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

Production: A Three-Point View

Production can be defined in several ways:

• Economic: The development of products from basic productive resources by companies, to be purchased or consumed by households.
• Technical perspective: A combination of elements, such as labor, raw materials, machinery, energy, and direction, based on monitoring and observation of procedures (technology) to obtain goods or services.
• Utility-function perspective: A process that adds value to things, creating useful goods; in other words, it adds value.

Productive Factors

To produce, a series of elements need to be combined:

• Natural Resources: Raw materials, supplies, and energy.
• Labor: The workforce or the time that workers dedicate to production/service.
• Capital: The set of necessary

Key Economic and Business Definitions

Tariff

A tax levied on the price of a product when it crosses the border into a country, with the objective of protecting domestic production from foreign competition. Thus, policies of market liberalization and those promoted by the World Trade Organization (WTO) tend to lower tariffs to stimulate free international trade.

Balance of Payments

Reflects all economic transactions made by a country with the rest of the world. This includes the trade balance, services, capital flows, and migrant remittances. This balance is often in deficit in Spain, and would be even more so without significant tourism income.

Balance of Trade

A crucial component of the balance of payments, it specifically includes the exports and... Continue reading "Essential Economic and Business Concepts" »

Types of Markets

Markets can be classified based on various criteria:

Based on Information and Transparency

A transparent market is one where agents are related and have all possible information. A market has friction when agents do not have all possible information.

Based on Goods Characteristics

A perfect market exists if the commodity traded is perfectly homogeneous. An imperfect market exists when the commodity is available in various models with different features.

Based on Player Power

A normal market is one where neither buyers nor sellers have the power to intervene in the market price. A forced market exists when they can act on the price.

Based on the Number of Participants

Markets can also be classified according to the number of buyers and... Continue reading "Economic Market Structures and Factors" »

The Origin of Money

The emergence of money is intrinsically linked to the concept of exchange. Money is widely accepted as a payment and collection tool, thereby acting as an intermediary in trade. In the earliest stages of human civilization, a subsistence economy prevailed, and money did not exist because there was no formalized exchange. However, once humans recognized the advantages of trade, they began to practice it.

From Barter to Modern Currency

Barter System

Barter was the first type of exchange, involving the direct trade of one object for another. This system became ineffective as trade became more generalized, leading to several significant problems:

• Difficulty finding someone who desired the specific item offered for exchange.
• Problems

Keynesian Economic Solutions

John Maynard Keynes argued that economic crises were not temporary and that recovery would not arise spontaneously if governments did not intervene. He posited that the core economic problem was a lack of demand, which preceded a fall in investment. Consequently, entrepreneurs lacked the incentive to increase production and employment.

Keynes proposed that the state should increase public spending (e.g., public works). The state would generate a spending deficit, but as the state spent, demand increased. This increase was not only by the amount of expenses incurred but also amplified through a Keynesian multiplier effect. This initial outlay, processed through wages and goods, created new demands in other sectors.... Continue reading "Keynesian Economics and the New Deal: Crisis to Recovery" »

Key System: Mixed Economy

• Inequality in the initial allocation of property
• Collective basic needs
• Natural monopolies

MARKET FAILURES:

• Cycle (the market cycle is critical, not growing)
• Externalities (effects outside a company)
• Public goods (the market has great agility to respond to the demand for private goods, but cannot provide the amount of public goods needed)
• Lack of competition (monopoly)
• Equity (the market generates a very uneven income distribution)

Cycle:

Boom, Recession, Depression, Recovery

Or Neo-Monetarists	Neo-Keynesians
Heirs to the tradition of liberalism They claim the full autonomy of the market The state should limit itself to ensuring a free market and controlling the amount of money and inflation. They criticize the weight of the state

... Continue reading "Understanding Mixed Economy and Market Failures" »

Business Concentrations and Market Structures

Vertical and Horizontal Mergers

Business concentrations are classified as vertical when they involve enterprises operating in distinct phases of the production process. Conversely, a horizontal merger brings together companies that are in the same phase of a productive process.

Holding Companies: Structure and Acquisition

The term Holding Company is used to designate business concentrations that arise from the acquisition of most of the shares by a parent company.

Market Failures, Public Goods, and Factor Markets

Understanding Market Failures and Public Goods

Market failures, on the one hand, cause cyclical crises and, on the other, produce unequal distribution. Additionally, certain situations, known... Continue reading "Business Economics: Market Structures and Factor Dynamics" »

Families and Households in the Economy

Families or households are primarily responsible for consumption. They make decisions about which consumer goods and services to choose to satisfy their needs. Their ability to spend depends on their income.

The circular flow of income describes the continuous flow of payments for goods and services between households, companies, and the public sector.

The Role of the Public Sector

The public sector consists of various public authorities operating at typically three levels of government:

• Local government: City councils and provincial bodies.
• Regional government: Autonomous regional administrations.
• Central administration: National government, ministries, etc.

The public sector uses several instruments to conduct... Continue reading "Economic Fundamentals: Families, Government, and Systems" »

Understanding Key Economic Concepts

Income Elasticity of Demand

Income elasticity of demand describes the direct proportional relationship between income and demand. Generally, as income increases, demand increases, and vice versa.

There are at least three types of goods based on income elasticity:

• Normal Goods: Demand (D) evolves directly proportional to income (I). (E_y > 0)
• Neutral Goods: Demand remains constant as income changes. (E_y = 0)
• Inferior Goods: Demand evolves inversely with respect to income. (E_y < 0)

Market Analysis: Equilibrium & Surplus

Mathematics for Market Analysis

To determine market equilibrium, the supply and demand functions are matched to find the equilibrium price and quantity.

Consumer Surplus

Consumer surplus represents... Continue reading "Essential Economic Concepts: Market Dynamics & State Intervention" »

Distribution: Key to ensuring products reach consumers effectively. Product Processes: Saving the product: Products aren't always sold whole; modifications can reduce storage costs. Physical Distribution: Ensures clients receive products in perfect condition. Billing and Collection: Essential for the sales process. Distribution Strategy: Three alternatives exist based on the number of intermediaries: Exclusive distribution: Sales through a single intermediary. Selective distribution: Choosing a specific number of distributors. Intensive distribution: Manufacturer aims for widespread availability across many outlets. Promotion: Aims to increase sales by highlighting product benefits. Advertising: Transmitting messages via media to inform and... Continue reading "Marketing Strategies: Distribution, Promotion, and Quality Management" »