SHS

APPLIED
ECONOMICS
Quarter 1 – Module 6:Analyze
the Effects of Contemporary
Economic Issues Affecting
Filipino Entrepreneurs

Region I
ALAMINOS CITY DIVISION
Alaminos City, Pangasinan
Project Write, Write, Write
Alternative Instructional Module

i
Applied Economics – Senior High School
Alternative Delivery Mode
Quarter 1 – Module 3:Analyze the Effects of Contemporary Economic Issues Affecting
the Filipino Entrepreneur
First Edition, 2020

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Published by the Department of Education

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Undersecretary: Diosdado M. San Antonio

Development Team of the Module

Writers: Haydee Prado-Nieto
Editors: Orlando I. Guerrero
Cynthia B. Tablang
Jose M. Radoc
Corazon Caaducio
Benedicta B. Santos
Rey B. Pascua
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 Target

Economic issues are sometimes called the basic or central economic

problem. It asserts that an economy’s finite resources are insufficient to
satisfy all human wants and need. Economics involves the study of how to
allocate resources in condition of scarcity .It is widely accepted that small
and medium enterprises play a very important and significant role in the
economic and social development of the country.

The SME (small and medium enterprises , which also encompasses

micro enterprises) have an overwhelming presence in the Philippine
economy. Medium enterprises , as defined by SMED Council are those with
total assets ( excluding land) of Php15M to Php100M or not less than 200
employees. Small enterprises are those with total assets ( excluding land ) of
Php3M to Php15M 10-99 employees. Microenterprises are those with total
assets (excluding land) of Php3M or less , with 1 to 9 employees.

In your previous lesson ,you learned on the four market structure,

like perfect competition, monopolistic competition, oligopoly and monopoly.

This module will focus on the four contemporary economic issues

facing the Filipino entrepreneur ,these are investment rate, rentals,
minimum wage and taxes.

Most Essential Learning Competency (MELC): Analyze the effects of

contemporary economic issues affecting the Filipino entrepreneur

After going through this module, you are expected to:

1. Analyze the effect of contemporary issues affecting business
2. Identify the different challenges faced by Filipino entrepreneurs
3. Discuss the different determinants of investments

Before going on, check how much you know about this topic. Answer
the pretest on the next page in a separate sheet of paper.

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Pretest. Read and analyze carefully the questions
Directions: Choose the letter of the correct answer. Use a separate sheet of
paper to write your answers.
1. It refers to the lifeblood of the government which is the source of all
funds of government project for the general welfare of the people.
a. Rentals b. Interest c. Investment d. Taxes
2. It is the amount of money that a lender charges the use of assets
expressed as a percentage of the principal .It is sometimes known as
the annual percentage rate.
a. Interest rate b. Investment rate c. Tax rate d.Wage
3. These are the enterprises whose total assets excluding land is 3M or
less, with 1 to 9 employees.
a. Medium enterprises c. Microenterprises
b. Small enterprises d. Macroenterprises
4. A person who creates business, bearing most of the risks and
enjoying most of the reward.
a. Politicians b. Actors c. Economist d. Entrepreneur
5. It refers to the lowest remuneration which the employers pay their
workers as provided by law.
a. Minimum wage c. Price floor
b. Price ceiling d. Benefits and salaries
6. It is a monetary asset purchased with the idea that it will provide
income in the future or later be sold at a higher price for a profit.
a. Interest b. wage c. rent d. investment
7. A concept in economics which states that “ small changes in
household income and spending can trigger much changes in
investment.
a. Domino effect b. Ceteris paribus
b. Accelerator effect d. Breakdown effect
8. Business entrepreneurs hire people who are this kind.
a. Honest
b. Punctual
c. Right attitude and disposition in life
d. Jack of all trades
9. The backbone of our economy
a. Cooperatives
b. Entrepreneurs
c. Sustainable development
d. Midterm development
10. Manpower is sometimes known as
a. Laborer c. Horse power
b. Power house d. System power

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11. It is generally indivisible, which means it can not be broken
into small amounts and bought separately.
a. Machinery
b. Land
c. Food products
d. Canned goods
12. Which of the following formula used in the computation of NET
INVESTMENT?
a. Gross investment = depreciation-net investment
b. Net investment = depreciation +gross investment
c. Net investment = gross investment – depreciation
d. Net investment = gross investment x depreciation
13. The following are the current problems of Filipino
entrepreneurs except _________
a. Financial capital
b. Inadequate access to technology
c. Marketing advise
d. Accelerator effect
14. It refers to the return made by tenant or occupant of a real
property to the owner for possession agreed upon between the
landlord and the tenant .
a. Interest
b. Investment
c. Wage
d. Rental
15. Value added tax must be collected for almost all kinds of
product sales, services and leases with how many percent?
a. 15% b. 12% c. 10% d. 11%

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Module Contemporary Economic
6 Issues Facing the Filipino
Entrepreneur
Your previous lesson in module 5 is all about Market structure .Market
structure is best defined as the organizational and other characteristics of a
market. We focus on those characteristics which affect the nature of competition
and pricing-but it is important not to place too much emphasis simply on the
market share of the existing firms in an industry.
The elements of market structure include the number and size distribution
of firms, entry conditions, and the extent of differentiation.

Monopoly

Prefect Market
Monopolistic
Competition Structures
Competition

Oligopoly

Figure 1. Market Structures

This diagram shows the different structures of market. In your
previous lesson, it focuses on the different structures of market in terms of
the number of sellers, types of products, the entry and exit to market and
the pricing power.
This module will discus on the contemporary issues facing the Filipino
entrepreneur like investment and interest rate, rentals, minimum wage and
taxes.

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 Jumpstart

For you to understand the lesson well, do the following activities.

Have fun and good luck!

