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

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" »

Chapter 1: Introduction to Economics

1. Scarcity

What do economists mean when they state that a good is scarce?

d. The amount of the good that people would like exceeds the supply freely available from nature.

2. Economic Choice and Competitive Behavior

Economic choice and competitive behavior are the result of:

d. scarcity.

3. Marginal Cost

Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is:

$1.

4. Opportunity Costs

The expression, "There's no such thing as a free lunch," implies that:

c. opportunity costs are incurred when resources are used to produce goods and services.

5. Economic Way

Financial Ratios for Long-Term Analysis

Solvency Ratio

• Solvency: Total Assets / Total Liabilities

Asset Structure Ratios

• Fixed Assets / Total Assets: Fixed Assets (or Non-Current Assets) / Total Assets
• Current Assets / Total Assets: Current Assets / Total Assets
• Current Assets / Non-Current Assets: Current Assets / Non-Current Assets
• Working Capital / Non-Current Assets: Working Capital / Non-Current Assets

Financial Structure Ratios

• Liabilities / (Equity + Liabilities): Liabilities / (Equity + Liabilities)
• Equity / (Equity + Liabilities): Equity / (Equity + Liabilities)
• Current Liabilities / (Equity + Liabilities): Current Liabilities / (Equity + Liabilities)
• Permanent Resources / (Equity + Liabilities): Permanent Resources / (Equity + Liabilities)

Permanent

-(management accounting) the application of principles of accounting and financial management to create, protect, preserve, and increase value so as to deliver that value to stakeholders of profit note for profit enterprises both public and private.

(balance sheet) about shows the financial position at a point in time as one accounting period ends and another one starts. The main elements of the balance sheets are assets, liabilities, and equity.

(budget) is a financial plan. It can be seen as a statement of financial effect expected from the resource conversion process that the business has planned.

(globalization) - it is an extension of internationalization in the sense that most aspects of the production or service are performed and integrated... Continue reading "Financial Management and Accounting Principles" »

5) Family Business Survival Strategies

A study indicates that family businesses often struggle to survive across multiple generations. However, there are four key strategies that can increase their chances of longevity:

Establish Strong Governance

Creating a solid governance framework is essential. This includes attracting and retaining top talent while maintaining a clear separation between the family and the business itself.

Preserve "Family Gravity"

Identify and empower key family members who can align everyone's interests and drive the pursuit of common goals. These individuals serve as motivators and role models within the family and the business.

Early Talent Identification and Development

Invest in developing the skills and potential of family... Continue reading "Strategies for Success in Family Businesses and Modern Organizational Structures" »

E-Marketing Fundamentals

Marketing Segmentation

• Geographic Segmentation: Dividing a market based on location.

• Demographic Segmentation: Dividing a market based on demographic variables.

  • Uses age, gender, family size, income, education, religion, or ethnicity.

• Psychographic Segmentation: Dividing a market based on psychological attributes.

  • Various social classes, personalities, or approaches to life.
  • Includes: Segmentation using customer behavior.

Applying to Internet Commerce

Internet commerce applies segmentation by:

1. Collecting user profiles.
2. Performing automatic analysis (e.g., personalization and classification).

Data sources for user profiles and analysis include:

• User input (e.g., user profile).
• Previous transactions.
• Other sources (e.g., from partner

What is Wall Street?

It is the American stock market.

How the Stock Market Works

To set up a company, you need capital. This capital is raised from investors (called shareholders because, in return, the investors own a share in the company), who then get their money back either through receiving dividends on the shares or through selling their shares. Investors buy and sell their shares on the "stock market."

How Shares Work

The value of shares is higher when the company is successful. When more people buy rather than sell shares, their price goes up. But when it is the other way around, the price falls.

Causes

Speculation

Investment on the stock market was attractive during the economic boom since the economy was doing well and people... Continue reading "Wall Street Crash of 1929: Causes and Market Collapse" »

The Great Depression

At the end of the 1920s, a series of problems in the USA caused a major economic crisis, known as the Great Depression. This crisis lasted until the end of the 1930s and brought an end to the prosperous, consumer lifestyle of the previous decade.

USA Crisis: Triggers of the Depression

The problems that led to the crisis in the USA included:

• Overproduction: American industry produced more goods than the population needed. When companies could not sell their products, they went bankrupt and had to close.
• Falling Consumption: When companies closed down, people lost their jobs and stopped spending money. Rising unemployment reduced demand. As a result, more and more companies went out of business.
• The Wall Street Crash: When many

1. What is economic competition?

The set of actions that undertakings (companies) take to obtain the preference of consumers, these actions include rivalry among companies and are only feasible because there are conditions that facilitate open and participative markets.

2. Mention and describe at least three negative effects that occur in markets when there are no conditions of effective competition.

• There are no alternatives in goods and services
• High prices
• There is no innovation, which causes inefficiency

3. What is the difference between economic regulation and the correct policy of economic competition? Describe at least two differences.

Regulation: Preserve the most valued elements by a given group through mechanisms of standard setting, information... Continue reading "Understanding Economic Competition: Effects, Regulation, and Characteristics" »