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

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How to use implications of multiple output cost functions?

Economies of Scope and Cost Complementarity

Economies of scope

• total cost of producing both products together is less than the total cost of producing both products separately

Implications for managerial decision making: managers alert to the possibility of profitably extending the product line to exploit economies of scope: reasons for mergers and acquisitions, reasons for not disinvesting a product line

Cost complementarity

• exists when the marginal cost of producing one output is reduced when the output of another product is increased:

Example of specialized investment

An investment in a particular exchange that cannot be recovered in another trading relationship

• Eg. Spending

Between 1870 and 1914, the Second Industrial Revolution transformed global economies, characterized by rapid industrialization driven by the growth of the financial sector and the rise of finance capitalism.

Financial Innovations and Capital Growth

This era saw significant innovations in finance, providing new sources of capital for burgeoning industries:

• Joint-Stock Company: A company formed by individuals who invested by buying shares, receiving a proportionate part of the company’s profits and losses.
• Banks: Financial institutions began to lend money to businesses in return for interest and started investing in shares. These changes fostered a closer union between financial and industrial capital.
• Stock Exchange: A marketplace where shares

Core Accounting Equation Elements

Understanding the fundamental components of a business's financial position:

• Assets: Resources owned by the business that have future economic value, such as cash, land, and equipment.
• Liabilities: Obligations or debts owed to external parties, including loans and accounts payable.
• Equity: The owners' residual claim on the assets after deducting liabilities, comprising common stock and retained earnings.
• Revenue: Income generated from the primary operations of a business, typically from sales of goods or services.
• Dividends: Distributions of a company's earnings to its shareholders.
• Accounts Receivable (A/R): Money owed to the company by customers for goods or services that have been delivered but not yet paid for.

Enterprise Location

The location of a business is usually considered when the business is first setting up. We may come across two kinds of problems: location and dimension. First, we should research the market and see if our product has any demand or interest, and analyze the level of competition. Then, we should analyze raw materials’ supply, the job market, the cost of the land where the business will be located, transportation facilities, government influence and laws, facilities for investing and acquiring money, and finally, the region's economic development.

Enterprise Structures

Holding

The parent company buys the shares of the subsidiaries or branches, so the parent is the owner. The parent makes the most important decisions because,... Continue reading "Enterprise Structures: Location, Holding, and More" »

  The rise of finance capitalism affected an organisation of work, the development of consumerism, economic inability and the expansion of international trade.

THE ORGANISATION OF WORK

  The assembly line developed: each worker specialised in a task, such as placing a nut. Henry Ford was the first to use the assembly line in his car manufacturing company.

THE BIRTH OF THE CONSUMER SOCIETY

  The consumer society led to a new way of thinking; people began to value material wellbeing highly.

  *The upper class was the only social group that could afford luxury items.

  *The lower class had lower wages and couldn't afford luxury items.

Shake Well Before Using

Support: On paper

Application: Press the body

Storage: Mint; store after use

Organizational Structures

Hierarchy Levels

• Tall Vertical: Many levels
• Flat Horizontal: Few levels

Span of Control

• Narrow: Limited span
• Wider: Increased span

Decision Making

• Centralized: Decisions made at the top
• Decentralized: Decisions made at lower levels

Chains of Command

• Long: Multiple layers of authority
• Shorter: Fewer layers of authority

Leadership

• Autocratic: Authoritarian leadership style
• Democratic: Participative leadership style

Delegation

• Limited: Less delegation of authority
• Increased: More delegation of authority

Types of Organizational Structures

• Structure by Hierarchy: Senior, middle, junior management/supervisor-worker
• Structure by Function: Board of

Types of Unemployment

Cyclical: Changes according to the economic cycle.

Seasonal: Caused by seasonal variations in demand. For example, employment in the tourism sector often increases during the summer.

Structural: Occurs due to a mismatch between available jobs and workers' skills, often caused by lack of access to education/training or shifts in industry demand.

Macroeconomic Policy Definition

Actions taken by governments to steer the economy towards specific goals by managing key economic indicators. This includes setting fiscal policy (taxation and public spending) and influencing the price level (often via interest rates set by the central bank).

Macroeconomic Policy Goals

1. Economic Growth (GDP)
2. Full Employment
3. Price Stability

Types of Macroeconomic

What is Economic Activity?

Economic activity encompasses all processes used to obtain goods and services that people need. This includes essentials such as food, clothing, housing, or medical attention.

Phases of Economic Activity

Economic activity is typically divided into three main phases:

• Production

  This phase involves the creation of goods and services.

• Consumption

  This is the process where individuals and households buy and use goods and services to satisfy their economic wants and needs.

• Distribution

  This phase refers to the movement of goods and services from their places of production to the consumer.

Evolution of Payment Methods

Throughout history, various methods have been used for payment:

• Barter
• Natural coins (e.g., shells, salt)
• Metal coins
• Paper

Understanding Key Development Indicators

HDI (Human Development Index)

The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable, and having a decent standard of living. It was created to emphasize that people and their capabilities should be the ultimate criteria for assessing a country's development, not economic growth alone.

MPI (Multidimensional Poverty Index)

The Multidimensional Poverty Index (MPI) is a summary measure of average achievement in key dimensions of human development: health, education, and a decent standard of living. This index replaced HDI in some contexts. It is used instead of Gross National Income (GNI) because GNI... Continue reading "Understanding Key Development Indicators: HDI, MPI, GPI & More" »