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

Group 1: Business Status

Challenge

Something that needs great mental or physical effort in order to be done successfully.

Booming

Increasing or becoming successful and producing a lot of money very quickly.

Disappointing

Not as good as you had hoped or expected; not satisfactory.

Hanging On

If you hang on, you manage to survive, achieve success, or avoid failure in spite of great difficulties or opposition.

Flourishing

Growing or developing successfully.

Thriving

Very successful and developing well.

In Decline

When something declines, it goes downhill.

Struggling

Unsuccessful but trying hard to succeed.

In Demand

Needed or wanted by many people.

Group 2: Idioms Describing Success and Failure

Bring the House Down

This is when people are very entertaining and cause...

Merger

A combination of two or more companies in which the resulting firm maintains the identity of the acquiring company.

Consolidation

The combination of two or more firms, generally of equal size and market power, to form an entirely new entity.

Portfolio Effect

Merger allows acquiring firms to enjoy potentially desirable portfolio effect:

• Achieves risk reduction while maintaining firm’s rate of return

Tax Loss Carry Forward

A loss that can be carried forward for a number of years to offset future taxable income and perhaps utilized by another firm in a merger.

Horizontal Integration

The acquisition of a competitor.

Vertical Integration

The acquisition of customers or suppliers by the company.

Synergy

The recognition that the whole may be equal to more...

Auditing

Checking and evaluating financial records.

Cash Flow

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Balance Sheet

A statement of the assets, liabilities, and capital of a business or other organization.

Bookkeepers

Individuals who record transactions in purchase ledgers and sales ledgers.

Income

The money a company receives from supplying goods or services.

Expenditure

The money that a company spends.

Fee

A charge for a service performed by a bank.

Premiums

Payments for an insurance policy.

Conglomerate

A multi-industry company. It is generally formed when one company expands by acquiring other firms.

Insurance

A method of protecting a person or firm against financial loss resulting from damage...

The Second Industrial Revolution (1870-1914)

Rapid Industrialization

The Second Industrial Revolution was characterized by rapid industrialization due to the increased importance of the financial sector in industry and the rise of finance capitalism.

Innovations and Changes Leading to Increased Production

Innovations and changes led to an increase in production, including:

• New sources of finance: Joint-stock companies, banks, and stock exchanges provided new ways to raise capital for businesses.
• New business structures: Cartels, trusts, and holding companies emerged to reduce competition and increase efficiency.
• New technological advances: Improvements in the Bessemer converter, the invention of dynamite, stainless steel, and artificial fibers revolutionized

Key Stakeholder Groups and Their Expectations

Understanding the needs and expectations of various stakeholder groups is crucial for business success. Here's a breakdown of major stakeholder groups and what they typically expect:

1. Owners and Investors

   Owners and investors have a financial or other interest in the organization. They generally seek high profits, dividends, long-term growth, and a positive corporate image.

   Example: An owner of company ABC expects a financial return on their investment.

2. Suppliers

   Companies often build strong relationships with suppliers. This fosters shared goals, visions, and strategies. Collaboration between buyers and sellers can deliver the best value to end customers, benefiting all partners.

   Example: Lulu Hypermarket,

Different Types of Businesses

Classification by Level of Activity

Primary activity: It takes all the natural resources and makes them more useful to consumers (e.g., timber).

Secondary activity: It takes the materials provided by primary industry and processes them in order to satisfy society’s needs (e.g., process minerals). However, there are companies that are supplied by other companies from the same sector, such as assembly-line companies. If a product’s demand decreased, it would cause a domino effect on other product’s demand (e.g., construction).

Tertiary activity: It provides all the services that industry and consumers demand, with the aim to satisfy directly consumer’s needs.

Classification by Size

Turnover, capital employed, number...

Debt and Equity Financing

Debt financing: This is when you borrow money from a bank or a financial institution, such as through bonds.

Equity financing: This is when you offer a portion of your company, such as stocks, in exchange for capital. You don't have to pay the money back, but you give up a portion of ownership.

• Bonds: Less risky with lower returns. The return of your money plus interest is guaranteed. Bonds are issued by companies, governments, etc. They are fixed-income securities, with the issuer being the borrower.
• Stocks: More risky with potentially higher returns. However, you assume the risk of the company not being successful.

Equity

• Additional paid-in capital: Capital that shareholders have contributed to the company above the nominal

Global Crisis Expansion

The U.S. crisis reverberated across Europe and the world. Capitalist prices plummeted, unemployment soared, and industry and international trade plunged.

The mechanisms for this crisis expansion were:

• Declining U.S. prices due to intense competition.
• Falling demand, reduced imports, and exports.
• Decreased investment and loans due to the stock market crash. U.S. capital repatriation spread the crisis.
• The collapse of world trade due to protectionist policies in the U.S. and other countries. International trade plummeted, affecting food-exporting countries in Latin America and Asia. Reduced income prevented loan repayments, further decreasing demand from industrialized nations. Japan and Latin America were also significantly

Oligopoly

An oligopoly refers to a market dominated by a small number of sellers offering similar products to a large number of buyers. These sellers can either collude to set prices, effectively acting as a monopoly, or compete against each other.

Collusive Oligopoly

In a collusive oligopoly, sellers cooperate to fix prices and allocate market share. This practice harms consumers through higher prices and reduced choice. Such collusion is often illegal and subject to penalties.

Price Leadership

One form of collusion involves price leadership, where a dominant firm sets prices, and other firms follow suit.

Non-Collusive Oligopoly

A non-collusive oligopoly occurs when sellers act independently and compete on factors like price and quality, benefiting...

Market Equilibrium and Its Variations

Market Equilibrium: Because the slopes of the demand and supply functions are contrary, there will be a point where they intersect. This point is called the equilibrium quantity. The market equilibrium price represents an agreement between buyers and sellers where the amount consumers want to purchase matches the amount that producers manage to sell.

Elasticity

Elasticity measures changes in quantities demanded or offered in relation to good prices, other good prices, other prices, or consumer income. It is a proportional ratio between the variation in the quantity and the proportional variation of the variable we want to compare it to.

• Demand Price Elasticity: A ratio that measures the relative changes in