Applied Economics: Contemporary Issues Affecting Filipino Entrepreneurs PDF

Applied Economics Contemporary Issues Affecting the Filipino Entrepreneurs Lesson 7 Most Essential Learning Competencies: At the end of the lesson the learner should be able to: Analyze the effects of contemporary economic issues affecting Filipino entrepreneurs. ...

Applied Economics Contemporary Issues Affecting the Filipino Entrepreneurs Lesson 7 Most Essential Learning Competencies: At the end of the lesson the learner should be able to: Analyze the effects of contemporary economic issues affecting Filipino entrepreneurs. Objectives: At the end of the Lesson, the learner should be able to: a. Identify the different challenges faced by the Filipino entrepreneurs. Review: 1. What do you call to a place where goods and services are being sold and purchased where the buyers and sellers are direct competition? a. Market b. Mall c. Grocery d. Sari-sari store 2. Who are the important feature in the market? a. People c. Buyers b. Buyer and Seller d. Sellers  Review: 3. What forms of market structure where the number of firms are varied but not too many? a. Perfect Competition c. Monopolistic Competition b. Monopoly Market d. Oligopoly Market 4. What forms of market structure where the degree of monopoly power is Zero? a. Monopolistic competitionc. Monopoly Market b. Perfect Competition d. Oligopoly Market  Review: 5. What forms of market structure where the entry and exits of the firm is restricted? a. Perfect Competition c. Monopolistic Competition b. Oligopoly Market d. Monopoly Market 6. What forms of market structure where the nature of product is one type? a. Monopoly Market c. Oligopoly Market b. Monopolistic Competition d. Perfect Competition  Review: 7. Enumerate at least four (4) advertisement paraphernalia? What is Entrepreneur? one who attempts to organize his own business, he assumes all the risk and returns on his investment decides on what, how, and how much of a food or service will be provided, and also monitors and controls all the activities of the business. He has an important role in our economy. Benefit of Entrepreneur: an individual was given access to better lives not only for themselves but for their family. It can also provide the solution to our economic problems by creating wealth, jobs, and social empowerment. Famous Entrepreneur: TONY TAN CAKTIONG HENRY SY History: In the Philippines, Entrepreneurship is viewed as important to empowering the poor, enhancing production, and being a driving force for innovation. The 1987 Philippines Constitution recognizes entrepreneurship as an engine of economic growth. Article XII Section 1 highlights the role of private enterprises in supporting the equitable distribution of income and wealth, sustaining the production of goods and services, and expanding productivity. History:  In 2011, there were approximately 830,000 business enterprises in the Philippines.  99.6% of it is classified as micro, small, and medium-sized enterprises (MSME) which are responsible for 38% of total job growth. (Universal Access to Competitiveness and Trade – U-ACT). Present Entrepreneur:  Entrepreneurship involves financial activity and it is called Investment. Investment is a product (Asset) that people buy which are not consumed today but are used in the future to generate wealth. How does the investment work? The goal of investment is to generate income and increase value over time, for example, by buying bonds, stocks, real estate property, or even buying products for the purpose of selling or to create products for selling. In general, any activity that is taken in the hope of gaining income in the future is considered an investment. Terms of investment: 1.Long Term Investment – engages in buying a property or engaging in real estate which intends to hold and accumulate profit for more than a year. 2. Short Term Investment – engages in savings and time deposits that is expected to earn profits within one year. Other Reasons of Investment: To replace worn out or failing machinery, equipment or building due to the continuous depreciation of such assets. To purchase new machinery, equipment or building to increase productive capacity, and competitiveness and raised their profits.  