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

Reverse Engineering as a Source of Knowledge and New Technology

Working Backwards: Take a product produced by a competitor and devise a method of producing a similar product.

Result: A slightly different product and a slightly different production function.

Profit Theories for Describing Business Performance (e.g., Amazon)

Monopoly Theory of Economic Profits

• Some firms are sheltered from competition by high entry barriers.
• Sources of protection: economies of scale, high capital requirements, patents, monopoly over inputs, government protection (e.g., import prevention).
• Monopoly profits can arise because of luck or happenstance (being in the right industry at the right time).

Innovation Theory of Economic Profits

• Profits arise following successful invention

Company Organization Chart

The business organization chart is headed by the Board of Directors, led by the chairperson or president. Below, we find the director of the company who is responsible for five departments led by senior managers. The company is composed of five main departments.

• The production department is responsible for producing goods efficiently, on time, and in the agreed quantities.
• The marketing department is made up of three units: market research, sales, and advertising/promotions. They find out what customers require and then try to ensure that they can get these goods and services. The sales department is divided into two sections: domestic sales and exports.
• The financial department deals with the money that goes in and out

Understanding Wealth Taxation

A wealth tax is a tax periodically levied on an individuals' net value of assets.

Definition and Scope

These assets, for example, include:

• Bank deposits
• Savings
• Real estate
• Luxury items (art, jewelry, airplanes, etc.)
• Personal trusts

Liabilities like mortgages, loans, or other debt are deducted from a person's wealth.

Global Implementation

Current Adopters

Currently, three countries have a wealth tax implemented in their tax systems:

• Norway
• Spain
• Switzerland

Tax characteristics vary from country to country and sometimes even within a country.

Specific Cases

Belgium recently implemented a form of wealth tax that, unlike in other countries, only includes financial instruments held in an individual's securities accounts.

France abolished... Continue reading "Wealth Taxation Explained" »

MANAGEMENT MODELS

Partial Models: specific elements of the Management process brought to the foreground

• Management by Exception – Management only in exceptional situations.
• Management by Delegation – Management by transfer of tasks.
• Management by Decision Rules – Default decision rules are given.
• Management by Results - Management by control of results.

* Total Models: Inclusion of all elements of the Management process

• Management by Objectives – Management by agreed targets.
• St.Gallener Leadership Model - overall integrating model.
• Harzburger Leadership Model - Management with autonomous employees.
• 7-S-Model - Mc.Kinsey Model - hard and soft factors.

* Management by objectives

-Description

o Management and employees agree jointly on targets.

o Employee... Continue reading "Management Models and Objectives: A Comprehensive Overview" »

Key Supply Concepts

The following terms are fundamental to understanding how supply operates in a market.

Supply Schedule Defined

Supply Schedule: A listing of the various quantities of a particular product that a producer would supply at all possible prices in the market.

Understanding the Supply Curve

Supply Curve: A graph that shows the quantities supplied at each possible price in the market.

The main thing to remember is that all normal supply curves have a positive slope that goes up when you read the diagram from left to right.

Changes in Supply

Change in Supply: A situation where suppliers offer different amounts of a product for sale at all possible prices in the market.

Factors Influencing Supply Changes

• Cost of resources
• Productivity
• Technology
• Taxes
• Subsidies
• Government

MONEY

First of all, having money can show your status in our society: having a good car, wealthy possessions, living in an upper-class neighborhood and so on...can be representative of real happiness. Nevertheless, in our society we can see how families can't make ends meet due to their mortgage and the cost of living in general because we are having endless mortgages, and the standard of living has risen a lot over the last years.

In relation to what I would do if I become a millionaire, I think I would buy a house or a powerful car but not a sports car because it is a little uncomfortable since only two people can fit in it and you are with the roof on your head. So weighing up the pros and cons, I think the best option would be to buy a house... Continue reading "The Impact of Money on Society and Gender Differences in Financial Management" »

A Given Tax Will Cause a Smaller Deadweight Loss If

Demand and Supply Are:

• Inelastic
• Bigger Elastic

Deadweight Loss in a Taxed Market Because:

• The tax causes the market to trade less than the optimal units
• All the surplus of the units not traded is lost

Diminishing MPL States That:

• Every additional worked contributes a small increase in production that previously hired worked

Empirical i Theorical Economi:

• TE, build models
• Econ test them

How is Marginal Utility Defined:

• The change in utility from consuming one additional unit of a given good

How Do We Graphically Represent the Utility Maximizing Consumption Basket:

• The point of tangency between an indifference curve and the total budget constraint

How Does the Marginal Rate of Substitution Change as You Move

Telemarketing

It is a marketing action in which the telephone is used as the communication channel. It is aimed at contacting clients for commercial purposes, sales, or improving corporate image. It is part of a sales strategy of a company

Applications

1. Commercial applications: the goal here is to make a sale. How?

• Locating potential customers

• Arranging interviews for the sales team

• Keeping track of previous contacts

• Teleshopping

• Generating new sales of a product or a related one to the same customer (cross-selling)

• Renewing subscriptions (magazines, etc)

• Communicating new offers

• Attracting new customers

• Reactivating “silent” customers

• Follow-up, keep track of commercial offers received through postal mail or e-mail

2. Marketing applications, to gather information

Application of Multistage Games: The Entry Game

This scenario explores the strategic interactions between a potential entrant (Firm A) and an existing firm (Firm B) in a market. Firm B can choose to engage in a price war (play hard) or share the market (play soft). Despite the threat, Firm B has no incentive to play hard as it would earn less profit. The Nash equilibrium predicts Firm A entering the market and Firm B playing soft.

Managerial Decision Making with Risk-Averse Consumers

Criteria for Assessing Risk and Information Asymmetry

Managers employ various tactics to address risk-averse consumers, such as lowering prices, offering free samples, and utilizing advertising, particularly comparison advertising. Joining chain stores can also be... Continue reading "Managerial Economics: Key Concepts and Applications" »

Markowitz Model Assumptions

Harry Markowitz was the first to investigate financial markets in this way. He developed the theory of portfolio selection based on the best conditions for the placement of capital in a situation of uncertainty.

Investor Motivation & Portfolio Goals

Markowitz focuses his work on defining the factors that motivate the investor when investing. It is based on the utility function of the investor that depends on the profitability he wants to obtain and the risk he can assume. What it intends is to compose an optimal portfolio of securities for an investor, this being the best possible among all those that can be formed. It will be a search for a portfolio where performance is maximized for a given risk or vice versa.... Continue reading "Markowitz Portfolio Theory Explained" »