Activity 1: Read and analyze

There are four contemporary economic issues facing the Filipino
entrepreneurs ,these are the investment and interest rate, rentals ,
minimum wage and taxes.
An entrepreneur is a person who organizes and operates business
or businesses taking on greater or normal financial risks in order to do so
.He is an individual who creates business , bearing most of the risks and
enjoying most of the rewards. Furthermore, he is also seen as innovator, a
source of new ideas, goods and services, and business or procedures.
Investment is the purchase of goods that are not consumed today
but are used in the future to create wealth. Investment in finance is the
monetary asset purchased with the idea that the asset will provide income
in the future or later be sold at a higher price for a profit.
Interest rate refers to the proportion of a loan that is charged as
interest to the borrower, typically expressed as annual percentage of the
loan outstanding .It also refers to the amount a lender charges the use of
assets expressed as a percentage of the principal .The interest rate is
typically noted on an annual basis known as the annual percentage rate.
Rentals is the return made by tenant or occupant of a real property
to the owner for possession and the use hereof especially the sum of money
agreed upon between the landlord and tenant for the use of real
property.Moreover, it also refers to the portion of the income of an economy
( as of nation) attributable to land as a factor of production in addition to
capital and labor.
Minimum wage refers to the lowest wage permitted by law or by
special agreement . It also refers to lowest remuneration that employers pay
their workers – the price floor below which workers may not sell their labor.
Most countries had introduced minimum wage legislation by the end of the
20th century.The purpose of minimum wage is to stabilize the post
depression economy and protect the workers in the labor force. The

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minimum wage was designed to create a minimum standard of living to
protect the health and well being of employees.
Lastly, taxes is the imposition of compulsory levies on individuals or
entities by governments. They are levied in almost every country of the
world , primarily to raise revenue for government expenditures although
they serve other purposes as well .They are also involuntary fees levied on
individuals or corporations and enforced by a government entity whether
local, regional or national, in order to finance government activities.

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 Discover

THERE ARE FOUR (4) CONTEMPORARY ECONOMIC ISSUES

FACING THE FILIPINO ENTREPRENEUR
A. Investment and Interest Rate

Investment spending is an injection into the circular flow of income.

Firms invest for two primary reasons:
1. Investment may be required to replace worn out or failing
machinery, equipment, or buildings.This is referred to as capital
consumption, and arises from the continuous depreciation of fixed
capital assets.
2. Investment may be undertaken to purchase new machinery,
equipment or buildings in order to increase productive capacity.
This will reduce long term cost, increase competitiveness and raise
profits.
Gross investment includes both types of investment spending,
but net investment only measures new assets rather than
replacement assets. This relationship is expressed in the following
equation:
NET INVESTMENT = Gross investment – Depreciation

Example:

If a bus transportation replaces ten worn out buses with

identical new buses, and purchase five more buses in order to be
able to move to more destinations, then gross investment is fifteen,
replacement is ten and net investment is five.

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INVESTMENT : A DETERMINANT OF INCOME

This diagram shows that investment is an essential determinant of

income.

▪ Investment
- A process of building up
stock or expenditure which
determines the income and
production in the economy
- Refers to the value of
machinery, plants and
buildings that are bought by
the firms for production
purposes
- Is the capital expenditure on
the purchase of physical
assets such as plants,
machinery, and equipment
( also known as fixed
investment) and stocks ( also
known as inventory
investments)
-
Investment

▪ Investment expenditure
- Investment expenditure mean
capital spending
- It is mainly derived from
accumulated savings and
other sources external to the
circular flow : it does not
come from current income
and consumption

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Importance of Investment to economy
Investment is important for improving productivity and
increasing the comprehensiveness of an economy. Without investment , an
economy could not enjoy high levels of consumption, but this creates an
unbalanced economy.

Why Investment Essential to the Economy?

➢ Current business income serves current business
needs
➢ The surplus may not be sufficient to finance even a
fraction of investment spending.Instead, a business
may borrow the savings of the economy, which
households likewise do, e,g, for housing construction
➢ Investment, therefore requires that a portion of
current consumption be foregone to free up resources
which can be used to finance investment

INVESTMENT IS CLASSIFIED INTO TWO TYPES:

A. Fixed Income Investment

➢ Investors are aware that there are risky investment options. For
investors who are averse to risk fixed income investments are
the best options since these investments are guaranteed to
have a lower risk of losses.
➢ Fixed income investment(FII) are investments that provide fixed
periodic sources of income over a certain period of time.
Examples:

a. Government securities like treasury bonds, treasury bills and

notes.
b. Corporate bonds (which gave higher interest compared to
government securities)
c. Special deposit accounts offered by the Bangko Sentral ng
Pilipinas (BSP)
d. Foreign currency time deposit
B. Variable Income Investment
➢ Are forms of investment that are suitable for risk tolerant
individuals
➢ In Variable Income Investment (VII), returns are not fully
guaranteed and money or resources invested may also not be

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 fully recovered.The reason for this is that,the returns from
variable income investment are strongly influenced by
economic situations and the behavior of financial markets.
Examples:

a. Business ownership in the form of equities

b. Company stocks
c. Investment fund shares that have a high level of liquidity since
they can be easily converted to cash

RELATIONSHIP BETWEEN INTEREST AND INVESTMENT

This diagram shows the relationship between investment and interest

rate. Always bear in mind that the higher the interest rate, the lower the
quantity of investments, the lower the interest rate, the higher the quantity
of investment

Interest rates play a Investment There is negative or

key role in and Interest inverse relationship
increasing capital rate between investment
stocks which in and interest rate
return affect
investent

MAIN CHARACTERISTICS OF INVESTMENT

➢ Risk Factor. Every investment contains certain portion of risk

➢ Expectation of Return. Return expectation is the main objective of
investment
➢ Safety. Investors expect safety for their capital
➢ Liquidity.
➢ Marketability
➢ Stability of income.

