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

Keynesian Response to Economic Crisis

In response to those who insisted on a downward adjustment of wages to increase production, Keynes argued this approach was flawed. He believed that recovery would not occur without government action.

The Role of Government Spending

Keynes argued that the main problem of the economy was the lack of demand stemming from declining investment. He proposed that the state increase spending on activities that employ many workers.

This would generate a deficit, but Keynes argued this was not a problem because increased demand would stimulate the economy. The initial spending, transformed into wages and goods, would create new demand in other sectors (the Keynesian multiplier).

The Keynesian Multiplier

Through the expansion...

Industrial Production Growth Analysis

Developments in Industry

Stress Analysis of Industrial Production Growth from 3 Aspects:

• Respect to the Overall Economy
• Regarding Environmental Factors
• Domestic Demand Considerations

Since 1985, the contribution of the industry to economic growth has significantly decreased, reflected in its reduced participation in the Gross Value Added (GVA) at current prices concerning employment (see Table 2, p. 168). From this perspective, the industry no longer plays the central role in Spain's economic development that it did in the 1960s, when its presence in GDP increased significantly, consolidating the industrialization process in Spain.

However, this does not mean that the Spanish economy is experiencing deindustrialization,...

Elements Involved in Economic Activity

We assume that our economy is a mixed system. A country's economy interacts with other countries, leading to exports and imports. With these assumptions, the elements are:

• Families and consumers
• Companies and producers of goods and services
• Government
• Non-governmental organizations (NGOs) or non-profit institutions
• The rest of the world, which has commercial relations

These interactions produce a cycle with a series of activities that lead to cash flows and real flows. Real flows occur when property is transferred; money flows occur when money is handled. This activity should be quantified (i.e., expressed in monetary units), which we call accounting. This accounting is necessary to:

• Determine the level of development

317 A slide along the same curve occurs when the quantity demanded changes as a result of a change in the price of that commodity. The shift occurs because any other factor varies.

318 Increase in the price of a good substitute; declining price of complementary goods, income growth (if it is a normal good), low income (if it is an inferior good), increased the public's preferences for that good.

319 Lowering the price of a good replacement, increased the price of complementary goods, income growth (if it is an inferior good), low income (if it is a normal good), drop in public preferences for that good.

361 A surplus is one in which, for a given price, the quantity supplied exceeds the quantity demanded. It is corrected when the producers, unable...

Wage Unit-VI

Wage means the compensation, whatever its denomination or method of calculation, that can be assessed in cash. It is payable by an employer to an employee for services or work already performed or to be performed, in accordance with the contract of employment. It is stipulated freely but may not be less than the minimum set according to the requirements of the law. For work of equal value, of the same nature or not, duration, and effectiveness, equal compensation shall correspond.

• Overtime work will be paid with 50% at least on the agreed salary for the ordinary workday.
• Night work will be paid with 30% of the regular wage set for work by day.
• Overtime at night will be paid a premium of 100% of the regular hourly wage.
• Hours worked

Classification by Legal Form

All companies must have a legal form, which is determined, among other things, by the number of people involved in creating it, by the capital provided, and by the size. We can distinguish:

1. Sole Trader: When the owner of the company is the only person who assumes all risk and is responsible for managing the business.
2. Companies (Societies): Where people decide to invest in a company, they may form a society. At present in Spain, the following types of companies exist:
   • Sociedad Anónima (S.A.)
   • Sociedad Anónima Laboral (S.A.L.)
   • Sociedad de Responsabilidad Limitada (S.L.)
   • Sociedad Cooperativa de Responsabilidad Limitada
   • Sociedad Colectiva
   • Sociedad Comanditaria
   • Regular Venture Contract Accounts

Classification by Activity Sector

Economic...

Comparison of Legal Forms

Sole Trader

Basic Features:

• No required minimum capital.
• Unlimited liability.
• Pays income tax.
• The employer has total control of the company.

Advantages:

• It's a perfect business form for the operation of small-sized companies.
• The employer has complete freedom of choice and total control of the company, as they do not need to agree with any partner.
• This form requires the fewest steps and procedures to carry out activities since there is no process to acquire legal personality.
• There is no minimum capital for start-up.
• It can provide tax credits to pay income tax, meaning that a progressive rate applies that increases as profits rise. In contrast, corporations have to pay a fixed tax rate of 25% or 30%. This means that companies

Key Factors for Business Location

When choosing a location for your business, consider these essential factors:

• Location:
  • Market demand: Analyze the interest in your product at the desired location. This includes assessing potential consumer response, competition, and other relevant market factors.
  • Supply of raw materials: Evaluate the quality and cost of materials.
  • Communication and transportation: Ensure easy access to the site and good communication for both customers and suppliers.
  • Utilities: Verify the availability and cost of electricity, water, and telephone services.
  • Construction and land costs: Note that these costs can vary significantly between areas.
  • Legislation: Understand the legal rules and restrictions, including tax, commercial, social,

Types of Competition in Distribution Channels

Understanding the dynamics of competition is crucial for effective channel management.

1. Horizontal Competition

Intratypic Horizontal Competition

Opposes intermediaries of the same kind operating on the same level of the network.

Intertypic Horizontal Competition

Opposes intermediaries at the same level in a network, but with differences in the sales formula adopted. This can translate into differences in stock, choice, and pre-sale services.

2. Vertical Competition

Involves agents located at different levels of the distribution network, exercising intermediate or higher functions in the previous net. Example: Retailers performing wholesale functions.

3. Competition Between Distribution Networks

Entire networks...

Understanding Trade Balance and Market Dynamics

This section explores the fundamental concepts of international trade, focusing on who benefits and who loses when countries engage in trade.

Market Equilibrium Without International Trade

Consider a scenario where a country's steel market is isolated from the rest of the world. In this hypothetical situation:

• No one in this country can import or export steel.
• The steel market operates solely at a local level.
• The accompanying figures illustrate the market balance in the absence of international trade.

The sum of consumer surplus and producer surplus measures the total welfare for buyers and sellers in this isolated market.

Comparative Advantage and Trade Patterns

A country's participation in international...