Notes, summaries, assignments, exams, and exercises for Economics for Baccalaureate

Business Structures

Sole Traders

A sole trader is any business that is owned and controlled by one person.

Advantages of Sole Trader

• It is easy to set up as no formal legal paperwork is required.
• Generally, only a small amount of capital needs to be invested, which reduces the initial start-up cost.
• As the only owner, the entrepreneur can make decisions without consulting anyone else.

Disadvantages of Sole Trader

• The sole trader has no one to share the responsibility of running the business with. A good hairdresser, for example, may not be very good at handling the accounts.
• Sole traders often work long hours. They may find it difficult to take holidays or time off if they are ill.
• They face unlimited liability if the business fails.

Partnerships

Partnerships...

Item 14: International Trade, Balance of Payments, and Exchange Rates

1. International Trade

International trade is the exchange of goods and services between countries.

2. Barriers to International Trade

Some countries place restrictions on international trade through protectionist measures that restrict or distort trade. This may be done to protect strategic sectors, maintain employment, or compensate for imbalances when imports exceed exports.

• Tariff: A tax on imports of goods from another country.
• Quotas: Limitations on the number of goods that can be imported.
• Measures of equivalent effect: Barriers to imports through complex bureaucratic procedures, eventually reducing imports.
• Dumping: A company sells its products at a loss to eliminate competition.

Request for Offers and Budget

The phase of bids and budget requests within the procurement process is a practice by firms in the following cases:

• When you first start the activity. The company is new and needs to find all types of providers. The first step is to study the market for suppliers of goods and services.
• When it is time to buy a new product. The first time we purchase an item, as in the previous case, we must first find suppliers that manufacture or sell the product.
• When we're not happy with the current vendors. The company wants to introduce some changes because it is not in accordance with suppliers or the business relationship with them.
• To expand the portfolio of suppliers. When the company works with a limited number of suppliers,

Understanding Key Macroeconomic Concepts

National Accounts and Economic Indicators

Gross Domestic Product (GDP)

GDP is the market value of all final goods and services produced within a country during a certain period of time.

GDP Calculation Formula

• GDP = Consumption + Investment + Public Expenditure + Exports - Imports

Other National Income Aggregates

• Gross National Product (GNP): GNP = GDP + Net Factor Income from Abroad (NFIA)
• Net National Product (NNP): NNP = GNP - Depreciation
• National Income (NI): NI = Wages + Rent + Interest + Profits
• Personal Disposable Income (PDI): PDI = National Income - (Undistributed Profits + Corporate Taxes + Social Security Contributions) + Transfer Payments

Real vs. Nominal GDP

• Real GDP = Base Price × Quantity
• Nominal

Capital

Fixed Capital

Buildings, installations, and machinery permanently dedicated to production. These depreciate gradually with use and eventually need replacement.

Working Capital

Invested in resources transformed during production, including raw materials, manufactured products, currency, credit, and labor. These are consumed in production and must be reported consistently. Includes variable capital.

Company Elements

• Human factors
• Material factors
• Organization
• Environment

Social Costs

Costs that affect society.

Shares

Equal, indivisible units of capital in a limited liability company, which are not negotiable.

Stocks

Equal portions of a corporation, typically documented in nominative or bearer securities and are negotiable.

Liability

Unlimited Liability

When...

Globalization and Economic Factors

Globalization encompasses economic globalization (global business), the economy of communication and knowledge. Two key factors drive this: new knowledge production and communication (innovation), and the Internet as a new form of organization.

It should adapt the fundamentals of business function.

Internet's Impact on Companies:

• Better communication with foreign entities (cheaper, faster, and improved economic management and operation).
• Greater choice of investment and financing (no frontiers thanks to the Internet).
• Increased labor productivity (flexible working relationships).

Interconnection Between Companies and Institutions:

• Improved customer relationship provider (intensifies and facilitates communication).

European System of Central Banks (ESCB) and the Bank of Spain

ESCB Functions

• Define and implement the monetary policy of the euro area.
• Manage foreign exchange reserves and conduct foreign exchange transactions.
• Foster the proper functioning of payment systems.
• Authorize the issuance of legal tender banknotes.

Bank of Spain

The Bank of Spain is the national central bank of Spain and, within the framework of the ESCB, the monetary authority that regulates the activity of the country. National central banks have two types of functions: specific functions and functions as a member of the ESCB.

Specific Functions of the Bank of Spain

• Hold and manage foreign exchange reserves and precious metals not transferred to the ECB.
• Monitor the operations of credit

Job Offer

Understanding the aggregate job offer involves analyzing different curves that indicate the quantities of labor individuals are willing to exchange for a determined wage. This is closely related to the population. If there are many births, this causes an increase in the job offer. Conversely, if births decline, the population stagnates or falls, leading to a decrease in future labor supply.

• Migration will cause a drop in the labor supply in the country of origin and an increased supply of labor in the destination country.
• Societal values play a significant role in labor. One consequence of the equality of women and their changing roles is the incorporation of female social work outside the home. This causes an increase in labor supply.

Understanding Corporate Dimension and Growth

Defining Corporate Dimension

The magnitude or size of a business is primarily defined by its production capacity.

Distinguishing Dimensions

• Dimension of the Factory or Farm (Techno-Economic Unit): Refers to the installation size for a particular product.
• Global Dimension (Economic and Financial Decision Unit): Represents an integrated set of factories, warehouses, and other assets.

Dimension and Market Demand

Every company must offer the market the required quantity of its product. Therefore, if there are changes in demand, the production capacity should be reviewed and adjusted accordingly.

Criteria for Business Dimension Classification

Different criteria are used to classify firms by their dimension, leading...

Key Business and Economic Terminology

Core Business Definitions

Services

Intangible things that businesses do for consumers that enhance their lives.

Innovation

A new way of doing things.

Online Business

A business that conducts operations by means of the internet.

Outsourcing

Contracting with other companies for services.

Niche

A small, specialized segment of the market based on customer needs discovered through market research.

Corporate Strategy and Structure

Strategic Alliance

Forming a partnership with another company.

Corporate Venture

A new venture started inside a large corporation.

Economic Factors and Resources

Fundamental concepts related to wealth creation and market dynamics:

• For creating wealth.
• Technology has shortened [business cycles].
• Competition