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

**PART B**

1. Understanding Price Elasticity of Demand

Price elasticity of demand measures the responsiveness of demand to changes in price. It indicates how much demand will change in response to a given price change.

Elasticity of Smartco's Fruit Products

Smartco operates in a competitive industry where price elasticity is high. This means that even small changes in price can significantly impact demand for their fruit products.

Predicting Smartco's Market Activities

The high price elasticity of Smartco's products influences their market activities in several ways:

• Pricing: Smartco must maintain competitive prices to attract and retain customers.
• Promotions: Promotions can reduce price elasticity by increasing product awareness and loyalty.

**PART

Ch 31: Balance of Payments

The balance of payments is a systematic record of all economic transactions between residents and non-residents of a country over a period. It is categorized into:

• Goods and Services (Trade Balance): This is the most significant component.

NX = NCO + Reserve Asset

Vehicle currency: $, Yen, Euro, Yuan

Real Exchange Rate: P / (P*e), where an increase in the Real Interest Rate (RIR) leads to a decrease in Net Capital Outflow (NCO), and a decrease in RIR leads to an increase in Net Exports (NX).

Purchasing Power Parity (PPP): This theory suggests that the nominal exchange rate is determined by the equation RER = P / (P*e) = 1.

Problem: The existence of non-tradable goods.

Arbitrage: Risk-free investment that leads to the Law

ch 1

accounting equation (ch 1):

the balance sheet shows the relationship between assets, liabilities, & stockholder’s equity at a particular date. In equation form, assets = liabilities + stockholder’s equity. This is referred to as the basic accounting equation.

financial statements (ch 1) format/content (which accounts belong on each financial statement):

4 types of financial statements:

income statement:

summarizes all revenue & expenses for a period (month, quarter, or year). If revenues exceed expenses, the result is a net income. If expenses exceed revenue, the result is a net loss.

• revenues
• service revenue
• expenses
• salaries & wages expense
• supplies expense
• rent expense
• insurance expense
• interest expense
• depreciation expense
• total expenses
• net

Launch

Start an action in order to introduce something (e.g. a new product).

Mailshot

Piece of advertising material sent to potential customers by post.

Mass Media

The main means of mass communication (newspapers, TV and radio).

Plug

Favourable publicity in a media for a commercial product (e.g. a book).

Poster

Large sheet of paper used in advertising.

Prime Time

Hours on radio and TV with the largest audience, usually in the evening.

Promote

Use advertising and publicity to try to increase sales of a product.

Roadside Signs

Large panels along roads and motorways used for outdoor advertising.

Slogan

Phrase used to advertise a product, or to identify a company or organization.

Slot

Specific time in a broadcasting schedule allotted for a commercial.

Soundbite

Short... Continue reading "Advertising Terminology and Definitions" »

Social Media

has transformed the ways in which people share and consume information. Social media has offered a host of new platforms to disseminate content, build relationships, foster engagement & better understand the needs of target audiences.

4 Phases Readiness

A sound crisis management strategy starts with preparation long before the onset of an actual crisis. While it’s impossible to plan for every future scenario, examine your company, facilities, people, products & environment to assess areas of significant risk & identify the potential threats that are both most likely to happen and cause harm. When a crisis breaks, things are going to accelerate & need a solid response plan in advance in order for your organisation... Continue reading "Effective Crisis Management Strategies" »

Cost Leadership

Requires a set of interrelated tactics, including:

• Aggressive construction of efficient-scale facilities
• Pursuit of cost reductions from experience
• Tight cost and overhead control
• Avoidance of marginal customer accounts
• Cost minimization in all activities in the value chain, such as R&D, service, sales force, and advertising
• Parity in differentiation with competitors

PITFALLS: lack of parity in differentiation, reduced flexibility, obsolescence

PRIMARY: EFFECTIVE

SECONDARY: todo lo que reduzca coste.

Transaction Processing Systems (TPS)

• Basic business systems that serve the organization's operational level
• Input: transactions (invoice, order, payroll), events
• Processing: Sorting, listing, merging, updating
• Output: detailed reports, lists,

Understanding Vertical Integration Strategy

Vertical integration is a strategy used by a company to gain control over its suppliers or distributors in order to increase the firm’s power in the marketplace, reduce transaction costs, and secure supplies or distribution channels. This strategy is one of the major considerations when developing corporate-level strategy.

The important question in corporate strategy is whether the company should participate in one activity (one industry) or many activities (many industries) along the industry value chain. For example, a company must decide if it only manufactures its products or if it will engage in retailing and after-sales services as well.

Forward Integration: Controlling Distribution

Forward integration... Continue reading "Vertical Integration Strategy: Forward vs. Backward Control" »

Understanding Disability Insurance

Before Purchasing Disability Insurance

• Review your employer’s plan.
• Determine if your union or professional organization pays disability benefits.

How Much Disability Coverage Do You Need?

Estimated required disability payments can be calculated as:

(Total monthly expenses × 120%) – (Non-wage reliable household income)

Group vs. Individual Disability Plans

• Group disability rates are not always the most economical because higher-risk and lower-risk individuals are grouped together in the plan.
• Lower-risk individuals can benefit from an individual plan because they may receive a lower premium.
• Higher-risk individuals may be able to obtain coverage through a group plan that they could not obtain with an individual

Group 1: Business Status

Challenge

Something that needs great mental or physical effort in order to be done successfully.

Booming

Increasing or becoming successful and producing a lot of money very quickly.

Disappointing

Not as good as you had hoped or expected; not satisfactory.

Hanging On

If you hang on, you manage to survive, achieve success, or avoid failure in spite of great difficulties or opposition.

Flourishing

Growing or developing successfully.

Thriving

Very successful and developing well.

In Decline

When something declines, it goes downhill.

Struggling

Unsuccessful but trying hard to succeed.

In Demand

Needed or wanted by many people.

Group 2: Idioms Describing Success and Failure

Bring the House Down

This is when people are very entertaining and cause... Continue reading "Business Vocabulary: From Booming to Disappointing" »