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

Expected Value of Perfect Information (EVPI)

Expected Value of Perfect Information = Expected payoff with perfect information – Expected payoff without perfect information.

Expected payoff with Perfect Information: Create a new row in the payoff table which lists the best payoff for each state of nature. Determine the expected payoff of this row to obtain the expected payoff with perfect information.

Expected payoff without Perfect Information: The expected payoff of the best decision when you use the expected value approach (choose the alternative with the highest expected payoff).

Posterior Probabilities and EVSI

Posterior probabilities arise when you obtain additional testing or survey data (at some expense) to improve prior state probabilities....

Features of Ltd Companies

• Ownership: Usually small to medium-sized companies owned by a small group of people or family members.
• Capital: A share capital of usually £50,000.
• Investment: Private investors are attracted to issue shares.
• Transferability: Shares in Ltds cannot be sold without the authorization of other shareholders.
• Naming: Must include the suffix 'Ltd' after the company name.

Features of Plc Companies

• Capital Raising: Can raise huge amounts of capital by issuing shares to the general public.
• Liquidity: Once issued, shares are traded on the stock exchange, making them more attractive to investors as they are easier to offload.
• Administration: Higher administrative costs and a significant loss of privacy.
• Scrutiny: Under constant research

Arguments For and Against Protectionism

Infant Industries

For: Industries in their early stages of development are unlikely to experience large economies of scale, placing them at a disadvantage when competing with established foreign firms. However, some industries have the potential to become world-class. Thus, governments may need to support the growth of these young industries.

Against: Protectionist measures shield inefficient firms from foreign competition, reducing the motivation to improve productive efficiency. Moreover, it is difficult for governments to identify which industries have true potential, and protectionist measures often carry high opportunity costs and tend to become permanent.

Anti-Dumping Measures

For:

• Protects the stability

Economic Systems

The central problem of every economic society is to allocate resources by deciding what, how, and for whom to produce. These three questions are addressed differently in every economy. Economic systems are classified into three categories:

• The market economy
• The command economy
• The mixed economy

Market Economy

In a market economy, resource allocation is carried out exclusively by private individuals. All factors of production are privately owned and managed. There is no government intervention, and individuals are free to operate according to their own will and desire.

Key Characteristics

1. Price/Market Mechanism: Resources are allocated through changes in relative prices. Adam Smith referred to this as the “invisible hand” of the

The General Accounting Plan (PGC)

3.2—The General Accounting Plan (PGC) is a statute that regulates various aspects of business accounting and is mandatory for all companies, regardless of their legal form and size.

Mandatory Annual Accounts and Financial Statements

3.3—The annual accounts: Financial statements are to be produced compulsorily by incorporated companies at the end of each fiscal year in order to provide information on their financial and economic situation.

They are part of the annual accounts; every company is required to include four statements: balance sheet, profit and loss account, the statement of changes in net assets, and the notes (memory).

Essential Books of Account for Businesses

3.4—The books of account: For good...

Are Purchases Considered Operating Expenses?

Yes, purchases are operating expenses. An expense is the economic value of the resources that are used up or consumed in the operations of the reporting entity. The difference between assets and expenses is that assets produce future economic benefits, while an expense is the economic value of the resources that are used up or consumed. As assets are used by the entity, a portion of their value is considered an expense (depreciation, for example).

Understanding Asset Impairment

Asset impairment occurs when the sum of the expected cash flows from the assets is less than the book value of the asset. Accounting practices require that long-term assets be evaluated for impairment. If a reduction is made...

Spanish Financial Intermediaries: Banking vs. Non-Banking

Financial intermediaries in Spain are divided into two main categories: banking and non-banking.

• Banking Intermediaries: Their liabilities are accepted as a means of payment (i.e., money).
• Non-Banking Intermediaries: They issue financial assets that are not considered narrow money.

Banking Financial Intermediaries

These are institutions whose financial assets are considered a form of payment.

Bank of Spain (Banco de España)

As the central bank, the Bank of Spain has several key functions:

• It does not work directly with individuals.
• It provides funding to other banks and the public sector by purchasing public debt.
• It issues currency, as authorized by the European Central Bank (ECB).
• It executes

Differences Between Microeconomics and Macroeconomics

Macroeconomics

Macroeconomics studies the general economic situation of a country. It includes a comprehensive study of all economic sectors. Economists use macroeconomics as a tool to determine the current state of an economy.

Microeconomics

Microeconomics studies the behavior of individual economic agents, considering the decisions made to meet their specific targets.

Macroeconomic Indicators

Inflation

Inflation is the comprehensive and sustained increase in the general price level (NGP) of goods and services in an economy. If prices decrease, it is known as deflation.

• Negative effects: Harms individuals with fixed incomes and savers; benefits debtors while hurting creditors; reduces competitiveness.

Business Financing Sources

Financing sources: Companies need financial resources to carry out their activities and investments. These resources can be classified according to three criteria:

A) According to the time horizon of the financing

• Short-term sources: financing sources maturing within the year.
• Long-term sources: financing exceeding one year.

B) According to their origin: internal or external to the company

• Internal financing: undistributed profits (reserves), depreciation quotas and amortization.
• External financing: capital, loans and credits for the company's operations.

C) According to whether the funds come from owners or from outside the company

• Own financing: capital and reserves.
• External financing: loans, bank credits and all types of