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

Inflation

Inflation is an increase in the average level of prices of goods and services.

Types of Inflation

• Demand-Pull Inflation: This occurs when various factors increase aggregate demand, leading to inflation.
• Cost-Push Inflation: This is a decrease in the supply of goods caused by an increase in the cost of production.

Causes of Inflation

• Increase in the cost of raw materials
• Increase in the cost of inputs (land, labor, capital)
• Increase in the cost of borrowing by producers
• Natural calamities, floods, earthquakes

Consequences of Inflation

• Price effect: Consumer consumption will go down.
• Income effect: Real income may decrease.
• Saving effect: Consumer saving declines.
• Wealth effect: The value of assets like land, cash, stocks, bonds, and bank deposits

Four Elements of a Successful Strategy

• Simple, consistent, and long-term goals
• Deep understanding of the competitive environment
• Objective appraisal of internal resources
• Effective implementation of these three elements

PESTEL Analysis

A framework for analyzing the external macro-environmental factors that impact an organization:

• Political: Tax policy, labor law
• Economic: Interest rates, inflation
• Sociological: Population growth, demographics
• Technological: Automation, innovation
• Environmental: Climate change, sustainability
• Legal: Discrimination and employment law

Porter's Five Forces Model

A framework for analyzing industry attractiveness and competitive intensity:

• Threat of new entrants
• Threat of substitute products or services
• Bargaining power of buyers
• Bargaining

Delegation of authority is the result of:

• the firm’s growth
• more complex decisions

Delegation and empowerment are essential skills for effective managers. Although the terms are sometimes used interchangeably, there are several areas of difference between them:

• Delegation is a straightforward means of assigning tasks to your employees.
• Empowerment seeks to give an employee more authority with the aim of developing employee commitment, enthusiasm, and expertise, while encouraging innovation that will benefit the organization over time. Empowerment necessarily requires some level of delegation, but not all instances of delegation will produce an empowered employee.

Responsibility: The obligation, placed on employees through delegation, to perform... Continue reading "Delegation of Authority and Empowerment in Management" »

The Model of Valuation of Financial Assets by the Arbitrage Pricing Theory

Stephen Ross developed this theory in 1976. It is an equilibrium model for asset valuation. Its central idea is the expected return on an asset must be a linear function of its systematic risk. The APT considers that the only risk that the market is willing to remunerate is the systematic one, since the rest of the risk can be eliminated via diversification. According to this model, the systematic risk is the fundamental explanatory factor of the performance of the profitability of financial assets, although that is not measured only by the beta coefficient of the profitability of an individual asset with respect to the profitability of the market portfolio, but by a... Continue reading "Understanding the Arbitrage Pricing Theory for Financial Asset Valuation" »

Understanding Credit, Debt, and Insurance

Credit Rule of Thumb: Product should outlive its payment; don't use credit if the purchase is beyond earnings capability.

Factors That Influence Credit Score:

• Billing history (35%)
• Length of bill payment history (15%)
• Amount owed (30%)
• New credit lines (10%)
• Types of credit (10%)

FICO Score:

300-850; above 800 is great; below 620 is not good (high risk); 40% of Americans have a score under 600.

Credit Bureaus:

TransUnion, Equifax, Experian (each has its own credit score).

Types of Entries in a Credit Report:

• Identifying Info
• Public Records (bankruptcies, civil judgments, and tax liens)
• Inquiries
  • Soft Inquiries (i.e., a credit

Understanding the Marketing Environment

Actors and Forces Shaping Marketing Success

A company's marketing environment encompasses the actors and forces beyond marketing that influence marketing management's capacity to cultivate and sustain successful relationships with target consumers. Companies must vigilantly monitor and adapt to the ever-changing environment. The marketing environment comprises two key components:

• Microenvironment: This includes actors close to the company that impact its ability to engage and serve customers effectively.
• Macroenvironment: This consists of broader societal forces that shape the microenvironment, including demographic, economic, natural, technological, political, and cultural factors.

The marketing environment... Continue reading "Understanding Marketing Environment and Consumer Behavior" »

Supply Defined

Supply: The amount of goods and services producers are willing to sell at various prices at a particular time.

Market Supply

Market supply: The total output of all the individual companies within a market.

Law of Variable Proportions

Law of variable proportions: Highlights the relationship between the input of a factor of production and the supply of a good or service.

Production Schedule

Production schedule: Shows how the quantity supplied changes as the number of workers increases.

Stages of Production

Stage of production: Is based on a change in marginal product, including diminishing returns.

Elasticity of Supply

Elasticity of supply: Is measured by how quickly the quantity supplied changes as a result of a change in price.

Understanding

Chapter 7: Business Accounting

What are Accounts and Why are They Necessary?

Accounts are financial records of a firm's transactions that are kept up to date by accountants, who are qualified professionals responsible for keeping accurate accounts and producing the final accounts.

Every end of the year, final accounts must be produced, which give details of:

• Profits and losses made
• Current value of the business
• Other financial results

Limited companies are bound by law to publish these accounts, but not other businesses.

Financial Documents Involved in Buying and Selling

Accountants use various documents that are used for buying and selling over the year for their final accounts. They can help the accountant to:

• Keep records of what the firm bought and

Economic Boom and the Great Depression

A period of general prosperity in the 1920s ended with the collapse of the Great Depression in the 1930s.

Key Factors and Events

• Bull Market: A stock market in which stock prices were steadily increasing. In the bull market of the 1920s, stock prices became vastly inflated.
• Buying on Margin: Purchasers were able to buy stocks on margin, putting only 10% down and borrowing 90%.
• Speculation Boom: Refers to the practice of buying real estate, stocks, or anything else to sell later at a profit.
• Black Tuesday: The market crash on October 29th.
• Smoot-Hawley Tariff: Reduced international trade.

Key Figures and Groups

• Herbert Hoover: Republican who believed in Laissez-faire economics. He did not think the federal government

Benefits of eMarketing Over Traditional Marketing

Demographics and Targeting

Internet users represent a desirable demographic for marketers, often possessing greater buying power and skewing towards the middle class. The internet's structure allows users to organize into focused groups, providing marketers easy access to niche markets. This targeted approach maximizes the effectiveness of marketing messages.

Adaptivity and Closed-Loop Marketing

Closed-loop marketing relies on constant measurement and analysis of marketing campaign results. Real-time analysis of responses allows for continuous adjustments, minimizing wasted advertising spend. This dynamic approach, combined with the internet's immediacy, allows for maximum marketing efficiency... Continue reading "The Power of eMarketing" »