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

Economic Rationality

Economic rationality assumes that households and businesses use their scarce resources to maximize their own utility or profit, respectively. It is used to model economics to explain and predict the behavior of economic agents.

Households

Function: Consumer target

Objective: Maximize their own welfare by choosing goods that satisfy them according to their preferences and their limited budget.

Businesses

Function: Production

Objective: Maximize profits through effective utilization of available resources to produce goods and services as profitably as possible.

Public Sector

Function: Regulation system

Objective: Maximize the general welfare by using available resources to produce required public goods and services and reducing inequalities....

Inventory Management and Internal Control

Inventory means the sum of those items of tangible property which:

• Are available for sale in an ordinary commercial transaction.
• Are in the process of production for such sales.
• Are available for current consumption in the production of goods or services available for sale.

Internal Control

Successful companies are very careful to protect their inventories. The elements of good internal control of inventories include:

1. Physical inventory count at least once a year, no matter what system is used.
2. Maintenance of efficient purchasing, receiving, and shipping procedures.
3. Storage of inventory to protect against theft, damage, or decomposition.
4. Permitting access only to authorized personnel.
5. Personnel with inventory

Assets (EP): This represents the set of assets, rights, and obligations that a business (PRMS) possesses. Assets are properly rated based on their order (k).

Masses (MP): This refers to the classification of heritage assets into groups or masses (k) of homogeneous elements. These elements are grouped and ordered based on their availability and enforceability.

Non-Current Assets: This category includes heritage elements linked to the business for more than one fiscal year. It contains the following masses:

• Intangible Assets: These are assets that the business needs for production but lack physical form.
• Tangible Assets: This includes all physical assets and corporeal property that the business uses in its activities for productive periods.
• Long-Term

What is Economics?

Economics is the social science that studies how societies organize and combine limited resources to meet unlimited needs and wants, and how alternatives are chosen.

Understanding the Production Possibilities Frontier (PPF)

The Production Possibilities Frontier (PPF) is a graph that illustrates the various combinations of two products that an economy can produce, given its available factors of production and existing technology.

Efficient Production on the PPF

To produce efficiently, a company's output should be at points on the Production Possibilities Frontier (PPF). These points represent the maximum production levels achievable with the given economic resources. Interior points within the curve represent production levels...

Understanding Financial Reserves: Classification and Types

Financial reserves, depending on their nature and purpose, can be broadly classified into two main categories:

Free Reserves

• Free Reserves: These reserves do not have a specific established purpose and can be used as deemed appropriate by the company.

Unavailable Reserves

• Unavailable Reserves: These reserves are earmarked for a particular purpose and cannot be used for other objectives.

Specific Types of Reserves:

Share Premium Reserve (Account 110)

This reserve collects the excess contributions from partners on the RCV at the time of creation or extension. It should be integrated and disbursed. It is an unrestricted reserve.

Equity Instrument Reserves (Account 111)

This is a component of equity...

Tema.la Commercial Function

Analysis of the Trading System

The Market

Marketing occurs when individuals or companies desire a product or service and have the economic capacity to satisfy that need. We can distinguish between:

• Consumer Market:
  • Difficult to quantify potential consumers.
  • Purchases meet subjective needs.
  • Prices are determined by the market.
  • Small volume transactions.
  • Manufacturing based on market demand.
• Industrial Market:
  • Easy to quantify due to planned dimensions.
  • Prices are negotiated.
  • Large volume purchases.
  • Manufacturing based on demand and consumer behavior.

Demand

Demand encompasses all activities and organizations involved when individuals seek, evaluate, use, and dispose of goods or services to meet their needs. These activities are:

• Complex
• Vary

Key Characteristics of Accounting Information

Accounting information must be presented publicly with priority, and be:

1. Significant: True, accurate, and clear.
2. Complete.
3. Economical: Benefits should outweigh the costs.
4. Timely: This relates to the principle of realization.

Financial Statements

• Balance Sheet: Presents the financial situation.
• Income Statement: Presents results, with expenditures detailed by function (abridged or detailed).
• Cash Flow Statement: Shows cash inflows and outflows.
• Statement of Changes in Equity: Details changes in equity.
• Notes to the Financial Statements: Provide additional explanations.

Users of Accounting Information

1. Internal Users: Managers, employees.
2. External Users: Tax authorities, banks, municipalities, customers, suppliers.

What is a financial statement?

It is a document intended to provide information about a company's financial situation to support decision-making.

What is the financial situation of a company?

It reflects the company's performance based on its operations up to a specific date or period, as shown in its financial statements.

How are financial position and income statements linked?

The primary link is the net profit or loss for the period, calculated on the income statement, which impacts the equity section of the statement of financial position (balance sheet).

What are common financial statements?

Common financial statements include:

• Income Statement (or Profit and Loss Statement)
• Statement of Financial Position (or Balance Sheet)
• Statement of Cash Flows
• Statement

Market Failures:
The fact that each person acts in their own self-interest has negative consequences, such as social inequality and the dominance of certain companies. These negative effects are called market failures. A market failure is a negative consequence of market function that leads to inefficient resource allocation.
In short, the main market failures are:

• Instability of economic cycles
• Existence of public goods
• Externalities
• Imperfect competition
• Unequal distribution of income

Instability of Economic Cycles:
Economic cycles are fluctuations between expansion and recession phases of economic activity.
Cyclical instability is the most important market failure because it directly affects the quantity and quality of jobs in a country. During a...

Accounting Schools

School Contista (France): Edmond Desgranges - Accounting in 5 accounts.

Personalist School: Giuseppe Cerboni - Personification of accounts, legalistic approach.

Materialist School: Fabio Besta - Economic approach to accounting.

French Doctrine: Dumarchay - Theory of account values. Two accounts: integral and differential.

German School: Schmalenbach - Dynamic theory of balance. Schneider - Outlined the circulation of securities in the company, external and internal environments.

Accounting Interpretations

Legal: Cerboni - Guarantee against third parties.

Economic: Schmalenbach.

Formal: Schneider; Culminates with Mattessich.

Accounting: Empirical science with respect to an economic unit. The knowledge allows qualitative and quantitative...