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

1 - In the Five Force Model: Factors Influencing Existing Competition

1. The degree of existing rivalry - Determined by number of firms, relative size, degree of differentiation between firms, demand conditions, exit barriers.
2. Threat of potential entrants - Determined by attractiveness of industry, height of entry barriers (e.g., start-up costs, brand loyalty, regulation, etc.)
3. Bargaining power of suppliers -Determined by number of suppliers and their degree of differentiation, the portion of a firm's inputs obtained from a particular supplier, the portion of a supplier's sales sold to a particular firm, switching costs, and potential for vertical integration.
4. Bargaining power of buyers - Determined by number of buyers, the firm's degree of differentiation,

Financial Terms

Basic Concepts

• Mortgage: A loan to buy real estate.
• Deposits: Money you put in the bank.
• Pension: Money paid to a retired person.
• Stock/Shares: Securities representing part-ownership of a company.
• Capital: Money invested in a business.
• Bonds: Interest-paying securities issued by companies that need to borrow.

Company Actions

• Takeover: When a company gains control of another by buying its stock.
• Merger: When two formerly separate companies join together.

Financial Institutions

1. Retail Banks: Making loans, receiving deposits.
2. Building Societies: Arranging mortgages.
3. Insurance Companies: Providing pensions, offering life insurance.
4. Investment Banks: Issuing shares or bonds, arranging mortgages, arranging or fighting takeover bids.

Vocabulary

Key

Monetary Policy

Monetary policy involves actions taken by a central bank or regulatory committee to control the money supply and influence interest rates. These actions include modifying interest rates, buying or selling government bonds, and adjusting bank reserve requirements.

Types of Monetary Policy

Expansionary Monetary Policy

Expansionary monetary policy increases the money supply to lower unemployment, encourage borrowing and consumer spending, and stimulate economic growth.

Contractionary Monetary Policy

Contractionary monetary policy slows or decreases the money supply to control inflation. While necessary at times, it can slow economic growth, increase unemployment, and reduce borrowing and spending.

Example: The Federal Reserve in the 1980s

To... Continue reading "Monetary Policy: Controlling Inflation and Economic Growth" »

Market Segmentation and Targeting

True/False Questions

Question 4

Dove, a division of Unilever, traditionally targeted both men and women with its Dove-branded skin care products.

Question 6

For some consumer products such as cigarettes, soft drinks, and candy that have a low per-unit cost, income is often a more valuable segmentation variable than population.

Question 12

Categories such as "successful idealists" and "affluent materialists" can be used to describe psychographic segmentation, not age segmentation.

Question 13

Sometimes it is preferable to market to a particular mind-set rather than an age group; in such an instance, psychographic studies can help marketers arrive at a deeper understanding of consumer behavior than is possible with traditional... Continue reading "Understanding Market Segmentation and Targeting" »

Basic Economic Problems

In view of the scarcity of resources at our disposal and the unlimited ends we seek to achieve, the economic problem lies in making the best possible use of our resources so as to get maximum satisfaction in the case of the consumer and maximum profit for the producer. Hence, economic problem consists in making decisions regarding the ends to be pursued and the goods to be produced and the means to be used for the achievement of certain ends.

Fundamental Problems facing an economy (Basic Economic Problems)

What to Produce?

The first major decision relates to the quantity and the range of goods to be produced. Since resources are limited, we must choose between the different alternative collection of goods and services that... Continue reading "Understanding Basic Economic Problems and Economic Systems" »

1. What is Economic Competition?

Economic competition is the process of rivalry between undertakings for consumer choice by offering the best possible goods and services.

2. Negative Effects of Lack of Competition

When markets lack effective competition, several negative consequences can arise:

• High Prices (Artificial): Without competition, businesses can artificially inflate prices beyond reasonable levels.
• Low Quality: The absence of competitive pressure can lead to a decline in product or service quality.
• Limited Options for Consumers: Consumers face fewer choices when competition is limited.
• Lack of Innovation: Without the drive to outperform competitors, innovation stagnates.

3. Economic Regulation vs. Competition Policy

While both aim to promote... Continue reading "Understanding Economic Competition and Its Effects" »

More engaged employees = up to 21% productivity boost

Strategy

Creating a competitive advantage that generates superior, sustainable financial returns.

• Need to choose a position against the competition, player dynamic, and industry changes.
• Successful strategy considers: external environment, internal activities, and long-term industry/organizational changes.
• Decisions should be mutually reinforcing, leading to optimization of effort.

Aspirations

The purpose and goals of a person or corporation, essential for a strategy.

• Personal Aspirations: Intrinsically motivated, more than a goal; enduring and motivated from within, an expression of the search for fulfillment.
• Organizational Aspirations: Extrinsically motivated, encompassing mission, vision, and

Understanding the Sustainable Development Goals (SDGs)

The United Nations Sustainable Development Goals (SDGs) are a universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity. There are 17 interconnected goals:

• 1. No Poverty: End poverty in all its forms everywhere.
• 2. Zero Hunger: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture.
• 3. Good Health and Well-being: Ensure healthy lives and promote well-being for all at all ages.
• 4. Quality Education: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.
• 5. Gender Equality: Achieve gender equality and empower all women and girls.
• 6. Clean Water and Sanitation:

The Welfare State: A Social Contract

The welfare state is a system in which the government provides citizens with a minimum level of education, healthcare, and financial support, even during challenging circumstances such as illness, retirement, disability, or unemployment.

Types of Taxes

Value-Added Tax (VAT)

A tax levied on the price of goods or services paid by consumers.

Income Tax

A tax on the income earned by individuals or businesses, including salaries and profits.

Company Tax

A tax on the profits generated by companies.

Social Security Contributions

Taxes paid by both employers and employees to fund social security programs.

Measuring Social Inequality: The Gini Coefficient

The Gini coefficient is a measure of social inequality, ranging from 0... Continue reading "Understanding the Welfare State and Social Security: A Comprehensive Guide" »