Since investment is expenditure on capital goods, it is also a component of Aggregate Demand which influences the capital stocks and productive capacity of the Economy. What is Aggregate Demand? Aggregate Demand is an economic measurement of the total amount of demand for all finished goods and services produced in an economy. It is expressed as the total amount of money exchanged for goods and services at a specific price level and point in time. Why Aggregate Demand Important? It gives an economist a tool for measuring the strength of economy. Usually, economists estimate the total market for items produced in an economy over a year. If aggregate demand is high, then the economy is strong – it means more selling of goods. If it is low, then the economy is weak – it means it trouble in moving the goods in the market, signals of potential downturn What is the difference between Aggregate Demand and Demand? Demand describes the market for a specific product. Aggregate Demand is a function of the individual market for every product in a marketplace. How to measure Aggregate Demand? Example Food panda in the Philippines. Consumer buy only Breakfast, Lunch and Dinner. The Total Demand for Breakfast in the country is P1 Million, Lunch is P3 Million, and Dinner is P5 Million. The total Aggregate Demand of the Country is P9 Million –it is the Sum of the need for every goods that the consumers demanded. Factors that influence investment: 1.Expected Return of Investment – it is required by the business to cover the risk of investing. 2.Business confidence – any changes in business confidence can affect investment decisions. 3.Changes in National Income- At the level of macro-economic, small changes in national income can trigger much larger changes in investment levels. Factors that influence investment: 4. Interest rates – investment is inversely related to interest rates for two reasons: a.If interest rates rise, the opportunity cost of investment rises. b.If interest rates rise, the firm may anticipate that consumer will reduce their spending. 5. General Expectation – any indication of the downturn in the economy may reduce the expected cost. Factors that influence investment: 6. Level of savings – increased savings may reduce interest rates and stimulate corporate borrowing and investment. It provides a flow of funds into the financial sector. 7. Corporation Tax – business organization usually paid their taxes from their profit, a reduction in tax may increase the profit they retain after tax is paid and this act as an incentive to invest. What is the investment climate in the Philippines? The Philippines is trying to improve its investment climate this past decade. But still, the country is struggling to overcome its investment constrain such as corruption, poor infrastructure, poor internet connection, the low public trust of politicians, and the burden of government regulation. One of the businesses that play a very important and significant role in the economic and social development of the country is the Small and Medium Enterprise, this is acknowledged by the Department of Trade and Industry (DTI 2004-2010 SME Development Plan). They created new products, produce wealth, and provide jobs to the people. Challenges of the Filipino Entrepreneurs: 1.Government Licensing and Permits- it is one of the common complaints of Filipino entrepreneurs is the difficulty to apply for or renew business permits due to lots of documents required. 2.Prohibited Rental Rates and other Clauses in Malls – Due to the thought that many people visited a mall, it is anticipated that entrepreneurs earned high profits. Eventually, the administrator of malls will increase rentals and add other incidental charges. Challenges of the Filipino Entrepreneurs: 3. Hiring Employees – Since unemployment is high in the country, normally thousands of applicants are expected to come. The hiring process will take several days to find those people who have the right attitude and disposition in life. 4. Inadequate access to technology – In terms of internet penetration, only 29% of Filipinos had access to the web through various channels. 5. Financial Capital – most entrepreneurs utilize loans for the sustenance of their business which would have a negative impact on the income status of the firm. Challenges of the Filipino Entrepreneurs: 6. Marketing Advice – Entrepreneurs exist due to experience and desire to pursue a business, that is why risk is expected without marketing advice. 7. Maintaining competitiveness – innovation is the secret of success of an entrepreneur, it is where they maintain high value by costumer and against competitors. Usually, they fail because they stop creating and innovating products. Challenges of the Filipino Entrepreneurs: 8. Minimum Wage and insurances – business is obliged to pay minimum wage to their employee regardless of how much they earned. 9. Taxes – payment of taxes may vary on the kind of business does an entrepreneur. 10. Income tax – business is obliged to pay government impost taxes based on their income. Why is it important to study the Different Challenges of the Filipino Entrepreneurs? Activity: Dramatize Entrepreneurial Business. Choose a small business to roleplay and show the challenges of the Filipino Entrepreneurs. Group 1- Challenges 1-2 Group 2 – Challenges 3-4 Group 3 – Challenges 5-6 Group 4 – Challenges 7-8 Group 5 – Challenges 9-10