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

EXAM REVIEW 2

Chapter 12

• A country’s standard of living depends on its ability to produce goods and services. Its ability depends on PRODUCTIVITY.
• Y = real GDP = quantity of output produced L = quantity of labor so productivity = Y/L (output per worker)
• Real GDP per capita: Y/Population
• What determines PRODUCTIVITY?

1. Physical Capital per Worker:

1. What is Physical capital? The stock of equipment and structures used to produce goods and services is called [physical] capital, denoted K.
2. Productivity is higher when the average worker has more capital (machines, equipment, etc.).

1. Human Capital per Worker (H):

1. What is Human Capital? The knowledge and skills workers acquire through education, training, and experience
2. Productivity is higher when the average worker

The cash inflows (collections) and outflows (disbursements) are not perfectly synchronized, and some level of cash holdings is necessary to serve as a buffer. Perfect liquidity is the characteristic of cash that allows it to satisfy the transactions motive.

Determining the Target Cash Balance

The target cash balance involves a trade-off between the opportunity costs of holding too much cash (lost interest) and the trading costs of holding too little. If a firm tries to keep its cash holdings too low, it will find itself selling marketable securities more frequently than if the cash balance were higher. The trading costs will tend to fall as the cash balance becomes larger. The opportunity costs of holding cash rise as the cash holdings rise.

Investing

The organizational structure is the framework of hierarchy, relationships, responsibilities, and information flow within a firm. It is shaped by several factors, including company size, international orientation, the number and consistency of product lines, and expansion plans.

Defining Organizational Structure

Dimensions of Activity and Responsibility

• Horizontal: Focuses on the division of *activities*.
• Vertical: Pertains to *authority* and *hierarchical relations*.

Key Organizational Structures for International Operations

Functional Structure

A functional structure groups each portion of the organization according to its purpose, such as a marketing department, a sales department, or a production department.

Export Department

Companies typically...

Adam Smith's Core Economic Principles

Adam Smith was a Scottish economist during the 18^th century. In 1776, he published his most influential book, The Wealth of Nations, where he made the first comprehensive examination of the emerging market capitalist system. He laid the foundations of classical free-market economic theory and developed the concept of division of labor. Smith explained how rational self-interest and competition can lead to economic prosperity.

Elements of Commercial Society

Adam Smith addressed two fundamental economic questions: the growth of wealth and its distribution. He provided an analysis of the relationship between three key elements of commercial society:

• Factors of production
• The market
• The state

From this framework,...

Differences Between Products and Services and Marketing Plan Considerations

What are the major differences between products and services, and how must these differences be taken into consideration when preparing your marketing plan?

The Four Key Differences Between Products and Services

1. Intangibility

• While products are tangible, services are intangible (they cannot be touched or tested before purchase).
• Buyers look for evidence of quality by drawing inferences from the place, people, equipment, communication material, symbols, and price.
• Service marketers must transform intangible services into concrete benefits. This requires choosing strong brand elements (logos, symbols, characters, and slogans).
• All aspects of the service delivery process can

Alternative Business Financing

Alternative business financing has become an issue of great importance in the wake of the recent financial crisis. The crisis led to a reduction in bank credit for companies, which has allowed alternative forms of financing to emerge. Alternative financing is used to finance companies and individuals beyond banks. It is particularly attractive for SMEs and individuals.

In the past, in Spain, the sources of funding were basically from banks, with easy access and fast processing. Thanks to these facilities and good interest rates, bank financing was consolidated over other loans. As a consequence, before the beginning of the crisis, we found a situation where the weight of bank financing was predominant.

With the outbreak...

Dimensions of Corporate Social Responsibility

Philanthropic (Good Citizen)

Ethical (Be Ethical, Right from Wrong)

Legal (Obey the Law)

Economic (Be Profitable)

5 Barriers to Sustainable Consumer Behavior

• Lack of Awareness & Knowledge
• Negative Perceptions
• Distrust
• High Prices
• Low Availability

Measuring Brand Equity

Contributes to positive perceptions of product quality

Qualitative (Free Association/Projective Techniques)

Quantitative (Brand Recognition Research/Brand Recall)

4 Dimensions of BrandAsset Valuator

Differentiation (Brand's Point of Difference)

Relevance (Brand Relates to You)

Esteem (How Well Regarded the Brand Is)

Knowledge (Understanding of the Brand)

Role of Social Media in Branding

• Brand Advocates/Sharing Info/Seeing Discounts/Customer Services
• Allows

Segmenting Business Markets

Business buyers can be segmented geographically, demographically or by benefits sought, user status, usage rate and loyal status. Almost every company serves at least some business markets. (Ex. Starbucks has developed marketing programs for coffees and for food).

Segmenting International Markets

Few companies have the resources to operate in all, or even most of the countries of the world. Some large companies, sell products in more than 200 countries, but most international firms focus on a smaller set of countries. Different countries, can vary greatly in their economic, cultural and political make up. Companies can segment international markets using one or a combination of several variables. They can segment by:...

Professional Personality Traits

Understanding key adjectives used to describe professional characteristics is essential for effective business communication.

Defining Key Personality Adjectives

Sociable

Likes to spend time with other people.

Ambitious

Wants to reach the top in their career.

Creative

Has a lot of new ideas.

Reliable

Does what they promise to do.

Relaxed

Is usually calm.

Hard-working

Spends a lot of time doing a good job.

Punctual

Likes to be on time.

Motivating

Encourages other people to work well.

Helpful

Is good at making things work.

Practical

Likes to do things for other people.

Applying Personality Traits: Maria's Profile

Maria is good in a team and she gets on well with her colleagues. She is extremely sociable. She is never late for meetings—she...