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

Understanding GST: Meaning and Purpose

GST (Goods and Services Tax) is a comprehensive, destination-based indirect tax introduced in India on 1 July 2017. It replaced multiple indirect taxes levied by the Central and State Governments, creating a unified national market. GST is charged on the supply of goods and services and is ultimately borne by the final consumer.

Meaning of GST

GST is a value-added tax levied on the supply of goods and services at each stage of the supply chain. Through the Input Tax Credit (ITC) mechanism, tax paid at earlier stages can be adjusted against tax liability at later stages, effectively eliminating the cascading effect of taxation.

The Need for GST

Before GST, India operated under a complex indirect tax system consisting... Continue reading "GST in India: Meaning, Objectives, and Tax Structure" »

What is a Firm?

Let us now try to understand the meaning of a 'firm'. A firm is a focal point of the production system of any country. A firm produces goods with the help of its own resources. Sometimes these resources are borrowed from outside, and they are paid remuneration (price) for using them, for example, land, labor, capital, etc. A firm is an organizational unit, while a plant is a 'technical unit'. The objective of a firm in organizing such factors of production is to maximize profit. In other words, profit is the main objective of a firm. Any decision of a firm is taken in accordance with this objective.

Two Views of a Firm in Business Economics

In business economics, a firm is considered in two ways:

1. From the theoretical point of view.

Balance Sheet Assets

Total Assets = Non-current assets + Current assets

• Net non-current assets = Gross asset + Accumulated amortization
• Gross asset = Gross asset (past year) + Capex
• Accumulated amortization = Gross asset * Cost of debt
• Current assets = Customer receivables + Inventory + VAT recoverable + Total cash
• Customer receivables = (Revenue / 12) * Average receivable periods (months) * (1 + VAT rate)
• Inventory = (Average supplier periods (days) * (Quantity (B) * Unit cost sale (B) + Quantity (A) * Unit cost sale (A))) / 360
• VAT recoverable = If Output VAT – Input VAT < 0; then Output VAT – Input VAT
• Total cash = Operating cash + Non-operating cash
  • Operating cash = Provided in statement
  • Non-operating cash = Past year + FCe

Balance Sheet Equity

Understanding Political Economy

Political economy applies economic principles to the analysis of political decision-making.

Public Goods & Direct Democracy

Economists have studied several methods for choosing levels of public goods in a direct democracy.

Lindahl Pricing & Preference Revelation

Lindahl pricing results in a unanimous decision to provide an efficient quantity of public goods, but relies on honest revelation of preferences.

Majority Voting Challenges

Majority voting may lead to inconsistent decisions regarding public goods if some people's preferences are not single-peaked.

Logrolling: Trading Votes

Logrolling allows voters to express the intensity of their preferences by trading votes. However, minority gains may come at the expense... Continue reading "Political Economy: Government Decisions & Public Policy" »

Net Present Value and Cash Flows

The Net Present Value (NPV) formula is the sum of cash flows discounted by appropriate interest rates in future time periods. Free Cash Flows (FCF) are not simply profit, as non-cash assets exist, whilst FCF is equal to Cash From Operations (CFO) minus Capital Expenditure (CAPEX) minus the change in working capital (if included). Working capital is equal to current assets (e.g., accounts receivable) minus current liabilities (accounts payable). Investments in working capital are cash outflows, just like an investment in CAPEX. NPV only concerns cash because of the time value of money (cash can be reinvested to make more earnings, making a future £1 worth less than a present £1). Net income in year t is earnings... Continue reading "Corporate Finance: Valuation, Capital Structure, and M&A" »

Chapter 11 – Unemployment & Labor Markets

BLS Household Survey

• 60,000 households monthly

• Population: 333,287,557

  • Age 17+: 269,523,012

  • Children: 63,764,545

  • Civilian Noninstitutional Population: 263,973,000

  • Labor Force: 164,287,000

    • Employed: 158,291,000

    • Unemployed: 5,996,000

    • Not in Labor Force: 99,686,000

Key Formulas:

• Unemployment Rate (UR) = (Unemployed / Labor Force) × 100 → 3.7%

• Labor Force Participation Rate (LFPR) = (Labor Force / Civilian Noninstitutional Pop) × 100 → 62.2%

Alternate Measures of Unemployment (U1–U6):

• U3: Official unemployment rate

• Marginally attached: sought work in the past year but no longer looking

• Underskilled: working below qualifications or hours desired

• Involuntarily part-time: want full-time but work part-time

• US Unemployed

Core Microeconomics and Market Equilibrium

The optimal point is reached when MRT = MRS (Marginal Rate of Transformation equals Marginal Rate of Substitution), determining the hours to work. Market Equilibrium is the point where supply equals demand.

Game Theory and Strategy

A Dominant Strategy is the strategy that earns a higher payoff than any other strategy, regardless of the strategies chosen by other players. In game theory, the best-response function illustrates the strategy that yields the highest payoff for a player, given the strategies chosen by other players.

Production Functions and Labor Effects

The Production Function is defined as q = f(L, K), where:

• Q: Quantity of output produced.
• L: Labor input.
• K: Capital input.

The Substitution Effect... Continue reading "Microeconomics Principles and Market Equilibrium Analysis" »

TI-Nspire Engineering Economy Cheat Sheet

The Master Tools (F and G)

The Golden Rule: Look at the factor attached in the menu. The letter on the bottom of the fraction dictates what goes in that V slot.

Tool G: Present Worth (PW) Master Tool

Use to pull all money to Year 0 (today).

• Menu: V1 + V2*(P/A) + V3*(P/G) + V4*(P/F)
• V1 [No Factor]: Initial Investment (P). (Usually negative)
• V2 (P/A): Base Annual Income/Expense (A).
• V3 (P/G): Gradient Amount (G). (Amount A changes each year)
• V4 (P/F): Salvage Value / Future Value (F).

Tool F: Annual Worth (AW) Master Tool

Use to flatten all money into equal yearly amounts.

• Menu: V1 + V2*(A/P) + V3*(A/F) + V4*(A/G)
• V1 [No Factor]: Base Annual Income/Expense (A).
• V2 (A/P): Initial Investment (P). (Usually negative)
• V3

Defining Information Technology (IT)

Information Technology (IT) means the collection, storage, processing, dissemination, and use of information. IT is not confined solely to hardware and software but also acknowledges the importance of the person, the goals he/she sets for the technology, the values employed in making these choices, and the assessment criteria used to determine whether he/she is controlling the technology and is being enriched by it.

Types of Information Systems

There are various types of information systems:

Transaction Processing Systems (TPS)

A Transaction Processing System (TPS) is used primarily for record keeping essential for conducting business operations within any organization. Examples of TPS include sales order entry,... Continue reading "Information Technology Systems and Their Business Applications" »

Sustainable Development Goals (SDGs)

Purpose of Sustainable Development

1. Reduce inequalities.
2. Caring for the environment.
3. Promote collaboration between social agents (productive agents).

Five Dimensions of the SDGs

The SDGs are "unique and special" in at least five dimensions:

1. All countries participate.
2. Target three dimensions: environmental, economic, and social.
3. All kinds of partners are involved.
4. Institutionally integrated.
5. More visible in public discourse.

Key Sustainability Metrics for Profitability

• Energy Efficiency and Cost Reduction
• Waste Reduction
• Water Efficiency
• Supply Chain Sustainability
• Brand Reputation
• Regulatory Compliance
• Productivity and Employee Engagement
• Innovation and New Product Development
• Carbon Footprint Reduction
• Return on Investment (ROI)