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Types of Investment
Investment are generally bucketed into types.There are
many ways to invest within each bucket. Here are some of the
types of investment you might consider for long term growth and
what you should know about each

Annuities Retirement Saving for

education
Alternative
Stocks and
complex
products

Initial coin
offerings and
Bonds
cryptocurren-
cies

Types of
investment
Commodity
Investment futures
fund

Security
Options futures
Bank Insurance
products

1. Bond is n instrument of indebtedness of the bond issuer to the

holder.Most common type include municipal and corporate
bonds.
2. Stocks is a share which entitles the holder to a fixed amount of
dividend whose payment takes priority over that of common
stock dividends
3. Investment fund is a supply of capital belonging to numerous
investors used to collectively purchase securities while each
investor retains ownership and control of his own share

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 4. Options are financial derivatives that give the buyers the right ,
but not the obligation to buy or sell an underlying asset at n
greed upon price and date.
5. Bank products means any service or facility extended to the
borrower or any subsidiary by the bank or any affiliate of the
bank including credit cards.
6. Insurance refers to a practice or arrangement by which a
company or government agency provide guarantee of
compensation for specified loss, damage, illness or death in
return for a payment of premium
7. Security futures contract is legally binding agreement between
two parties to buy or sell a specific quantity of shares of an
individual stock at a specified price on a specified date in the
future.
8. Commodity futures contract is an agreement to buy or sell a
predetermined amount of a commodity t a specific price on a
specific date in the future
9. Initial Coin Offering (ICO) act as a way to create a new coin ,
app, or service launches an ICO
10. Alternative and complex products is a financial asset
that does not fall into one of the conventional investment
categories
11. Savings for education provides for special tax treatment
of money set aside by parents or guardians for educational
purposes of a child
12. Retirement is the withdrawal from one’s position or
occupation from one’s active working life.
13. Annuities is a fixed amount of money paid to someone
each year typically for the rest of their life.
Status of Investment in the Philippines
According to the United Nations Conference on Trade and Development
(UNCTAD’s) world investment report 2020, foreign direct investment (FDI) to the
Philippines fell to USD 5 billion in 2019, down from USD 6.6 billion in 2018 and
remaining below the full-year target of USD 8 billion set by the Central
Bank of the Philippines.

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 Status of Foreign Investment in the Philippines
Total foreign investment (FI) approved in the first quarter of 2020
reached PhP 29.4 billion, 36.2 percent lower compared with PhP 46.0
billion in the same period in 2019.

Investment Climate in the Philippines

The country’s weak investment climate has been a major hindrance
to generating investments and creating more and better jobs .Among the
investment climate constraints, corruption is the biggest concern in the
Philippines according to the Economic Forum’s Executive Opinion Survey
finds that corruption is the biggest constraint in the country .This is
collaborated by country’s lacklustre performance in the Global Competitive
Report( GCR) pillar of institutions, in which insecure property rights,
diversion of public funds, low public trust to politicians, burden of
government regulation were found to be major constraints to raising
competitiveness .The World Governance Indicators (WGI) also finds
corruption and related governance issues to be quite problematic in the
Philippines.

The GCR also points to two other major shortcomings: inadequate

public infrastructure , third most problematic and restricted labor
regulations sixth most problematic.

Interest Rate and its Role in Investment

Interest rate refers to the proportion of a loan that is charged as
interest to the borrower, typically expressed as annual percentage of the
loan outstanding .It also refers to the amount a lender charges the use of
assets expressed as a percentage of the principal .The interest rate is
typically noted on an annual basis known as the annual percentage rate.

A. In economics , interest is used in two ways:

➢ It can be the price of the credit, which is often referred to as
loanable funds.
➢ It can also be the return that the t of the capital earns as an
input of the production process
B. Interest rate represent the cost of using or borrowing money.
Loanable fund refer to the amount of money lent out by a lender to a borrower , for
which the borrower will pay an interest rate to the lender for the use of that fund.
Determinants of Investment
There are seven determinants of investment

1. The expected return on the investment. Investment is sacrifice,

which involves in taking risks .This means that businesses ,

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 entrepreneurs and capital owners will require a return on their
investment in order to cover the risk, and earn reward .In terms of
the whole economy, the amount of business profits is a good
indication of the potential reward for investment.
2. Business confidence. Changes in business confidence can have a
considerable influence on investment decisions .Uncertainty about
the future can reduce confidence and means that the firms may
postpone their investment decisions until confidence returns.
3. Changes in national income. Changes in national income create an
accelerator effect.Economic theory suggest that, at the macro-
economic level, small changes in national income can trigger much
larger changes in investment levels.
4. Interest rates. Investment is inversely related to interest rates,
which are the cost of borrowing and reward to lending. Investment is
inversely related to interest rates for two reasons.
a. If interest rates rise, the opportunity of cost investment
rises. This means that a rise in interest rates increases the
return on funds deposited in n interest bearing account, or
from making a loan, which reduces the attractiveness of
investment relative to lending .Therefore, investment
decisions may be postponed until interest rates return to
lower levels.
b. If interest rates rise, firms may anticipate that consumers
will reduce their spending and the benefit of investment will
be lost. Investing to expand requires that consumers at least
maintain their current spending .Therefore , a predicted fall
is likely to discourage firms from investing and force them to
postpone their investment decision.
5. General expectations. Because investment is high risk activity,
general expectations about the future will influence firm’s
investment, appraisal and eventual decision- making .Example , any
indication of downturn in the economy , a possible change in
government, war or rise in oil or other commodity prices may reduce
the expected benefit or increase the expected cost of investment.
6. Corporation tax. Firms pay their corporation tax on their profit, so
reduction of tax increases the profits they retain after tax is paid and
this acts as an incentive to invest.
7. The level of savings. Household and corporate savings provides a
flow of funds into the financial sector, which means that funds are
available for investment. Increased savings may reduce interest rates
and stimulate corporate borrowing and investment.

