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

Balance of Payments (BoP)

Y = C + I + G + EX – IM = C + I + G + CA

When production > domestic expenditure = exports > imports = current account > 0 (surplus) and the trade balance is positive.

CA = S – I. If Savings < Investment: current account deficit (IM > EX)

Components of BoP

Current Account

The current account tracks flows of goods and services (imports & exports), income receipts (e.g., interests earned), and net unilateral transfers (gifts, remittances).

Financial Account

The financial account tracks flows of financial assets (shares, stocks) and foreign direct investment (FDI). It represents the difference between sales of domestic assets to foreigners and purchases of foreign assets by domestic citizens.

• Inflow (+):

Investment & Trading

Key Concepts

Collateral: Assets a borrower uses to secure or guarantee a loan.

Shares: Certificates representing part ownership of a company.

Institutional Investors: Financial organizations that own a lot of shares.

Day Traders: People who buy and resell shares in a very short time, often just a few hours.

Raise Capital: To get money from investors with which to run a business.

Issue: To offer securities for sale to financial institutions and the public.

Market Dynamics

Bid-Offer Spread (Bulls & Bears): The difference between the buying (bid) and selling (offer) price of shares. Bulls are investors who buy shares expecting prices to rise, while bears sell shares anticipating price drops.

Market Makers: Traders who buy and... Continue reading "Finance Essentials: A Glossary of Key Terms" »

The role of price in the marketing mix

When pricing a product, a business needs to choose one that fits with the rest of the elements in the marketing mix

Price determination in a free market

People think that prices are determined by the seller of the product, but that is not quite so. Prices are driven by market forces called demand and supply.

Demand

Demand is not only that people want to buy a product, but that they want it and are willing to pay for it. Prices can affect how much demand there is for a product. Normally, if the price goes up, demand goes down, and vice versa.

Supply

Supply also varies with price. However, it is different. If the price goes up, then the owners would want to be supplied with more products to take advantage of the... Continue reading "Understanding Price Determination in Marketing" »

Topic 1: The Marketing Function

What is Marketing?

Marketing is the process of identifying, understanding, and meeting customer and societal needs by creating, communicating, delivering, and exchanging value.

Key Concepts:

• Need: A basic requirement for survival (e.g., food, shelter).
• Want: A specific desire for a product or service that can satisfy a need.
• Demand: Wants backed by the ability and willingness to pay.
• Product: Any tradable offering that satisfies a need, including tangible goods, services, ideas, and experiences.
• Market: All potential buyers who share a need or desire and have the ability to exchange value.
• Consumer Insight: A non-obvious understanding about customers that can change their behavior for mutual benefit.

Evolution of Marketing

1. Product

Factors Affecting Supply

Costs in Supplying Goods to the Market

• Price of raw materials
• Wage rates

Improvements in Technology

Makes it cheaper to produce goods.

Taxes and Subsidies

Higher taxes mean higher costs.

Climate (for Agricultural Products)

Supply of crops depends on weather.

Impact of Supply on Market Price and Sales

If supply falls, the market price will rise, sales will fall, and the supply curve will shift to the left. If supply rises, the market price will fall, sales will rise, and the supply curve will shift to the right.

Elasticity of Supply

Elasticity of supply measures how easily and quickly supply can change when prices change. This depends on how quickly products can be produced and supplied, which is often slow for agricultural products.... Continue reading "Supply, Demand, and Pricing Strategies in Business" »

Market expansion strategies (concentration-specialization and spreading-flexibility)

Motivation for internationalizing: Proactive and Reactive:

• Reactive: market-competitive environment-political environment-economic environment-chance occurrence-extra inventory-exporting.
• Proactive: expanding sales-launch an offensive-power & prestige, lower costs of labor-less stringent rules-extend life of a product.

Rules of entry mode: Naive-Pragmatic – strategy.

Entry modes: Exporting-Contractual- Investment.

• Exporting: Types:
  • Direct (ad: control foreign markets-good info feedback-better protection of trademarks. Dis: higher start-up costs-high investment-info requirements)
  • Indirect (ad: fast market access-Little commitment-export management is outsourced.

Capacity Planning Considerations

Capacity can be stated in terms of inputs or outputs. Planning capacity too low results in unmet demand, while planning it too high results in higher costs.

Facility Considerations

Facility: Permanent, semi-permanent, or temporary commercial or industrial property such as a building, plant, or structure, built, established, or installed for the performance of one or more specific activities or functions. When deciding where to produce (Facility), important factors to consider:

• Proximity to market
• Availability of raw materials, transportation, power, and labor
• Climatic influences and community characteristics
• Taxes and inducements

Facility Layouts

1. Fixed-Position Layout

A layout that brings all resources required to... Continue reading "Optimizing Capacity, Facility Layouts, and Supply Chain Management" »

Potential Drawbacks of Revenue Management

While revenue management offers significant advantages for businesses, certain practices can lead to customer dissatisfaction. Hotels, in particular, should avoid the following:

• Offering insufficient benefits in exchange for restrictions.
• Imposing overly severe restrictions on discounts.
• Not informing customers of changes in the reference transaction.

Insufficient Benefits for Restrictions

First, if hotels do not offer sufficient incentives to customers in exchange for imposing restrictions, customers are likely to view the practice as unacceptable. For example, in this study, respondents did not view a free breakfast or a room upgrade as an acceptable trade-off for cancellation penalties.

Overly Severe Discount

Marketing Strategy and the Marketing Mix

A strategic plan defines a company's overall mission and objectives. Consumers are at the center. The goal is to create value for customers and build profitable customer relationships. Next comes the marketing strategy, which is the logic by which the company creates customer value and profitable customer relationships. The company decides which customers it will serve and how.

Customer-Driven Marketing Strategy

Market Segmentation

The marketer must determine which segments offer the best opportunities. Consumers can be grouped in various ways based on geographic, demographic, psychographic, and behavioral factors. The process of dividing a market into distinct groups of buyers is called market segmentation.... Continue reading "Mastering Marketing Strategy: Segmentation, Targeting & Mix" »

Understanding Pension Plans

A private pension plan is a savings plan with flexible contributions designed for future retirement, disability, or death, or to complement a public pension. A company pension plan is a retirement plan where an employer makes contributions into a fund for a worker's future benefit.

Benefits of a good pension plan often include favorable taxation, versatility, and flexibility in payments.

• Private Pension Calculation Example: % of previous salary - public pension
• Public Pension Calculation Example: Regulating base x % (depending on years)

Money: Functions and Types

Money is generally accepted as a medium of exchange for payments and collections.

Functions of Money

1. Medium of exchange
2. Store of value
3. Unit of account

Types of Money

1. Legal