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

6. Can corruption be beneficial to the economic performance? Some studies have suggested that corruption may be beneficial for the economy. Positive correlation between corruption and economic growth in Asian countries:

• Bureaucrats do not have enough information or are not competent for taking decisions; corruption can result in a competitive sale.
• Innovative and expensive projects have been created through corruption of capital.

7. Possible solutions:

• Access to information / right to information (Transparency)
• Cooperation between Governments (common database)
• Code of Conduct (education on legal base)
• Reveal Information (protected by law and incentives)

Informal Economy:

1. Definition: Set of economic activities, enterprises, jobs, and workers that are

What is Standard of Living?

A person's standard of living is the level of material comfort that they are able to enjoy in terms of the goods and services which they can buy or use.

Understanding Gross Domestic Product (GDP)

The GDP measures the growth of economies over time.

• It can be used to make comparisons between levels of production, income, and spending between countries.

Limitations of GDP as a Measure

GDP is NOT a good measure for several reasons:

• It doesn't take into account the degree of inequality in a society. Although GDP per head in a country might rise over time, prosperity does not necessarily make much difference to the living standards of poorer people.
• GDP simply measures the value of goods produced; it doesn't take into account

Understanding Corporate Structures

Diversification: This occurs when a company offers new products and attempts to enter new markets.

Holding: A parent company buys the shares of its subsidiaries, making the parent the owner. The parent company makes the most important decisions, holding the majority of shares and votes.

Trust: The subsidiaries are the owners of the shares, so the profits are shared among each company. The management of the shares is handled by a board of directors. The companies produce the same or similar products, with the objective of growing as a company and becoming more competitive.

Cartel: Companies that produce the same product sign an agreement to reduce competition. They agree to sell the product at the same price and... Continue reading "Understanding Corporate Structures: Diversification to Transnationals" »

Market Structures

Perfect Competition: many buyers & sellers of a standard product & easy entrance & exit (ex: oranges)

Monopolistic Competition: many buyers & sellers of slightly differentiated products & easy entrance & exit (fast food)

Oligopoly: few businesses and entry to industry is restricted (cars & cellphones)

Monopoly: one business supplies a product w/ no close substitutes (debeers diamonds)

Key Concepts

Entry Barriers: increasing returns to scale, market experience, restricted ownership of resources, legal obstacles, market abuses, advertising

Market Power: a business's ability to affect the price of the product it sells

Revenue

Average Revenue: the extra total revenue earned from an additional unit of output... Continue reading "Understanding Market Structures and Competition" »

Operational Effectiveness (OE) means performing similar activities better than rivals perform them. Operational effectiveness includes but is not limited to efficiency. It refers to any number of practices that allow a company to better utilize its inputs by, for example, reducing defects in products or developing better products faster. In contrast,

strategic positioning means performing different activities from rivals’ or performing similar activities in different ways.

Positioning is rejected by many managers as too static for today’s dynamic markets and changing technologies. Nowadays rivals can quickly copy any market position, and competitive advantage is temporary.

During the last decade, we can see different examples in which values and ethics have been ignored in the financial world.

The risky decisions and lack of values are principal causes of the crisis according to the Larrosiere Report. The lack of values due to wrong incentives of the governors led to a wrong price of the risk and an increase in leverage. There was also a complete lack of transparency.

The increase of the market of derivatives also increased the 'appetite for risk' and investors do not seem to worry about the danger of these decisions or be cheated about them.

The US Congress Report, which was created to examine the collapse of the financial system, concluded that there were big failures in supervision, corporate governance, and... Continue reading "Finance and Ethics: Examining the Impact of Values on the Financial World" »

TEMA 6

Definition of product and the two approaches in product management

A product is a set of physical and psychological features that an individual perceives.

• Focused in the product itself
• Focused on the consumer's needs

List ten of the product decisions and briefly explain what they mean

• Current product positioning
• Brand product positioning
• Identifying target segment
• Modifications and changes in products
• Positioning of product line

Depending on who buys the goods, products can be:

Consumer product:

Industrial product

According to their duration, consumer goods can be:

• Non-durable consumer goods
• Durable consumer goods

That avoids problems arising from negative interpretations of the name in other areas (different countries, regions, languages)

List the main

Key Characteristics of Common Equity

Which of the following is not a characteristic of common equity?

The company is obligated to make periodic dividend payments.

Statutory Voting Explained

The type of equity voting right that grants one vote for each share of equity owned is referred to as statutory voting.

Understanding Preference Shares

All of the following are characteristics of preference shares except:

• They are either callable or putable.
• They receive an additional dividend exceeding a predetermined level.

Private Equity Securities: Market-Determined Quoted Prices

Which of the following statements about private equity securities is incorrect?

They have market-determined quoted prices.

Venture Capital Investments: Mezzanine Financing

Venture capital... Continue reading "Understanding Equity Securities: Key Characteristics and Risks" »

Strategy: Adding Value to Your Business

Three Horizons of Growth

Horizon 1: Extend and defend core business.
Horizon 2: Build emerging businesses.
Horizon 3: Create viable options.

PESTEL Analysis

Political: Role of the state, government policies.
Economic: Interest rates, exchange rates, unemployment rates.
Social: Changing cultures and demographics.
Technological: New discoveries and technology developments.
Ecological: Environmental issues (pollution, waste, climate change).
Legal: Legislative and regulatory constraints or changes.

Porter's Five Forces

Threat of Entry: High barriers to entry equate to a low threat of entry.
Threat of Substitutes: Products or services offering similar benefits but with different maturity.
Bargaining Power of Buyers: Powerful... Continue reading "Strategic Management: A Comprehensive Guide" »

The seven principles stated on the article are:

1.)Price stability provides substantial benefits

Low and stable inflation prevents overinvestment in the financial sector which otherwise would be a way to escape the costs of inflation. It lowers uncertainty enabling businesses and individuals to make appropriate decisions, increasing economic efficiency and finally lowers distortions from interactions between the tax systems and inflation (Better employment of resources and increase economic growth).

2) Fiscal policy should be aligned with monetary policy;

Large government deficits place pressure on monetary authorities to monetize debt, producing rapid money growth and inflation.

3) Time inconsistency is a serious problem to be avoided;

Motivation... Continue reading "Principles of Monetary Policy and the Fed's Performance" »