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

Economic Boom and the Great Depression

A period of general prosperity in the 1920s ended with the collapse of the Great Depression in the 1930s.

Key Factors and Events

• Bull Market: A stock market in which stock prices were steadily increasing. In the bull market of the 1920s, stock prices became vastly inflated.
• Buying on Margin: Purchasers were able to buy stocks on margin, putting only 10% down and borrowing 90%.
• Speculation Boom: Refers to the practice of buying real estate, stocks, or anything else to sell later at a profit.
• Black Tuesday: The market crash on October 29th.
• Smoot-Hawley Tariff: Reduced international trade.

Key Figures and Groups

• Herbert Hoover: Republican who believed in Laissez-faire economics. He did not think the federal government

Stages in the Consumer Adoption Process

The adoption process consists of five distinct stages:

• Awareness
• Interest
• Evaluation
• Trial
• Adoption

This model suggests that the new product manager should focus on how to help consumers move through these stages.

Individual Differences in Innovativeness

People differ greatly in their readiness to try new products. There are five adopter groups:

• Innovators (2.5%): Venturesome; they try new ideas at some risk.
• Early Adopters (13.5%): Adopt new ideas early but carefully; they are often opinion leaders.
• Early Majority (34%): They are rarely leaders; they adopt new ideas before the average person.
• Late Majority (34%): Skeptical; they adopt new products after a majority of people have tried them.
• Laggards (16%): Traditional

Benefits of eMarketing Over Traditional Marketing

Demographics and Targeting

Internet users represent a desirable demographic for marketers, often possessing greater buying power and skewing towards the middle class. The internet's structure allows users to organize into focused groups, providing marketers easy access to niche markets. This targeted approach maximizes the effectiveness of marketing messages.

Adaptivity and Closed-Loop Marketing

Closed-loop marketing relies on constant measurement and analysis of marketing campaign results. Real-time analysis of responses allows for continuous adjustments, minimizing wasted advertising spend. This dynamic approach, combined with the internet's immediacy, allows for maximum marketing efficiency... Continue reading "The Power of eMarketing" »

Fundamental Economic Definitions

Budget

Es el cálculo, exposición, planificación y formulación anticipada de los gastos e ingresos de una actividad económica.

Budget Constraint

All possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent. It defines the boundary of the opportunity set (limits to the amount of money that is available to spend).

Sunk Costs

Costs that were incurred in the past and cannot be recovered.

The Budget Formula and Calculation

General Budget Formula

The budget formula calculates total expenditure based on prices and quantities:

Budget = P₁ × Q₁ + P₂ × Q₂ + ... + Pₙ × Qₙ

Where P and Q are the price and respective quantity of any number, n, of items... Continue reading "Key Economic Concepts: Budgeting, Efficiency, and Rationality" »

Economic Factors of Production and Income

Factors of Production Defined

• Land (including natural resources): All the "gifts of nature" that we use to produce goods and services.
• Labor: The work time and work effort that people devote to producing goods and services.
• Capital: Consists of tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services.
• Entrepreneurship: The human resource that organizes labor, land, and capital. This involves coming up with new ideas about what and how to produce, making business decisions, and bearing the risks that arise from these decisions.

Human Capital

Human Capital is the knowledge and skill that people obtain from education,... Continue reading "Understanding Economic Factors of Production" »

Personal Selling

Personal selling is utilized when the nature of a product varies, such as in housing, where price and quality fluctuate, or when customer requirements are unique. It is essential in the following scenarios:

• When customers require advice to determine the most appropriate product for their situation.
• When selling expensive products, such as automobiles.
• When negotiation regarding price or product specifications is necessary, which is common in B2B transactions (e.g., bulk discounts).
• When a business is represented at a trade fair.

Public Relations

Public relations is effective for improving a brand or company's image and raising public awareness. Activities include:

• Sponsoring events, such as football matches.
• Donating products to charity.

Understanding Organizations

An organization is a tool used by people to coordinate their actions to obtain something they desire or value, while attempting to fulfill a common goal.

Organizations are a response to and a means of satisfying human needs. They provide goods and services, employ people, and bring together people and resources to produce products. Ultimately, organizations exist to create value.

Why Do Organizations Exist?

People working together to produce goods and services create more value than people working alone. Organizations exist for the following reasons:

• Increase specialization and the division of labor: Division of labor allows for specialization, enabling individuals to become experts at their jobs.
• Use large-scale technology:

EU Energy Market Liberalization Packages

First Package: Directive 96/92 concerning common rules for the internal market in electricity and Directive 98/30 on the internal market of natural gas. Liberalization was to be progressive, applying gradually to different categories of consumers. It introduced a partial opening of national markets to competition; both required liberalization of certain segments of their electricity and gas markets to enlarge.

Second Package: Directives 2003/54 and 2003/55. The liberalization process took place at different speeds in different Member States, aiming at the creation of an internal market. It required national gas and electricity markets to be liberalized for large consumers by 2004 and for all consumers... Continue reading "EU Energy Liberalization and Banking Union Framework" »

Charts and Graphs

• Pie chart
• Line graph
• Bar chart
• Table
• Flow chart
• Organigram

Types of Lines in Graphs

• Solid line
• Curve
• Fluctuating line
• Dotted line (puntos)
• Axis
• Undulating line
• Broken line

Describing Trends: Increase

• To increase = raise (aumentar)
• Rise = go up (subir)
• Grow
• Boom / soar / climb (remontar)
• Jump = skyrocket (dispararse)
• To reach a peak (pico)

Describing Trends: Decrease

• To decrease
• Fall
• Plunge (picado)
• Drop
• Go down
• Decline
• Collapse

Describing Trends: Stability

• To remain stable
• Stay constant
• Stabilize

Describing Trends: Leveling Off

• To level off / out = flatten out (nivelar)
• Stop or start falling / rising

Trend Modifiers: Size

• Dramatically
• Vastly
• Hugely
• Significantly
• Considerably
• Slightly (leve)

Trend Modifiers: Speed

• Substantially
• Rapidly
• Suddenly
• Gradually

Incoterms

• EXW: Ex

Loan Types and Capital Cost Analysis

Understanding Loan Structures

American Loans Explained

In American loans, all intermediate payments only include interest expenses. The principal is paid back at maturity.

C − Fees = I = ∑T_i · C_o + C_o

_{o o j=1} (1+R_B)^j (1+R_B)^T

French Loans Explained

The loan is repaid with equal payments (P), which include both interest and partial repayment of the principal. The process requires three steps:

1. Calculate the constant payment per period ‘P’.
2. With the computed value ‘P’, calculate the cost of debt.
3. Compute the effective annual rate.

The Cost of Equity Capital

Firms with excess cash can either pay a dividend or make a capital investment. Because stockholders can reinvest the dividend in risky financial assets,... Continue reading "Financial Valuation: Loan Structures and Equity Cost Models" »