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

Fundamental Economic Definitions

Budget

Es el cálculo, exposición, planificación y formulación anticipada de los gastos e ingresos de una actividad económica.

Budget Constraint

All possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent. It defines the boundary of the opportunity set (limits to the amount of money that is available to spend).

Sunk Costs

Costs that were incurred in the past and cannot be recovered.

The Budget Formula and Calculation

General Budget Formula

The budget formula calculates total expenditure based on prices and quantities:

Budget = P₁ × Q₁ + P₂ × Q₂ + ... + Pₙ × Qₙ

Where P and Q are the price and respective quantity of any number, n, of items... Continue reading "Key Economic Concepts: Budgeting, Efficiency, and Rationality" »

European Union Energy Market Regulations

1st package- Directives 96.92 concern common rules for the internal market in electricity and 98.30 internal market of natural gas. Liberalization was to be progressive, applying gradually to different categories of consumers. Introduce a partial opening of national markets to competition, both required liberalization of certain segments of their electric and gas markets to enlarge. 2nd- 2003.55-54 liberalization process took place at different speeds in different member states aiming at the creation of an internal market. Required national gas and electric markets to be liberalized for large consumers by 2004 and 2007, respectively. 3rd- Directive on electric, on gas, security of supply electric, regulate... Continue reading "European Union Energy and Financial Market Regulations" »

Charts and Graphs

• Pie chart
• Line graph
• Bar chart
• Table
• Flow chart
• Organigram

Types of Lines in Graphs

• Solid line
• Curve
• Fluctuating line
• Dotted line (puntos)
• Axis
• Undulating line
• Broken line

Describing Trends: Increase

• To increase = raise (aumentar)
• Rise = go up (subir)
• Grow
• Boom / soar / climb (remontar)
• Jump = skyrocket (dispararse)
• To reach a peak (pico)

Describing Trends: Decrease

• To decrease
• Fall
• Plunge (picado)
• Drop
• Go down
• Decline
• Collapse

Describing Trends: Stability

• To remain stable
• Stay constant
• Stabilize

Describing Trends: Leveling Off

• To level off / out = flatten out (nivelar)
• Stop or start falling / rising

Trend Modifiers: Size

• Dramatically
• Vastly
• Hugely
• Significantly
• Considerably
• Slightly (leve)

Trend Modifiers: Speed

• Substantially
• Rapidly
• Suddenly
• Gradually

Incoterms

• EXW: Ex

Loan Types and Capital Cost Analysis

Understanding Loan Structures

American Loans Explained

In American loans, all intermediate payments only include interest expenses. The principal is paid back at maturity.

C − Fees = I = ∑T_i · C_o + C_o

_{o o j=1} (1+R_B)^j (1+R_B)^T

French Loans Explained

The loan is repaid with equal payments (P), which include both interest and partial repayment of the principal. The process requires three steps:

1. Calculate the constant payment per period ‘P’.
2. With the computed value ‘P’, calculate the cost of debt.
3. Compute the effective annual rate.

The Cost of Equity Capital

Firms with excess cash can either pay a dividend or make a capital investment. Because stockholders can reinvest the dividend in risky financial assets,... Continue reading "Financial Valuation: Loan Structures and Equity Cost Models" »

E-commerce Fundamentals

Payment Methods for Online Shoppers

Online shoppers commonly use a credit card or a PayPal account to make payments. Other alternative methods include:

• Billing to mobile phones
• Cash on delivery (COD)
• Check
• Debit card
• Electronic money
• Gift cards
• Postal money order
• Invoice

Product Delivery Options

• Downloading (for music, movies, images, etc.)
• Drop shipping (the manufacturer ships the item directly to the consumer)
• In-store pick up (collecting items at a physical shop)
• Printing or by e-mail (tickets for concerts, cinema, etc.)

Market Share and Statistics

E-commerce represented 8% of sales in the USA. In 2012, there were 242 million people shopping online in China.

Advantages of E-commerce

• Convenience

  Online shops are usually available 24 hours

Production and Productivity

Production is the provision of a product to satisfy wants and needs. The process involves businesses adding value to their products. Productivity: is the outputs measured against the inputs used to create it. This is measured by: Output (over a given period of time)/Number of employees If a worker makes more products in the same amount of time, his productivity increases. Firms aim to be productively efficient to be able to make more profits and compete against their competitors.

Methods of Production

Job production: Goods are made individually, by one person. Goods are usually specialized, no two goods are the same. Usually made to order. Pros: The product meets exact requirements of the customer. The workers have... Continue reading "Understanding Production and Methods of Production" »

The Great Depression: The Longest and Deepest Economic Downturn in American History

Causes of the Great Depression

In 1929, the prevailing economic theory held that the economy possessed self-correcting mechanisms that would prevent a severe depression. However, the Great Depression defied these expectations.

• Overproduction: Some economists believed the depression was caused by an excess of goods and services.
• Lack of Investment Opportunities: Others pointed to a decline in profitable investment opportunities.
• Technological Innovation: Joseph Schumpeter argued that the failure of entrepreneurs to introduce new products contributed to the depression.
• Stock Market Crash and Bank Panics: The stock market crash of 1929 and subsequent bank failures exacerbated

Understanding Global Inequality: Thomas Piketty's Capital in the 21st Century

The Inequality Problem: R > G

Thomas Piketty's research on inequality has gained significant attention, particularly his formula r > g, where:

• r represents the return on capital (profits or interest from investments)
• g represents the overall growth of the economy

Piketty argues that over time, wealth concentrates in the hands of the wealthy few, regardless of hard work or intelligence. The actual distribution of wealth reveals higher inequality rates than commonly perceived. To combat this, he advocates for active redistribution and improved access to education.

Capitalism and Inequality

Piketty's book, Capital in the 21st Century, challenges the notion that capitalism... Continue reading "Understanding Global Inequality: A Deep Dive into Thomas Piketty's Capital in the 21st Century" »

External Environment Tools

PESTEL Analysis

List of influences on the possible success or failure of strategies:

• Political Factors: Government policies, taxation changes, trade regulations. Zara's corporate social responsibility is transparent; Zara collaborates with communities in its areas of operation and has a code of conduct.
• Economic Factors: Business cycles, interest rates, GDP trends. Zara conducts deep consumer research and acts in a unique way. Export and import concerns affect performance.
• Social-Cultural Factors: Population changes, income distribution. Zara has a good image through donations and charity. Zara embraces diverse cultures, and its brand is known worldwide.
• Technological Factors: ICT innovations, new discoveries, and technological

Topic 1: Intro to FAB

Types of Businesses: Manufacturing (make & sell), Merchandising (buy & sell), Services (delivery etc.)

Business Structures: Sole Proprietorship -> owned and opened by 1 person; business is a separate entity from owner, owner is liable for debts. Partnership -> 2 to 20 partners; business is a separate entity from partners, partners are liable for debts.

Types of Partnerships: 1. General -> equal responsibility & unlimited liability. 2. Limited (Liability) -> 1 partner(s) not liable for debts beyond the agreed obligations. 3. Limited Liability Partnership (LLP) -> ≥2 partners are separate legal entities and are not liable for business debts. Business ceases if partner dies UNLESS have perpetual... Continue reading "Understanding Business Structures and Financial Fundamentals" »