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

1. Sunk Costs

Costs that do not vary according to different decisions

• Eg. A student buys a book for $50 and can sell it for $20. Sunk costs amount for $30
• Eg. Market research, R&D (frequent in IT sector)

Managerial decision-making:

1. Ignore sunk costs and consider only avoidable costs to be very careful before committing to costs that will become sunk, since such commitments cannot be reversed
2. Exploit investments in sunk costs as a way to strategically influence the behavior of competitors

- Major entry barrier because they increase the cost of exit

Relationship between fixed and sunk costs: - sunk costs are the amount of fixed costs that cannot be recouped

2. Incremental Costs

Change in costs between undertaking a course of action and not undertaking... Continue reading "Cost Concepts and Pricing Behavior" »

Globalization: A Shift Towards a More Integrated World Economy

Globalization of Markets

• National markets merge into a single global market.
• Trade barriers are reduced or eliminated.
• Tastes and preferences converge.
• Firms promote the trend by offering the same products worldwide.

Globalization of Production

• Goods and services are sourced from locations around the globe.
• Firms take advantage of national differences in the cost and quality of factors of production (land, labor, capital).

Benefits of Globalization

• Lower prices for goods and services
• Greater economic growth
• Higher consumer income
• More jobs

Critics of Globalization

• Job losses
• Environmental degradation
• Cultural imperialism of global media and multinational enterprises (MNEs)

Factors Driving Globalization

• Declining

Floating Exchange Rate: When a country allows its exchange rate to be determined by currency markets, the exchange rate is said to be floating.

Effects of Fiscal Policy (Floating Rate)

Government Spending Increase (G↑) or Taxes Decrease (↓T) => IS* shifts right (↑) => exchange rate appreciation (e appreciation) => crowds out Net Exports (NX) => no effect on Aggregate Demand (AD) (When the economy is open, capital immediately flows inwards)

Effects of Monetary Policy (Floating Rate)

Money Supply Increase (M↑) => LM* shifts right (↑) => Output (Y) increases (↑), interest rate (r) decreases (↓) => exchange rate depreciation (e depreciation) => Demand (D) increases (↑) for foreign exchange => Net Exports (... Continue reading "Fixed vs. Floating Exchange Rates: Policy Effects" »

Liberalism is a political theory that starts from the idea that the individual and their rights must be at the center of political reflection. Therefore, the State must guarantee a legal framework that protects individual rights, ensures free exchange, and respects the rules of free economic competition. In this way, citizens can pursue their legitimate personal interests without the State interfering in the markets.

Adam Smith and The Wealth of Nations

The Wealth of Nations argues that the welfare and wealth of a society depend on three factors:

1. The pursuit of self-interest. In commercial exchange, the consumer is willing to pay the minimum and the producer wants to earn the maximum; the self-interest of each party helps them reach an agreement

1. Is the DuPont Key Figure System the Only Accepted System With No Disadvantages?

False

While widely recognized, the DuPont system doesn't account for liquidity, a factor often considered more critical than profitability. Focusing solely on profitability as a single objective is a shared limitation of many analytical tools.

2. What's an Advisable Approach to Developing Charts for Reports?

Consider these steps:

1. Statement: Define the message you want to convey.
2. Comparison: Determine the basis for comparison (e.g., time periods, categories).
3. Chart: Select a chart type that best visually represents the data and comparison.

3. What Are the Four Perspectives of the Balanced Scorecard? Explain One Briefly.

The Balanced Scorecard encompasses:

1. Financial: Focuses

Consolidated Financial Statements

When Consolidated Financial Statements Cannot Be Compiled

Determine when a parent entity, which is itself a subsidiary, is *not* required to prepare consolidated financial statements:

• When the ultimate parent entity produces consolidated general-purpose financial statements that comply with full IFRSs or with IFRS for SMEs.
• When an entity has no subsidiaries other than one that was acquired with the intention of selling or disposing of it within one year.

Presumption of Control

Identify the circumstances under which control is presumed to exist:

• When the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity.
• When the parent owns half or less of the voting power of

When talking about tourism you always come with ideas like luxurious hotels, incredibles views, relaxing spaces, Paradise and pure fun, this is idea when think in Puerto Colombia.Nobody think and talk about tourism is the risk that this entails, risks as destruction of environment, pollution, overpopulation, among many other risks that result in the development of a tourist destination, but not only can we that about the risks that making Puerto Colombia a tourist city, the risks that would have been tourism in this areas, risks such as losing a large volume of visitors, less investment in the structure of city, that bring as a result less economic income to the city. So that question arise what is better, to make Puerto Colombia tourist destination... Continue reading "The Risks and Benefits of Making Puerto Colombia a Tourist Destination" »

Chapter 18: International Pricing and Trade Mechanisms

Pricing Approaches and Objectives

• 1. Active Pricing Instrument: A company using this approach sets prices to achieve targeted returns on profit.
• 2. Static Pricing Element: A company following this approach places a low priority on foreign business.
• 10. Administered Pricing Goal: The end goal of all administered pricing activities is generally to reduce the impact of price competition or eliminate it.

Distribution and Market Control

• 3. Parallel Importing Condition: Exclusive distribution often encourages retailers to stock large assortments, which frequently creates a favorable condition for parallel importing.
• 11. Market Control Agreement: A cartel exists when various companies producing similar

Societal Issues in Global E-commerce

Understanding the pressures that global e-commerce places on contemporary society is critical to being successful in the e-commerce marketplace. The primary societal issues are intellectual property, individual privacy, and public policy.

Academic Disciplines Contributing to E-commerce

The study of e-commerce requires identifying and integrating knowledge from major academic disciplines. There are two primary approaches to e-commerce research: technical and behavioral. Each of these approaches is represented by several academic fields.

Technical Approaches to E-commerce

On the technical side, key contributing disciplines include:

• Computer Scientists: Interested in e-commerce as an application of Internet technology.