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

International Logistics

International logistics is the process of planning, implementing, and controlling the movement of goods from supplier to customer from one country to another. It describes the activities necessary to get materials to a manufacturing facility, through the manufacturing process, and out through a distribution system to the end user. The goal is to manage a global supply chain at a low cost while providing superior customer service. Firms now typically use electronic data interchange (EDI) via the Internet to coordinate the flow of materials into manufacturing, through manufacturing, and out to customers. This eliminates delays among suppliers, shippers, and the purchasing firm, and reduces paperwork. EDI can also help a... Continue reading "International Logistics, Trade, and Marketing Strategies" »

Loans are contracts where a financial institution provides an agreed amount of money to a company, which undertakes to return it with pre-set interest according to a depreciation plan until total repayment. Credit is a contract where a financial institution opens a credit line for a company, allowing it to access funds up to an agreed limit. Interest is paid only on the amount utilized, and repayment occurs within a specified period.

Bondholders and Shareholders: As an investor, you have two main choices for investing in a company: purchasing its shares or buying its bonds. Shareholders own stock in a company. Both investments offer opportunities to make money, but each carries inherent risks.

Forex refers to the foreign exchange market. Each... Continue reading "Understanding Business Financing: Loans, Credit, Bonds, and Forex" »

… Δ Qd Y1

EY = --------- × ---------

Δ Y Q1

…perfectly (or infinitely) elastic:

the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; horizontal in appearance

perfectly inelastic:

the highly inelastic case of demand in which a percentage change in price, no matter how large, results in zero change in the quantity; thus, the price elasticity of demand is zero; vertical in appearance

(relatively) elastic:

the percentage change in quantity demanded is greater than the percentage change in price; measured price elasticity of demand is greater than one (in absolute value)

(relatively) inelastic:

the percentage change in quantity demanded is less than the percentage... Continue reading "Understanding Elasticity of Demand and Revenue in Economics" »

Incoterms: FAS, FOB, CIP, and CPT

What kind of cargo is used for FAS? Why?

Containers are used for FAS because the goods are carried on board a ship.

Which are the two possible cases of delivery for FCA?

• When the goods have been loaded on the transport designated by the buyer or by a person acting on its behalf.
• When the goods are made available to the seller's carrier transport, without being discharged.

Allocation of Costs and Risk for FAS and FOB

The seller is required to deliver the goods alongside the actual ship on the pier. From that point forward, the buyer bears all costs (loading cost, freight, insurance) and risks. Under FAS terms, the buyer is required to clear the goods for export and pay the cost of loading the goods.

Why is it so important

SOCIAL:

• Population development in the relevant countries (important groups, migration…).
• Social-psychological currents (work mentality, propensity to save, leisure behaviour, automation, relevant materials and products).

TECHNOLOGICAL:

• Production technology (trends in the process technology, innovation, automation…).
• The speed of product innovation.
• Substitution technologies (possible innovations, development of costs).
• Recycling technology.

LEGAL:

• Trends in economic policy (tax, compliance, competition laws).
• Trends in social legislation, labour law.
• Importance, freedom and influence of trade unions.

ECOLOGICAL:

It refers to trends in the protection of environment (environmental awareness, environmental impact and environmental legislation). Availability... Continue reading "Analysis of Social, Technological, Legal, Ecological, and Organizational Trends" »

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

The Bretton Woods Conference

Today's monetary and financial system has its roots in the planning of a new economic order during the Bretton Woods Conference of 1944. The goal of the conference was to avoid another Great Depression like that of the 1930s by ensuring a stable international monetary and financial system and by building an open international trade system.

Following this objective, two plans were implemented:

The Keynes Plan (UK)

• Creation of a new international non-metallic currency, to determine the exchange rates between each of the national currencies.
• Creation of an international clearing union for international payments compensation.
• Building an international mechanism to stabilize the system by applying pressure on both surplus

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

1. Stages of Economic Integration

• Preferential Trade Agreement or Free Trade Area: A trading bloc involving cooperation between at least two countries to reduce or eliminate trade barriers and increase the exchange of goods and services.
• Customs Union: Participant countries establish a common external trade policy. Goals typically include increasing economic efficiency and fostering closer political and cultural ties.
• Common Market: Factors of production move freely between member states.
• Economic and Monetary Union: Features a common monetary policy, a single currency, harmonized tax rates, and a unified fiscal policy.
• Political Union: Involves a common government.

2. What is the Acquis Communautaire?

In short, the acquis communautaire is the supreme... Continue reading "European Economic Integration and EU Membership Criteria" »

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" »