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 B. RENTALS

In economics, rent is any payment to an owner of factor of

production in excess of the cost needed to bring that factor into production
.In addition, it is the payment made periodically by a tenant to a landlord in
return for the use of land, a building, an apartment, an office or other
property , a payment or series of payments made by a lessee to an owner in
return for the use of machinery , equipment, etc.Rent is also the price paid
for the use of land and other natural resources or factors of production that
is in fixed supply.

Economic rent is a payment in excess of opportunity cost. According

to David Ricardo,an influential British classical economist in early 1800s,
rent is a surplus of revenue over cost, which arises due to differences in the
level of usability of the land.The scarcity of land becomes the concept of
rent.

RENT ON LAND

➢ Land is one of the most common type of investment aside from

owning shares, cash and securities
➢ In order to analyze how the price for the use of land is determined
,we must look t the supply of land and its level of demand
➢ Since the supply of land is perfectly inelastic , the level of demand is
what determines the rent of land
➢ Since supply of land is fixed , demand becomes the determinant of
rent.
➢ Aside from renting the land out, the owner of the land can also opt to
sell the land at a higher price to earn profit.

How rents affect Filipino Entrepreneurs?

Filipino entrepreneurs especially the new ones experience multiple
challenges in making their business profitable and sustainable. Inflation
and higher prices of goods and rentals, an entrepreneur needs to set a time
frame for his/her business to gain profit. If things are done in hasty
manner, it is almost a sure sign that business will fall.Before setting
everything up, one must have already an accurate computation of cash
outflow ( rental, employees salary, utilities etc.)and how much mark up
they sell to cover the expenses and eventually gain them some profit.

C.Minimum Wage
Minimum wage is the lowest wage permitted by law or a special
agreement. In addition, it is also defined as the “minimum amount of
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renumeration that an employer is required to pay wage earners for the work
performed during a given period, which can not be reduced by collective
agreement or n individual contract.The purpose of minimum wages is to
protect workers against unduly pay.The imposition of minimum wage by
the government is an intervention to alleviate poverty and income inequality
in terms of rendering job services.The effects of minimum wages may in
principle differ between industries in which employers do and do not have
control over the wage rates they pay for the labor of a given skill and
application.A decent minimum wage is actually a useful tool in addressing
wide disparities in wage distribution.

DETERMINANTS OF MARKET WAGES

❖ A basic principle of economics is the notion that the price or

value of goods , services and even resources , such as labor, is
determined by the behavior of demand and supply
❖ Labor Demand
a. The demand for labor is similar to the demand for good,
and thus generally follows the law of demand.
b. The wage which is the price of labor, is plotted in the y-axis
of the graph and the quantity of labor which is expressed by
the number of employment available in the market is plotted
in the x-axis.
c. Similar to the law of demand , when the price of labor
increases, the related quantity of labor decreases, which
makes the price of labor inversely related to the quantity of
labor.This means that employers will hire more people when
wages go down.
❖ Labor supply
a. It follows the principle o the law of supply, which says that if
the price of labor increases, then the supply of labor also
increases and vice versa.
b. As wage increases, more people will enter the labor market
and compete for higher-paying jobs. But if wages decline,
there will be fewer people looking for jobs and competing for
these lower wages.

How does minimum wage affect employers and labor force in the
Philippines?

Using various econometric methods, the study finds that minimum

wage policy reduces employment in small firms .It causes the small firms to
reduce their production workers, Furthermore, because of the minimum

xviii
wage, firms re reluctant to hire younger , less educated and female
production workers.

D.Taxes
Taxes refers to the compulsory contribution to state revenue, levied
by the government on workers’ income and business profits, or added to the
cost of some goods , services and transactions .It is also known as the sum
of money demanded by the government for its support or for specific
facilities or services, levied upon incomes, property, sales ,etc. burdensome
charge, obligation, duty or demand.They are the lifeblood of the
government.Without taxes , the government will not be able to provide
services to its people, such as public works, health, education ,defense and
police protection and social services.Hence, taxation is necessary for the
government to be able to finance its expenditures.It is an inherent power of the
state to demand enforced contributions from the people to public purposes.

How do taxes affects business and consumers?

Taxation policy affects business costs. For example, A rise in

corporation tax ( on business profits)has the same effect as an increase in
cost. Businesses can pass some of this tax on to consumers in higher
prices, but it will also affect the bottom line.

Types of Business taxes

Types of business taxes Characteristics

Value –added tax A 12% VAT must be collected for almost all kinds of
product sales, services and leases
Salary and wage taxes As a business owner responsible to the welfare of
your employees, you must withhold and remit to
the proper government agencies employee income
withholding taxes, SSS premiums, Pag -Ibig and
Medicare
Amusement tax Cockpits, movie houses, night and day clubs
,boxing tournament, basketball games, horse
racing and other amusement taxes by the local and
national government
Excise Tax If you have a business that involve in the
manufacture of alcohol, tobacco, and petroleum
products, importing of automobile or jewelry, and
mining,, you need to pay special excise taxes.
Import tax When your business involves the importation of
goods as part of your raw material, you have to pay
customs duties
Individual income tax Your income from a sole proprietorship business is
consider personal income and must be included in

xix
 your Individual Tax Return
Corporate income tax If your business is structured as a corporation, the
corporation pays its own income taxes as if it is a
separate entity .As one of the stock owners, you will
pay additional taxes on dividends if they are
declared and distributed to you. Such dividends are
included in your income when you file for ITR
Real estate taxes If your business own real estate or land, you must
pay for real estate taxes on quarterly basis. There
are penalties involved in late payments
Estate or inheritance tax Tax from inherited properties or money

