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

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" »

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" »

Present Value Calculation

Present Value Calculation: The present value method has multiple applications in finance and refers to today’s value for a stream of future cash flows. Positive cash flows are called cash inflows and negative cash flows are called cash outflows.

The present value (PV) formula can be written as follows:

Where k is the discount rate and the expression is called the discount factor.

Net Present Value (NPV)

Net Present Value: It is defined as the difference between the present value of the future cash flows generated by the investment and the initial cash outlay.

Internal Rate of Return (IRR)

IRR: It is defined as the discount rate that makes the present value of future cash flows equal to the initial investment outlay. The... Continue reading "Financial Valuation Methods and Cost of Capital" »

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

1. Purpose of Business

• Identify needs of consumers.
• Use scarce resources to produce goods and services.
• Meet the needs and wants of consumers profitably.
• Add value to resources so they become more valuable.

2. Benefits of Added Value

• Charge higher prices, thus earning higher profits.
• Create a point of difference from competitors, establishing a Unique Selling Point (USP).

3. How to Increase Added Value

• Increase the selling price.
• Create a luxurious retail environment.
• Use high-quality packaging.
• Promote the brand so it becomes a "must-have."
• Create a USP.
• Deliver great customer service.
• Reduce the cost of materials and wastage in production (being careful not to affect quality).

4. Characteristics of an Entrepreneur

• Innovative: Visionary with creative and original

Core Business Concepts

• Quality: An essential or basic characteristic or feature that belongs to something; how good or bad something is.
• Perishable Goods: Goods that may decay or be destroyed.
• Consumer: A person or organization that buys something or uses a service.
• Planning Regulations: Official rules governing development and land use.
• Tariffs: A schedule or list of charges or fares; a system of duties charged by a government on imports or exports.
• Capital: The wealth owned or used in business by an individual.
• Remuneration: Reward; pay; to pay for in money or the equivalent.
• Stakeholders: A person or group owning a significant percentage of a company's shares.
• Output: The quantity or amount of something produced in a specified period.

Motivational