, Thomas. PESTLE Analysis: Everything you need to know. 2016. Accessed on March
11, 2021. [Link]

14 NegOr_Q4_AppliedEconomics11_Module4_v2