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

Understanding Unemployment

Historical Roots & Economic Costs

Unemployment is a phenomenon of the industrial economy, emerging over the past two centuries. In the past, land was an important source of employment. Nowadays, unemployment incurs significant economic costs due to production loss, and substantial social costs because of its negative effects on income distribution.

Factors Shaping the Job Market

Laws, social institutions, and personal assessments are among the many factors that influence the job market.

Spain's Labor Market: 1980-2011 Trends

Pre-Crisis Growth & Post-Crisis Plunge

According to García Brossa, the evolution of the Spanish job market from 1980 to 2011 has been characterized by several key developments. There was an... Continue reading "Unemployment Dynamics: Economic & Social Impacts" »

Debt and Equity Financing

Debt financing: This is when you borrow money from a bank or a financial institution, such as through bonds.

Equity financing: This is when you offer a portion of your company, such as stocks, in exchange for capital. You don't have to pay the money back, but you give up a portion of ownership.

• Bonds: Less risky with lower returns. The return of your money plus interest is guaranteed. Bonds are issued by companies, governments, etc. They are fixed-income securities, with the issuer being the borrower.
• Stocks: More risky with potentially higher returns. However, you assume the risk of the company not being successful.

Equity

• Additional paid-in capital: Capital that shareholders have contributed to the company above the nominal

Ricardian Model

Unit Labour Req.  Pears(Ib).  Oranges(Ib)

Home                  4h (aLp).         3h (aLo)

Foreign.              6h (aLp*).        1h (alp*)

Absolute Advantage - country takes less time to produce goods?

Home -> pears // Foreign -> oranges

Comparative Advantage - lower opportunity cost 

- Home has a C.Adv in pears production as its opp. cost of pears production is lower than foreign country - will specialize in pears

PPF (grafico) - (aLp · Qp) + (aLo · Qo) <= L

4Qp + 3Qo <= L (Qp = 300 & Qo=400)

Maximum home pears production is 300 and oranges 400

Slope = opp. cost - the opp. cost of pear is how many pounds of oranges Home must stop producing in order to make one more pound of pear

Absence of

Equity and Shares Fundamentals

Venture Capital and Initial Public Offerings (IPOs)

Key Formulas and Metrics

• Venture Capital (VC) Calculation: VC = X / V
• Operating Income (OI): OI = s * [1 - percentage of VC²]
• Payoff Monitoring: (Percentage × Cash Flow if Monitor) - Cost of Monitoring
• Cost of Underpricing: Shares Issued × (True Stock Value Pre-IPO - Actual IPO Price)
• Valuation Scenarios:
  • UT + I if P < Value of the Firm
  • UT if P > Value of the Firm
• Value of Right: True Value of Stock - Strike Price

Earnings Per Share (EPS) Calculations

Rights Issues and Adjustment Factors

• Theoretical Ex-Rights Price (Pₓ): Pₓ = ((P₀ × N₀) + Pᵣ) / (N₀ + 1)
  (Note: Pᵣ is not included in Bonus Issues)
• Adjustment Factor: Pₓ / P₀

Corporate Payout Policy

Dividend

International Pricing Policies

• Pricing Policy Variables: Country, product type, competitive conditions, and active marketing efforts all influence pricing.
• Objectives: Pricing serves as an active marketing instrument and a static element in business decisions. Greater control often leads to greater achievement, and the complexity of the process increases with the number of countries involved.

Gray Markets and Price Differences

• Gray Markets: Price differences between markets, exceeding transportation costs, create opportunities for gray markets.
• Illicit Distribution: Importers buy products and sell them to distributors illegally. Exclusive distribution is used to maintain retail margins and quality image.

Pricing Methods

• Full-Cost Pricing: Each unit

Business and New Technologies: Remote Work & E-commerce

Business and the New Technologies (Working from Home / E-commerce during Crises / Business Ethics)

Information technologies are growing every day, and millions of people around the world use the Internet. There has been a significant increase in purchases of mobile devices and computers. This leads to business growth and important changes in the jobs people will have in the near future. Firms and individuals must adapt to these changes and be prepared, because through the web nothing is impossible.

As a result of these technological changes, firms should be able to adapt easily if they want to survive. According to INE, 70% of Spanish households have Internet access and 31.5% of them... Continue reading "Technology Transforming Business: Remote Work & E‑commerce" »

Name three DHS Program Offices

-Office of Child Development and Early Learning (OCDEL); Office of Children, Youth and Families (OCYF); Office of Developmental Programs. (ODP)

Describe what NAS stands for and one change they recommended (Book)

National Academy of Sciences: the need to adjust for cost across geographic regions

Define what SNAP stands for and describe what it provides

-Supplemental Nutrition Assistance Program: Provides nutrition benefits to people in need so they can afford to purchase food.

List two effects of poverty as discussed in Power Point

-Negative effects on wellbeing of children, Homelessness, Illness, Poor Academic achievement.

US and Britain underwent a study between 1992 and 2003 regarding “stayers” of poverty. Approximately

Operating Leverage

The degree of operating leverage measures how sensitive a firm is to its fixed costs. It increases as fixed costs rise and variable costs fall. Operating leverage magnifies the effect of cyclicality on beta. That is, a firm with a given sales cyclicality will increase its beta if fixed costs replace variable costs in its production process.

Financial Leverage and Beta

Financial leverage is the sensitivity to a firm's fixed costs of financing.

The equity beta will always be greater than the asset beta with financial leverage: the equity beta of a levered firm will always be greater than the equity beta of an otherwise identical all-equity firm.

Extensions of the Basic Model

The Firm vs. the Project

Any project's cost of capital depends... Continue reading "Understanding Operating and Financial Leverage in Business Valuation" »

Key Business & Finance Terms

1. Bargain

Something that is of very good quality but relatively inexpensive.

2. Change

The money that someone gives back to you when you pay more than something actually costs.

3. Currency

The system or type of money that a country uses.

4. Discount

Something you buy that costs much less than normal.

5. Entrepreneur

Someone who starts a new business or arranges business deals in order to make money, often in a way that involves financial risks.

6. Fair Trade

The activity of making, buying, and selling goods in a way that is morally right.

7. Loan

An amount of money that you borrow from a bank, etc.

8. Mortgage

A legal arrangement by which you borrow money from a bank or similar organization in order to buy a house, and pay... Continue reading "Key Business and Finance Terms Defined" »

It was a decade of contradictions. It was not only a period of hedonism but there was another important aspect: transformation of American industry.

Transformation of American Industry

Transformation of American industry

• Consumption: major driver of American industry.
• Readjustment: military and army technological advances adapted for civilian uses.
• Mass consumption: helped to originate installment plans.

The Great Depression

The Great Depression

The Industrial Utopia in the 1920s

Charles Sheeler and Precisionism

Charles Sheeler was a painter of Precisionism, a movement where artists celebrated industrial capitalism in their paintings. Those examples represent the new Ford factory.

Economic Factors Behind the Crash

Economic factors behind the crash

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