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

Dimensions of Information Systems

Describe the organizational, management, and technology dimensions of information systems.

• Organization: Such as the organization’s hierarchy, functional specialties, business processes, culture, and political interest groups.
• Management: Involves setting organizational strategies, allocating human and financial resources, creating new products and services, and re-creating the organization if necessary.
• Technology: Involves computer hardware, software, data management technology, and telecommunications technology.

Impact of Information Systems on Business

Describe how information systems have changed the way businesses operate and their products and services.

Wireless communications, including computers and mobiles,...

Market Analysis and Demand Metrics

• Market Size by Value: Total volume of sales × Average market price
• Market Size by Value: (Business sales / % Market share) × 100
• Market Share: (Value of firm A's sales / Value of total market sales) × 100
• Market Growth: (Change in size of market by value / Original size of market by value) × 100
• Price Elasticity of Demand (PED): Percentage change in quantity demanded / Percentage change in price
• Income Elasticity of Demand: Percentage change in quantity demanded of Good A / Percentage change in consumers' real income

Revenue, Costs, and Profitability

• Total Revenue: Average selling price × Quantity sold
• Total Costs: Total fixed costs + Total variable costs
• Average (Unit) Costs: Total costs / Number of items produced
• Profit:

Small Business Criteria and Economic Contributions

A small business is typically defined by the following criteria:

• Financing is supplied by one person or a small group.
• Localized business operations (except for marketing).
• Business size is small relative to larger competitors.
• Fewer than 100 employees.

Economic Contributions of Small Businesses

Small businesses are vital to the economy, demonstrating significant impact:

• Produce 14 times more patents than large company staff, and are twice as likely to turn innovation into market success.
• Account for 50% of the Gross Domestic Product (GDP).
• Create more than 60% of new jobs.
• Account for 44.3% of total payrolls.

Women Entrepreneurs: Growth and Challenges

The role of women in business ownership has expanded...

E-commerce: Buying and Selling Online

Like many people, I regularly buy things online, mostly books, music, and airline tickets. Many online retailers offer good rates or discounts. Occasionally, I also buy things on internet auction sites such as eBay, where people sell items to the highest bidder.

The Four Main Steps to Buying Online

There are four main steps to buying online:

1. First, you enter a site dedicated to e-commerce and browse their products.
2. Then, you put the items you want to buy into a virtual shopping cart, a program that lets you select the products and purchase with a credit card.
3. Third, you enter your personal data – you may have to log in with a username and a password if you have an account with the site.
4. Finally, you confirm

The Washington Consensus: Policies and Origins

The concept and name of the Washington Consensus were first presented in 1989 by economist John Williamson, who used the term to summarize policies advised by Washington-based institutions such as the International Monetary Fund (IMF), World Bank, and U.S. Treasury Department. These policies were believed to be necessary for the recovery of countries in Latin America from the economic and financial crises of the 1980s. These key policies include:

• Downscaling of government
• Deregulation
• Trade liberalization
• Liberalization of capital flows
• Privatization

Foreign Direct Investment: Drawbacks for Developing Nations

Foreign Direct Investment (FDI) refers to a company's physical investment into building a plant...

Understanding Minimum Efficient Scale (MES)

The Minimum Efficient Scale (MES) represents the level of production where economies of scale are fully realized, and unit costs are at their lowest possible point. For production levels lower than q*, unit costs are not at their minimum. If production increases, businesses can still benefit from economies of scale.

MES and Economies of Scale

Gains from an integrated market, which are closely related to MES, depend on:

• The difference between production before integration (q) and MES (assuming q > q*). The larger this difference, the greater the potential gain.
• The fall in unit cost as production moves towards MES.

Optimal Firms and Product Differentiation

The optimal number of firms in an integrated market...

Chapter 10: Competitive Advantage

A firm is said to have a competitive advantage in a market if it earns a higher rate of economic profit compared to the average economic profit in the industry. It is a strategic positioning, the ability to create value and enjoy it over other firms.

Determinants of Profitability

Benefit position relative to competitors and the cost position relative to competitors influence the value created relative to competitors and join with the general industry condition influence the economic profitability. The comparative position of a firm is an important determinant of profit.

Components of Value Creation

Value Created = Firm Profit (or Producer Surplus) + Consumer Surplus = Consumer Benefit - Cost = B - C = CS + PS

Measures

Chapter 4: Pricing Decisions

Bertrand Paradox

Assumptions

Supply

Market: two firms, A and B, that offer a homogeneous product. There are no limits to firm capacity. Cost: fixed cost = 0, marginal cost = c. Pricing and profits: free setting of prices and the profit for firm A is: π_a = (P_a - c) D_a(P_a, P_b).

Demand

Free consumer choice, fully homogeneous product, and consumers know all prices. The firm that offers the lower price gets all demand.

Nash Equilibrium

The Nash equilibrium under these assumptions is: P_a = P_b = c and π_a = π_b = 0.

Solution of the Bertrand Paradox

The central assumptions of the Bertrand paradox are not always valid. Each deviation from these assumptions can allow firms to realize positive profits. Key deviations include:

• Product

Differences Between Cost and Financial Accounting

Purpose

• Cost Accounting: To inform about the company's production process and internal efficiency.
• Financial Accounting: To represent transactions between the company and external parties by calculating assets, liabilities, and income.

Primary Users

• Cost Accounting: Internal users, such as company managers and directors.
• Financial Accounting: Primarily external users, such as banks, creditors, investors, and regulatory bodies.

Time Orientation

• Cost Accounting: Historical, but also heavily used for future planning, budgeting, and decision-making.
• Financial Accounting: Primarily historical, providing information about past events and performance.

Legal Mandate

• Cost Accounting: Generally not legally mandatory,