Effects of High Taxes on Business

1. Inadequate incomes. The total income of all the effects is a large tax
burden. And only workers feel the brunt of this burden, because only
workers create wealth. When all of these effects combined, the tax
burden on the average worker is currently about 73% of income. So
people can’t live on their incomes.
2. Low wages. Multiple governments levy so many taxes on businesses
that taxes is the highest budget items on the ledger sheets of most
businesses .These takes away some of the money otherwise used to
pay wages. So employers can’t pay good wages.
3. High prices. Businesses have to raise prices to get money to pay
these taxes. So product prices go up. This leads to inflation.
4. Substandard products. Taxes take away money otherwise used to
improve quality. Instead, businesses must cut corners to make the
products and pay high taxes .Many recalls are the results of business
cutting too many corners to save money so they can pay the high
taxes.
5. Product unavailability and continuation. Because high taxes cost
business more, they can’t provide as many s they used to be able to.
Property taxes makes it expensive to stock products with lower
quantities demanded .And manufacturers can’t afford to produce low
demand products and also pay their taxes.
6. Poverty and high crimes .Because more people can’t afford to live
with their income, the poverty rate goes up .This causes an additional
drain on the government social programs. This means that the poor
person can’t get enough to live on .Many poor people unable to find
jobs because government overtaxed the economy, turn to crime to get
the money needed to support their families .This causes the crime
rate to go up .And since many of these crimes are robberies, the
violent crime rate goes up too.

xx
CHALLENGES FOR THE FILIPINO ENTREPRENEURS
At present, Filipino entrepreneurs are faced with the following
challenges, namely:

Self Strapped Capital Marketi Choosing

doubt budget ng what to
strategy sell

Govern
Delegati
ment
Challenges for the Filipino Entrepreneur ng task
licensing

Prohibitive Many Cash flow Hiring Time

rental have no manage employees management
rates jobs ment

1. Government licensing and permits. Entrepreneurs complain on

how difficult to apply or renew with certain local government
units. All the while, President Aquino has ordered the streamlining
of government transactions .In fairness there are cities, which are
known for efficient known for efficient transaction. It make
somebody feel like being in a private office, However, there are
LGUs giving difficulties to the entrepreneur.
2. Prohibitive rental rates and other clauses in Mall .There is no
doubt that doing business in shopping malls has advantages .Life
for most people has included a weekly if not twice visits in the
malls .An exemption is when the re label with words “SALE” is
displayed .Mall administration should avoid squeezing
entrepreneurs dry to the bone. A mall operator can initiate an
effort with their tenants. Sometimes mall operators should look
first for the welfare of the tenants before profits. It hurts to see a
newly opened store and after six to twelve months show signs of
losing money which eventually gets boarded up with tag” For
Lease.”
3. There are many who have no jobs. Unemployment is high in the
country. Every time there is job fair thousands queu even under
the heat of the sun or in mall corridors. One point noted is the

xxi
 quality and experience of the manpower. Entrepreneurs do look
for hose who are not just doing menial tasks. They are in need of
people who have the right attitude and disposition in life.
Sometimes workers lack focus on their work. Because of social
media efficiency is affected. One remedy to solve this problem
among workers is for the academic institutions for the proper
molding of their students who are on OJT( On the Job Training).As
they graduate from their courses, they are ready to face
employment and are expected to perform with efficiency in the
performance of their duties and responsibilities as a worker.
Entrepreneurs are the backbone of our economy, because they
are the one providing employment to the people.
4. Cash flow management. The challenge .Cash flow is essential to
small business survival, yet many entrepreneurs struggle to pay
bills while they are waiting for checks to arrive .Part of the
problem stems from stems from delayed invoicing, which is
common to entrepreneurial world.
The solution .Proper budgeting and planning are very critical
to maintaining cash flow .one way to improve cash flow is to
require a down payment for your products and services .Your
down payment should cover all your expenses associated with
a given project or sale as well as some profit for you.
5. Hiring employees .The challenge .The hiring process can take
several days of your time. Reviewing resumes, sitting through
interviews, sifting through so many unqualified candidates .
The solution. Be exclusive. Seek real reference. Not neighbor
lady your candidate grew up with, but the people who can
honestly attest to their work ethic and potential.
6. Time management.
The challenge . Time management might be the biggest
problem faced by entrepreneurs who wear many hats. If you
only had more time, you could accomplish so much more.
The solution . Make time. Like money, you have to be smart
about how you’re spending it. Here’s how:
a. Create goal list. You have a list of lifetime goals,
broken down into annual goals, broken down into
monthly goals, then into weekly goals .Your weekly
goals will be broken into specific task by day.
b. If any task do not mesh with your goals, eliminate
them
c. If any task do not absolutely have to be completed by
you, delegate them

xxii
 d. Consistently ask yourself,” Is what am I doing right
now the absolute best use of my time?
7. Delegating tasks.The challenge. You know you need to delegate or
outsource tasks, but it seems every time you do something gets
messed up and you need to redo it anyway.
The solution . Find good employees and good outsourced
contract help.You might have to pay a little more of it, but ht e
savings in time, more than make up for it.
8. Choosing what to sell .The challenge. You know you could make
a mint, if you just know what products and services to sell. You’re
just unsure how to pick a niche.
The solution. Admit that you are in identifying prosperous
niches, and delegate the task to someone who is strong in this
area .You don’t need to hire huge expensive marketing
firm,rather recruit a freelance researcher who has the
experience in what ever type of field you are considering.

