Notes, summaries, assignments, exams, and problems for Economics

Economic Profits

Economic profits are calculated as total revenue (TR) minus accounting (explicit) costs and implicit costs.

Economic costs = accounting (explicit) costs - implicit costs.

In managerial economics, the term "costs" refers to economic costs, and the term "profits" refers to economic profits.

Baumol's Sales Revenue Maximizing Model in Practice

Large firms have research units that develop new product ideas or production techniques. The application of these projects is spread over time to avoid wide swings in the firm's economic performance. Baumol seems to imply that the risk-avoidance and the desire for steady growth of large corporations secure 'orderly markets,' in the sense that they have stabilizing effects on the economy.

O. Williamson'

Key Business Concepts

Economic Factors

Differentiating factor: Price can be a decisive factor for a product. For example, a cafeteria can be oriented based on price, class, or other demographics.

Practical Factors

Practical factors, such as comfort and confidence, can influence purchase decisions. An example of this is home delivery.

Aesthetic Factors

Aesthetic factors, like an attractive package, color, and size, can appeal to customers.

Technical Factors

Consider what unique features your product offers compared to others.

Psychological Factors

Psychological factors relate to social status and fashion.

Product

A product is anything offered for consumption in the market.

Product Levels

• Basic: The core need the consumer expects to satisfy.
• Formal: Something

Direct and Indirect Methods for Company Valuation

In recent years, company acquisitions and mergers have significantly increased, making it crucial to find effective valuation methods. These methods provide insights into a company's true market value. The approach to valuation depends on the motives, objectives, and reasons behind the assessment. There are simple methods, which use a single endpoint, and composite methods, which combine several criteria. Composite methods include direct (Anglo-Saxon) and indirect (practical) approaches. These methods aim to determine a company's value by combining different criteria, often drawing from experience. They consider intangible assets, such as goodwill, which reflects the company's market appreciation,...

Distribution Strategies

Intensive Distribution

Producers of convenience products and common raw materials typically seek intensive distribution—a strategy in which they stock their products in as many outlets as possible. These goods must be available where and when consumers want them. For example, toothpaste, candy, and other similar items are sold in millions of outlets to provide maximum brand exposure and consumer convenience. Procter & Gamble, Coca-Cola, and other consumer goods companies distribute their products in this way.

Exclusive Distribution

By contrast, some producers purposely limit the number of intermediaries handling their products. The extreme form of this practice is exclusive distribution, in which the producer gives...

Explain the differences and concerns with performance measures

Different types of Performance Measures. 2 types of measures:

• Objective Measures: quantitative and based on counts of behaviors or outcomes. Ex: number of students in a class, multiple choice exam.
• Subjective Measures: qualitative and based on judgments from raters.

Explain the value of using multiple sources for performance appraisal ratings

Common Problems with Performance Measures (1/2) Rater Errors. Rating errors occur when:

1. Raters provide assessments that follow an undesirable pattern.
2. The rater does not properly account for factors that might influence assessments.

A common error is central tendency error, which is the pattern of placing almost everyone in the middle of the scale....

Business Objectives

• Business Survival
• Profit
• Returns to Shareholders
• Growth of the Business
• Market Share
• Service to the Community

Objectives of Public Sector Organizations

• Financial: Meet profit targets set by the government.
• Service: Provide service to the community and meet quality targets set by the government.
• Social: Create employment.

Stakeholder Groups

• Owners
• Government
• Community
• Customers
• Managers
• Banks
• Workers

Stages of Economic Activity

• Primary: Extraction of Earth's natural resources.
• Secondary: Manufacturing of primary resources.
• Tertiary: Providing a service.

Business Growth

Internal growth or external growth (takeover or a merger with another business):

• Horizontal Integration: When one firm merges with or takes over another one in the same industry at

1.4) Economic Development under Franco (1939-1959)

1.4.1) Self-Sufficiency & Liberalization (to 1959)

Until 1959, the Spanish economy was marked by stagnation and a focus on agriculture. The 1959 Stabilization Plan initiated economic expansion.

a) Autarky, Stagnation, and Rationing (1939-1951)

Economic policy aimed for self-sufficiency. The primary goal was to prevent famine.

• Agricultural Policy: Focused on production recovery and returning expropriated land.
• Industrial Policy: The 1941 National Institute of Industry aimed to boost basic industries, hindered by resource and equipment shortages.

Autarky and interventionism led to:

• Emphasis on light industry over basic industry.
• Increased monopolies.
• Significant state investment.

b) Beginning of Liberalization

Market Structures

Perfect Competition: many buyers & sellers of a standard product & easy entrance & exit (ex: oranges)

Monopolistic Competition: many buyers & sellers of slightly differentiated products & easy entrance & exit (fast food)

Oligopoly: few businesses and entry to industry is restricted (cars & cellphones)

Monopoly: one business supplies a product w/ no close substitutes (debeers diamonds)

Key Concepts

Entry Barriers: increasing returns to scale, market experience, restricted ownership of resources, legal obstacles, market abuses, advertising

Market Power: a business's ability to affect the price of the product it sells

Revenue

Average Revenue: the extra total revenue earned from an additional unit of output...

Human Resource Management (HRM)

Core Functions of HRM

Staffing

The staffing process ensures an organization has the right number of employees with the appropriate skills in the right jobs at the right time. It involves:

• Job analysis: Determining the skills, duties, and knowledge required for jobs.
• Human resource planning
• Recruitment: Attracting qualified candidates.
• Selection: Choosing the best candidate for the position.

Performance Management

Performance management is a goal-oriented process that maximizes employee, team, and organizational productivity.

Human Resource Development

This function encompasses:

• Training and development
• Career planning and development
• Organization development
• Performance management and appraisal

Compensation

Compensation provides...

Effective Segmentation

MEASURABLE: The size, purchasing power, and profiles of the segments can be measured.

ACCESSIBLE: The market segments can be effectively reached and served.

SUBSTANTIAL: The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.

DIFFERENTIABLE: The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.

ACTIONABLE: Effective programs can be designed for attracting and serving the segments.

Important:

The difference delivers a highly valued benefit to target buyers.

Differences to Promote

DISTINCTIVE: Competitors do not offer the difference, or the company can...