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

Market Mechanics and Types

Market

Market: It is the means by which people or groups who wish to acquire a given good (demand) contact others who want to sell it (suppliers) (price). For there to be a market there must be a free market, private ownership of property, the factors of production must be recognized, and there should be laws governing bills of sale and other economic transactions.

What? It produces what people demand.

How? Producing as efficiently as possible, looking at savings in production costs.

Who? For those who can afford it.

Ask and Bid

Ask: Indicates how much of a good or service consumers would be willing to buy at every price level, holding constant the other factors that affect this desire: the price of the good, the prices...

Economic and Accounting Costs

Accounting cost is the actual cost plus expenses of depreciation of capital equipment. Economic cost is the cost for a company that utilizes financial resources in production, including the opportunity cost.

Opportunity Cost

Opportunity cost is the cost of the opportunity lost by not utilizing the company's resources for an alternative of greater value. Both accountants and economists include the cost of real money, known as cash flows, in their calculations. These include:

• Salaries and wages
• Cost of raw materials
• Leases of real property

Sunk Costs

A sunk cost is a cost that has already been incurred and cannot be recovered. They are usually visible, but once they have been spent, they should always be left aside when...

MRP II: Manufacturing Resource Planning

MRP II plans and oversees all the resources of a manufacturing company: manufacturing, marketing, finance, and engineering.

Objective of Production Control Analysis

To analyze the organizational activity of production control and its approach as a system.

Production Control Scope

Controls the product since it is required until delivery to the customer.

Systemic View Objective

To see the company as a whole system, including the material supply chain and information flow from supplier to end customer.

Importance of Asset Generation

Important: Generating productive assets at a cost requires coordinating and scheduling their activities so that production processes are efficient and resources are used to the maximum....

Market Positioning Strategy

We must first conduct market research to determine which strategies will effectively position the company within the market. Positioning is defined as the perception consumers have regarding the attributes of our product in relation to competing brands or ideals.

The Positioning Process

To successfully position a product, follow this process:

• Identify existing segments and the placement of competitor products.
• Analyze direct competitors.
• Establish criteria for determining the market position.
• Analyze and evaluate how consumers perceive the company versus the competition.
• Create a graphical representation of the company and competitors using a positioning map.
• Determine the strategic positioning of the company.

Brand Identity

Chapter 1: What Is Strategy?

Strategy is a set of goal-directed actions that a firm takes to gain and sustain superior performance relative to competitors. Strategies are:

• Long-term oriented (versus tactics)
• Difficult and costly to reverse
• Not a zero-sum game
• Win-win scenarios ("co-opetition": collaborative efforts among competitors for mutual gain; expanding the pie)
• Requiring trade-offs for strategic positioning

A good strategy is based on three elements:

1. A diagnosis of the competitive challenge (analysis of the firm’s internal and external environments).
2. A guiding policy to address the competitive challenge (formulation; results in corporate, business, and functional strategy).
3. A set of coherent actions to implement the firm’s guiding policy.

Competitive

Concepts and Principles

Primary Objective of SME Financial Statements

What is the primary objective of financial statements of SMEs? To provide information about the financial position, performance, and cash flows of the entity that is useful for economic decision-making by a broad range of users who are not in a position to demand reports tailored to meet their particular information needs.

Qualitative Characteristic: Reliability

What does the qualitative characteristic “reliability” mean? Information presented in financial statements should be free from material error and bias and ensure a faithful representation of the economic phenomenon.

True Statements About Financial Position

Which of the following statements are true?

• The financial position

Modern Currency Trading

Currency trading began in 1980, with transactions now averaging over $3 trillion a day. New financial instruments have emerged, including:

• Derivatives: Options against the future
• Sovereign wealth funds
• Offshore financial centers

The 1990s Asian Financial Crisis

In 1997, speculation drove up the Thai baht. Attempts to protect its value caused investors to flee, leading to a 20% drop in value. The crisis spread to Malaysia, the Philippines, Indonesia, Singapore, and South Korea.

As countries were unable to quickly adjust to rapid capital withdrawal:

• Exchange rates plummeted 50%
• Stocks fell 80%
• Real GDP dropped 4–8%

The International Monetary Fund (IMF) responded with large, controversial bailout packages featuring lengthy conditions...

The Three Indispensable Roles of the State

But that didn’t mean that the state is unimportant for Smith. He saw that it performed three indispensable roles in the commercial stage of society:

• First, the state should provide defense of the territory in order for perfect liberty to be exercised.
• Second, the state must uphold the rule of law. Without secure property rights over the use and disposal of goods and capital, the market cannot function. To cap the interest rate was very important. He realized that if the reward was too big, investors would forget the risk. But with the rate capped, people will take reasonable risks.
• Third, the state should provide certain “public goods” that it may never be profitable for individuals to produce privately.

Market Segmentation Bases

Geographic Segmentation

Where is the segment or market located? This may be split by country, region, city/rural, or climate.

Demographic Segmentation

Demographics include age, gender, income, family life cycle/stage, race, and religion. It is important to think about the number of elderly people or children within a specific segment or market.

Psychographic Segmentation

This looks at lifestyle, social class, and personality. For example, personality is reflected in certain types of behavior. One example is the tendency to haggle; haggling in a country such as Turkey is almost a national pastime.

Behavioural Segmentation

This category looks at occasions, benefits, usage, and user status. Consider religious or cultural festivals,...

Accounting Notes

Profitability Ratios

These measures indicate how much profit a business has generated. When analyzing these, always compare figures over time to determine growth or decline.

• Gross Profit (GP) %: Measures the amount of GP made on sales. Analyze whether the figure has increased or decreased and explain the impact on the business. Consider factors like the quantity of sales, bulk purchasing, and supplier relationships.
• Operating Profit (OP) %: Measures the amount of OP made on sales after deducting administration and distribution expenses. An increase is a positive sign of expense control, while a decrease suggests rising costs.
• Return on Capital Employed (ROCE) %: Evaluates the success of a business in generating satisfactory profit