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

inequality:the unfair situation in society when some people have more opportunities,money, etc. Than other people:

global village:The term global village represents the simplifying of the whole world into one village through the use of electronic media.

MEDC:A developed country (MEDC) is a rich country.

LEDC:A developing country (LEDC) is a poor country.

fair trade:comercio justo(trade between companies in developed countries and producers in developing countries in which fair prices are paid to the producers.)

conflict-mineral:(Especially in Africa) A mineral mined in an area of armed conflict and traded illicitly to finance the fighting.

economic development:Economic development is the process by which a nation improves the economic, political,

Shareholder and Manager Contracts

A complete contract between shareholders and managers would specify exactly what the manager will do under each of all possible future contingencies.

Current Account Surplus and Foreign Investment

A country with a current account surplus is likely to acquire foreign firms in an overseas country, thereby increasing its net foreign wealth.

Understanding Currency ETFs

A currency exchange-traded fund (ETF) is a portfolio of financial assets in which shares representing fractional ownership of the fund trade on an organized exchange.

Evolution of International Monetary Systems

The chronological order of international monetary systems is as follows:

1. Bimetallism
2. Gold standard
3. Bretton Woods system
4. Flexible exchange rate regime

Purchasing

Countertrade as a Pricing Tool

Countertrade occurs when products are exchanged for other products instead of cash. For instance, PepsiCo sold Pepsi to Russians in exchange for the exclusive rights to sell Stolichnaya vodka in the USA.

Although cash might be the preferred method of payment, countertrades are becoming an important part of trade with Eastern Europe, China, and some Latin American and African nations.

Types of Countertrade

Countertrade includes four distinct transactions:

Barter

Direct exchange of goods between two parties. In a barter transaction, the seller must be able to dispose of the goods at a net price equal to the expected selling price in a regular, for-cash transaction, and the seller must know the market and the price for... Continue reading "Understanding Countertrade Pricing Mechanisms" »

The External Business Environment

All businesses operate in an external environment, and its conditions significantly impact them. The environment consists of various conditions external to the business.

Strategic Planning and STEEPLE Analysis

There are few ways to control the influence of external environmental factors. To succeed and overcome these challenges, a contingency plan is used to identify environmental changes and features. This allows a business to develop strategies and objectives to prevent issues from becoming major problems. A tool used to create this analysis is STEEPLE.

STEEPLE includes Social, Technological, Economic, Ethical, Political, Legal, and Ecological factors. Here, the business considers the influence of each element... Continue reading "STEEPLE Analysis for Strategic Business Success" »

Dual Income Tax System

This system levies a proportional tax rate on all net income (capital, wage, and pension income less deductions) combined with progressive tax rates on gross labor and pension income.

Implemented in Denmark, Finland, Norway, and Sweden, the dual income tax (DIT) system was introduced for reasons of economic efficiency, net-wealth tax, and a broader tax base.

Key features:

• Capital incomes are taxed at a lower rate.
• Acts as a hybrid model between income and consumption concepts (interest-adjusted income tax).
• All income and profit are divided into capital income (proportional/flat rate) and labor income (progressive rate).
• Features the lowest personal income tax (PIT) percentage on labor income.

Dividend Taxation

Corporate tax systems... Continue reading "Dual Income Tax & Dividend Taxation: A Comprehensive Guide" »

Factors Influencing Business Ownership Structure

Key Determinants of Legal Status

• Growth: Many businesses start small and gradually expand. Most businesses change their legal status as they grow, primarily to raise more capital.
• Size: Small businesses typically operate as sole traders or partnerships. Public limited companies (PLCs) are much larger, often having thousands of employees and huge turnovers.
• The Need for Finance: Finance is a primary reason owners change their business's legal status. Changing the organizational structure is often the only way to secure significant additional funding.
• Control: Some owners value independence and complete control over the business. This preference often leads them to remain sole traders.
• Limited Liability:

Fundamentals of Marketing Management

The role of the Marketing Manager involves strategic decisions regarding Market Share, focusing on the core elements of the Marketing Mix: Product, Price, Promotion, and Place.

The Evolution of Marketing Eras

• Production Era (Pre-1920s): Goods were scarce; buyers accepted what was available. (Approx. XIX Century to 1920)
• Sales Era (1920 to 1960): Increased production necessitated aggressive selling to move products out.
• Marketing Concept Era (1960 to Present): Focus shifted to satisfying customer needs and delivering value.
• Customer Relationship Era (1990 to Present): Emphasis on satisfying high customer expectations and building long-term relationships.

Strategic Decision Making

Key components of strategic decision... Continue reading "Marketing Strategy Fundamentals: Eras, Data, and Consumer Decisions" »

Essential Financial and Business Vocabulary

Market Trends and Movements

• Go up: Goes through the roof, rally, stage a comeback.
• Go down: Slide, tumble, drop.
• Synonyms: Drop = went down; Rise = grow; Plunge = drop; Stock = shares = equity; Profit = income = markup = earnings.

Corporate and Financial Terms

• Fine: A monetary penalty for breaking the law.
• Conglomerates: A firm engaged in two or more unrelated businesses.
• Underwriting: The act of undertaking to purchase at an agreed price any unsold portion of a public issue of shares.
• Depositors: A person or entity that deposits money in a bank.
• Merger: A decision by two companies to combine all operations, officers, structure, and functions.
• Takeover: When a company gains control of another by buying its stocks.

Essential Macroeconomics and Market Terms

Types of Unemployment and Labor Concepts

• Cyclical - fired because of economic cycles (laid off during downturns).
• Structural / Seasonal - structural: changes in the economy that make skills obsolete; seasonal: employment that changes by season.
• Frictional - moving from one job to another.
• Discouraged - people who give up looking for a job.
• Marginally - when you have a good job.

Current Economic Condition and Policy Options

It is a contractionary economy because of lower GDP and inflation, and unemployment is on the rise. Fiscally, we can decrease taxes and raise government spending. The Federal Reserve should buy bonds in open market operations (putting money into circulation).

Tax Systems

• Proportional - everybody

Economics

Definition

Derived from the Greek word ‘oikonomos,’ meaning “one who manages a household,” economics studies how societies allocate scarce resources to satisfy unlimited wants and needs.

Core Principles

1. Trade-offs: Acquiring something necessitates forgoing something else (e.g., watching TV versus studying).
2. Opportunity Cost: The cost of something is the value of the next best alternative forgone.
3. Marginal Thinking: Rational individuals make decisions by comparing the additional benefits and costs of an action.
4. Incentives: People's behavior is influenced by incentives, such as price changes (e.g., lower prices may increase consumption).
5. Benefits of Trade: Specialization and trade allow individuals and nations to achieve higher levels