9. Marketing strategy.The challenge. You don’t know the best way to

market your products and services: print online, mobile,
advertising etc.
The solution. If you are not adept at creating marketing plans
and placing ads,, it’s a good idea to outsource your marketing
strategy to someone .All you need is core marketing plan, what
marketing activities you will undertake to motivate purchases?
Give your planner a budget and tell them to craft a plan that
efficiently uses that budget to produce profit.
10. Capital .The challenge. You want to start or grow your
business , but you have a little capital to do it with.
The solution .There are many ways to earn funding, from
traditional bank loans to family and friends .Instead of trying to
launch multi million peso corporation overnight, focus on your
initial core customers. Continually work to find new customers.
Word of mouth will spread and more customers will come
looking for you .Your business will grow slow and steady and
you’ll be able to solve problems while they’re small.
11. Strapped budget .The challenge .Even though cash flow is
fine, it seems you never have enough in your budget to market
your company to its full potential.
The solution .Every entrepreneur struggles with their budget.
They key is to prioritize marketing effort with efficiency in
mind- spend your money where it works and reserve the rest
for operating expenses and experimenting with other market
methods.

xxiii
 12. Self doubt.The challenge. An entrepreneur’s life is not
enviable, at least in the beginning. Its extremely easy to get
discouraged when something goes wrong or when you’re not
growing as fast as you’d like. Self doubt creeps in and you feel like
giving up.
The solution . Being able to overcome self doubt is a
necessary trait for entrepreneurs . Having a good support
system will help: family and friends who know your goals and
support your plight , as well as an advisory board of other
entrepreneurs who can objectively opine as to the direction of
your business.

Ten Reasons Why Entrepreneurs Fail

1. Not smart enough. Not talking about IQ here. Entrepreneurial IQ
here is about holistic understanding of situations .Many
entrepreneurs understand their idea, but not the market that will
accept or reject the idea .If an entrepreneur is incapable of seeing
what everyone else sees ,he or she is blind to success.
2. Not knowing who’s who. Entrepreneurs fail because they can not
separate friends from enemies. They also fail because they can not
recognize smart loyal co founders and employees or how to
optimize their contributions. There’s a lot to know and many
entrepreneurs just don’t know enough bout the players.
3. Not finding enough funding. Entrepreneurs fail because they can
not raise the right kind of funding at the right time at the right
valuation.
4. Grandiose expectation. While something good to believe in
miracles, it’s no way to run a start up. Entrepreneurs who fail
often do so because they believe they will change the world, and if
the world doesn’t welcome their authority, it’s the world’s fault,
not their’s.
5. Horrible soft skills. Entrepreneurs fail because they’re not house
broken , they speak their mind no matter how inappropriate or
inopportune the situation may be. If an entrepreneur will not
listen, he or she is insecure, short tempered and intolerant of
opposing opinions, he or she will fai l.The worst entrepreneurs are
the one’s who can not accept responsibility for anyone and spend
their days and nights looking for someone-anyone- to blame for
their mistakes.
6. Bad partners. Entrepreneurs fail because they hang up with the
“wrong people”
7. Ineffective sales.Entrepreneurs fail because they can not sell to the
right clients at the right time t the right price.
xxiv
 8. Markey invisibility.Entrepreneurs fail because their companies are
invisible to the world because they can not bear to spend money
on marketing and promotions.
9. Pivot paralysis.Entrepreneurs fail because they can not adapt to
unpredictable events and conditions
10. No sense of inevitable exit. Entrepreneurs fail because
they can not gauge their ultimate exit relatively early in their
journey.

Current Problems of Filipino Entrepreneurs

The current problems that Filipino entrepreneurs encounter today
are the following:

1. Inadequate access to technology

2. Financing capital
3. Marketing advice
4. Logistical problems in setting up and maintaining their
competitiveness in their community

Eight Things that Hinder the Success of Filipino

Entrepreneurs
➢ Red-tape. Despite of the anti- red tape law in the Philippines,
too much bureaucracy in the government is still unavoided.
➢ Poor public utility services.
➢ Lack of financial support
➢ Lack of marketing skills
➢ Ineffective management
➢ Inability to innovate
➢ Lack of customer care
➢ Lack of self growth
The Accelerator Effect
This means that small changes in household income and spending
can trigger much larger changes in investment. This is because firms often
expect new sales and orders to be sustained in the long run, and purchase
larger quantities of capital goods than they need in the short run .In
addition, machinery is generally indivisible which means it can not be
broken into small amounts and bought separately .Even small increase in
demand can trigger to buy a complete new machines or build entirely
factories and premises, even though the increase in demand my be
relatively small.

xxv
TAKEAWAYS OF THIS MODULE

I. THERE ARE FOUR CONTEMPORARY ECONOMIC ISSUES

AFFECTING FILIPINO ENTREPRENEURS
a. Investment and Interest Rate
b. Rentals
c. Minimum wages
d. Taxes
A. Investment and Interest
1. Investment : A Determinant of Income
2. Importance of investment to economy
3. Two classification of investment
4. Relationship between Interest and Investment
5. Characteristics of investment
6. Types of Investment
7. Status of investment in the Philippines
8. Status of foreign investment in the Philippines
9. Investment climate in the Philippines
10. Interest rate and its role in investment
11. Determinants of investment
B. Rentals
1. Rent on Land
2. How rents affect Filipino entrepreneurs
C. Minimum Wage
1. Definition of minimum wage
2. Determinants of market wages
3. How does minimum wage affect employers and
labor force in the Philippines?
D. Taxes
1. Meaning of taxes
2. How do taxes affects business and
consumers?
3. Types of business taxes
4. Effects of high taxes on business

II. CHALLENGES FOR THE FILIPINO ENTREPRENEURS

1.Government licensing and permits
2. Prohibitive rental rates and other clauses in mall
3.There many who have no jobs
4. Cash flow management
5. Hiring employees
6. Time management
7.Delegating tasks

xxvi
 8.Choosing what to sell
9.Marketing strategy
10. Capital
11. Strapped budget
12.Self doubt

➢ TEN REASONS WHY ENTREPRENEURS FAIL

➢ CURRENT PROBLEMS OF FILIPINO ENTREPRENEURS
➢ EIGHT THINGS THAT HINDER THE SUCCESS OF FILIPINO
ENTREPRENEURS
➢ ACCELERATOR EFFECT

xxvii
 Explore

Here are some enrichment activities for you to work on to master and
strengthen the basic concepts you have learned from this lesson.

Enrichment Activity 1:

Directions: Give at least two examples or situation how does the four (4)
contemporary economic issues affects the Filipino entrepreneurs, based on
the present set up of the Philippine economy .Answer briefly and use a
separate sheet of paper to write your answers.
Contemporary Economic Issues How do they affect Filipino
Entrepreneurs

1. Investment and Interest Rate

2. Rentals
3. Minimum wage
4. Taxes

.
Assessment 1

Directions: Modified True or False.Write true if the statement is correct, and

if the statement is incorrect, write word/words or modify the sentence to
make the statement correct .Use a separate sheet of paper to write your
answer.
________1.Investment is sacrifice , which involves in taking risks.
________2. According to the accelerator effect ,changes in household
income and spending will not affect investment.
________3. Investment is inversely related to interest rates.
________4. The main purpose of imposing the minimum wage is for
the protection of the laborers against unduly pay.
________5. Inflation and higher prices of commodities and rentals
increases the profit of the entrepreneur.
________6. If there is a rise of corporation tax among businesses, this
situation will not affect the consumers.
________7. Taxation is one of the inherent powers of the state .

xxviii
________8. Possible change in government, rise in oil price and other
commodity and other general expectations in the future will greatly
affect the decision-making of the entrepreneur.
________9. A business owner is responsible to the welfare of his
employees and must withhold and remit to the proper government
agencies employee income withholding taxes, SSS, Pag-Ibig and Phil
Health contribution.
________10.If a business is structured as a corporation, the
corporation pays its own income tax as a separate entity. The stock
owner is also required to pay additional taxes on dividends declared
and distributed to them.

Enrichment Activity 2. Write what you know .

Directions: There are twelve (12) challenges which the Filipino
entrepreneurs are facing as stated in this module. If you are an
entrepreneur , choose at least six(6) challenges which you believe
affects you most . Answer briefly use a separate sheet of paper to
write your answers .

Challenges for the Filipino Reason how it affects you as an

entrepreneur entrepreneur
1.
2.
3.
4.
5.
6.

Assessment 2.
Directions : Identify the following statement, if they are considered
challenge or solution to the problems encountered by a Filipino
entrepreneur .Use a separate sheet of paper to write your answer.
__________1. Hiring process can take several days of your time.
Reviewing resumes, sitting through interviews, screening of
applicants.
__________2. Find good employees and good outsourced contract help.
You might have to pay a little of it but the savings in time , more than
make up for it.
_________3. Time management might be the biggest problem faced by
entrepreneurs who wear many hats.

xxix
_________4. Identify prosperous niches and delegate the task to
someone who is strong in choosing what products or services to sell.
_________5. Be exclusive. Seek a real reference who attest honestly to
the work ethic and potential of the applicant.
_________6. Entrepreneurs complain on how difficult to apply or
renew business permits with certain local government units.
_________7. Entrepreneurs struggle to pay bills .Part of the problem
stems from delayed invoicing which is common to entrepreneurial
world.
_________8. Proper budgeting and planning are very critical to
maintaining cash flow. One way to improve is to require a down
payment for your products and services.
_________9. You want to start or grow your business , but you have
a little capital to do with it.
_________10. Every entrepreneur struggles with their budget. The key
is to prioritize marketing effort with sufficiency in mind- spend your
money where it works and reserve the rest for operating expenses and
experimenting with other market methods.

Enrichment Activity 3.Concept Mapping

Directions: You are going to accomplish this graphic organizer
containing a diagram by writing your understanding about the seven
(7) determinants of investment. Use a separate sheet of paper for you
to write your answer.

Determinants of
Investment

xxx
Assessment 3. Fill in the blanks.
Directions. Write the missing word/s in the blank to complete the idea of the
statement.
A. Investment is 1.___________ related to interest rate.
B. Changes in national income create an 2. ____________ effect.
C. Changes in business confidence can have a considerable influence on
investment 3.___________..
D. Reduction of corporation tax by firms will increase 4._________.
Investment is a sacrifice , which involves in taking risks. This means
that businesses 5. ______________ and 6._____________ will require a
return on their 7.______________ in order to cover the risk and earn a
reward
E. Increased savings may reduce interest rates and stimulate corporate
8.______________ and investment.
F. Uncertainty about the future can reduce confidence and means that
the firms may postpone their investment decisions until confidence
9.______________
G.10________________ suggest that, at the macro economic level, small
changes in national income can trigger much larger changes in
investment level.

Great job! You have understood the lesson.

Are you now ready to summarize?

xxxi
 Deepen
Directions :At this time, answer the following activities to show if you
were able to understand the lessons of this module.Use another sheet
of paper to write your answers.
A. Answer the following:
1. What is investment?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
_________
2. What is interest rate?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
__________
3. What is accelerator effect?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
_________
B. Identify the different challenges that Filipino entrepreneurs
encounters. Can you conceptualize how these Filipino entrepreneurs
will be able to overcome these challenges .If yes how, if no why.
(Support your answer)
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________

xxxii
 Gauge

Directions: Read carefully each item. Use a separate sheet for your
answers. Write only the letter of the best answer for each test item. Choose
the letter of the correct answer . Use a separate sheet of paper for you to
write your answer.
________1. A business tax paid by cockpits, movie houses, night and
day clubs, boxing tournament, basketball games horse racing etc.
a. Value added tax
b. Excise tax
c. Amusement tax
d. Individual income tax
________2. It is the amount of money that a lender charges the use of
assets expressed as a percentage of the principal .It is sometimes
known as the annual percentage rate.
b. Interest rate b. Investment rate c. Tax rate d.Wage
_________3. If you have a business which involves in the manufacture
of alcohol, tobacco, and petroleum products, importing of automobile
or jewelry and mining.You will pay what kind of business tax?
a. Import taxes
b. Excise tax
c. Value added tax
d. Amusement tax
_______4. These are the enterprises whose total assets excluding land
is 15M to 100M and not less than 200 employees.
c. Medium enterprises c. Microenterprises
d. Small enterprises d. Macroenterprises
_______5.A person who creates business, bearing most of the risks
and enjoying most of the reward.
b. Politicians b. Actors c.Economist d. Entrepreneur
_______6.It refers to the lowest renumeration which the employers
pay their workers as provided by law.
c. Minimum wage c. Price floor
d. Price ceiling d. Benefits and salaries

________7. It is a monetary asset purchased with the idea that it will

provide income in the future or later be sold at a higher price for a
profit.
b. Interest b. Wage c. Rent d. Investment

xxxiii
 _________8. A concept in economics which states that “small changes
in household income and spending can trigger much changes in
investment.
a. Domino effect c. ceteris paribus
b. Accelerator effect d. Breakdown effect
_________9.Business entrepreneurs hire people who are this kind.
a. Honest
b. Punctual
c. Right attitude and disposition in life
d. Jack of all trades
_________10.The backbone of our economy
a.Cooperatives
b. Entrepreneurs
c. Sustainable development
d. Midterm development
__________11. Manpower is sometimes known as

a. Laborer
b. Power house
c. Horse power
d. System power
___________12.It is generally indivisible, which means it can not be
broken into small amounts and bought separately.
a. Machinery
b. Land
c. Food products
d. Canned goods
__________13. Which of the following is the correct formula used in the
computation of NET INVESTMENT?

a. Gross investment = depreciation-net investment

b. Net investment = depreciation +gross investment
c. Net investment = gross investment – depreciation
d. Net investment = gross investment x depreciation
___________14. The following are the current problems of Filipino
entrepreneurs except
a. Financial capital
b. Inadequate access to technology

xxxiv
c. Marketing advise
d. Accelerator effect
____________15. It refers to the return made by tenant or
occupant of a real property to the owner for possession agreed
upon between the landlord and the tenant .
a. Interest
b. Investment
c. Wage
d. Rental

Great job! You are almost done with this module.

xxxv
References
Printed Materials:
Kagawaran ng Edukasyon,(2015.)( Aralin 7): Mga Organisasyon ng Negosyo(pp84-
88).Pasig City,,Philippines
Leano ,Ramon D. (2016). Applied Economics for Senior High School,Intramuros,
Manila ,Philippines:MINDSHAPERS CO.,INC
Macalinao, Eloisa M. Applied Economics.
Rillo, Julia D. Et al.( 2008) . Economics, Basic Principles, Applications and
Issues,Quezon City, Philippines: Vibal Publishing House , Inc.

Website:
http://www.investopedia.com
http://www.santandertrade.com
http://www.ilo.org
http://www.eldis.org
http://www.businesscasestudies.co.uk
http://www.businesstips.ph
http://www.deluxe.com/sbrc/financial

xxxvi
KEY ANSWER
A. Pretest
1. D 9. B
2. A 10. A
3. C 11. A
4. D 12. C
5. A 13. D
6. D 14. D
7. B 15. B
8. C

B. Explore
I. A.Enrichment Activity I ( Essay)

Rubrics for Essay Answer

Features 20 15 10 5
Quality of -Piece was -Piece was written -Piece had a -Piece had no
writing written in an in an interesting little style style
extraordinary style -Give some -Gives no new
style - somewhat new information and
- very informative and information very poorly
informative organized but poorly organized
and well organized
organize

Grammar -No errors in -Few spelling -A number -So many

and usage spelling, and punctuations of spelling, spelling,
punctuation errors and minor punctuation punctuation and
or grammar grammatical or grammatical
errors grammatical errors that it
errors interferes with
the meaning

B.Assessment I
1. True
2. False( It will affect investment)
3. True
4. True
5. True
6. False( it will affect consumers because there will be price
increase for commodities
7. True
8. True
9. True
10. True

xxxvii
II. A.Enrichment Activity II

(Essay) Rubrics for Essay Answer

Features 20 15 10 5
Quality of -Piece was -Piece was written -Piece had a -Piece had no
writing written in an in an interesting little style style
extraordinary style -Give some -Gives no new
style - somewhat new information and
- very informative and information very poorly
informative organized but poorly organized
and well organized
organize

Grammar -No errors in -Few spelling -A number -So many

and usage spelling, and punctuations of spelling, spelling,
punctuation errors and minor punctuation punctuation and
or grammar grammatical or grammatical
errors grammatical errors that it
errors interferes with
the meaning

B.Assessment II
1. Challenge
2. Solution
3. Challenge
4. Solution
5. Solution
6. Challenge
7. Challenge
8. Solution
9. Challenge
10. Solution
III. A. Enrichment Activity 3 .Answer through a graphic organizer

B.Assessment 3
1. Inversely related
2. Accelerator effect
3. Decision
4. Profit
5. Entrepreneur
6. Capital owners
7. Investment
8. Borrowing
9. Return
10. Economic theory

xxxviii
C. Deepen
(Essay) (Essay) Rubrics for Essay Answer
Features 20 15 10 5
Quality of -Piece was -Piece was written -Piece had a -Piece had no
writing written in an in an interesting little style style
extraordinary style -Give some -Gives no new
style - somewhat new information and
- very informative and information very poorly
informative organized but poorly organized
and well organized
organize

Grammar -No errors in -Few spelling -A number -So many

and usage spelling, and punctuations of spelling, spelling,
punctuation errors and minor punctuation punctuation and
or grammar grammatical or grammatical
errors grammatical errors that it
errors interferes with
the meaning

D. Gauge

1. C
2. B
3. B
4. C
5. D
6. C
7. D
8. B
9. C
10. C
11. A
12. A
13. C
14. D
15. D

xxxix
xl