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

Key Concepts of the European Union

Demographic Indicators

• Population Density: Calculated by dividing the area of a place by the number of inhabitants that live there.
• Urbanization Rate: Expressed as a percentage, it represents the population living in cities compared to the total population of a country or area.

EU Treaties and Their Significance

• Treaty of Paris (1951): Established the European Coal and Steel Community.
• European Coal and Steel Community: Created by the Treaty of Paris.
• Treaty of Rome (1957): Established the European Economic Community (EEC), or Common Market, aiming for the free movement of persons and goods.
• Single European Act: Promoted economic and monetary integration and strengthened structural funds.
• Maastricht Treaty: Created

The Capitalist System

Capitalism, also known as a free market economic system, is dominant in today's world. This system has four main features:

• Private Ownership: The private ownership of the means of production, including land, machinery, technology, and businesses.
• Profit Motive: The pursuit of profit as the primary engine of economic activity.
• Supply and Demand: The regulation of the quantity of products made by companies and their price is determined by the law of supply and demand. Under this law, the production and the price of an item increase when the product supply is low, and decrease when there are plenty of products to meet consumer demand.
• Free Competition: The existence of free competition means that any individual or company can

Monopoly and Consumer Harm

Monopolies reduce production to raise prices, benefiting at the expense of consumers. This conflict of interest differs from perfect competition. Monopolies cause inefficiency: consumer losses exceed monopolist gains. By producing less than where marginal cost equals market price, monopolies increase profits but harm consumers.

Reducing output and raising prices above marginal cost allows monopolies to capture consumer surplus as profit, creating deadweight loss. In a monopoly, total surplus (consumer surplus and profit) is less than in perfect competition, resulting in a net loss to society. Individuals who value the good above its marginal cost are left without it due to high monopoly prices, indicating a market failure.... Continue reading "Monopoly Inefficiencies and Economic Policy Solutions" »

Wage Slip

With a wage, the employer is obligated to provide the employee a document known as a wage slip, also known as a payroll slip, specifying individual earnings as well as deductions.

Contribution Base

The contribution base is an amount calculated in relation to workers' salaries, on which tax rates apply for contributions to be deducted from the payroll.

Perceptions (Non-Wage Benefits)

Perceptions are non-wage benefits characterized by being excluded from social security contributions, provided they do not exceed certain limits. The excess over the set limits is computed on the basis of social security contributions.

Permanent Displacement

Permanent displacement occurs when a worker is assigned to a workplace in the same company requiring a... Continue reading "Key Concepts in Employment Law" »

Direct and Indirect Methods for Company Valuation

In recent years, company acquisitions and mergers have significantly increased, making it crucial to find effective valuation methods. These methods provide insights into a company's true market value. The approach to valuation depends on the motives, objectives, and reasons behind the assessment. There are simple methods, which use a single endpoint, and composite methods, which combine several criteria. Composite methods include direct (Anglo-Saxon) and indirect (practical) approaches. These methods aim to determine a company's value by combining different criteria, often drawing from experience. They consider intangible assets, such as goodwill, which reflects the company's market appreciation,... Continue reading "Company Valuation: Direct and Indirect Methods Analysis" »

The Old Regime: Definition

The Old Regime refers to the economic, social, and political systems that emerged from the decline of feudalism and the development of capitalism, alongside the rise of authoritarian monarchies.

Key Features

• Persistence of the manorial economy
• Early development of commercial capitalism
• Stagnant population growth
• Monarchical absolutism
• Stratified society

Commerce

Domestic trade developed slowly due to limited surpluses, inadequate transportation, and low productive specialization. Colonial trade began to flourish, stimulating the European economy by providing raw materials and creating markets for manufactured colonial products. Finances also evolved, with new credit arrangements emerging to meet the needs of banks. This facilitated... Continue reading "Old Regime to Capitalism: 17th Century Transformation" »

The Evolution of Money

Barter: The First Exchange System

Barter was the initial form of exchange, involving trading one object directly for another. This system became insufficient as trade expanded, leading to challenges with barter.

Commodity Money: Goods as Currency

Certain goods started functioning as money. These were generally accepted, divisible for varied payments, easily transportable, and durable.

Paper Money and the Gold Standard

Later, money transitioned from a commodity to a medium of exchange. Its value isn't derived from its intrinsic use but from the goods and services it can purchase. As gold became a valued commodity, people sought secure storage, leading to the emergence of the first 'banks'. This led to the gold standard, where... Continue reading "From Barter to Banking: Money's Transformation" »

Financial Management Essentials

Key Concepts in Finance

Dividends

Dividends represent the distribution of corporate profits to shareholders based on the number of shares held.

Financial Management Tasks

A primary task of financial management is determining the sources of necessary resources.

Fundraising Sources and Their Uses

The main sources of external funding are equity contributions from owners and debt financing from creditors. Internal sources include cash sales and collections.

Financial Covenants

Financial covenants are indicators used by banks to ensure that borrowers operate prudently to repay their debt.

Financial Management Techniques

Financial Analysis

Financial analysis involves calculating indicators, ratios, and proportions between different... Continue reading "Financial Management: Key Concepts and Techniques" »

Item 1: Company Functions in a Market Economy

Directing and Coordinating Production Factors

The pursuit of efficiency in utilizing scarce resources drives the continuous division of labor and specialization, ultimately boosting productivity.

Creating or Increasing Value of Goods

Businesses enhance the ability of goods to satisfy human needs. As goods become more useful, their value and the price consumers are willing to pay increase.

Taking Risks

Companies assume financial risks by paying for production factors (wages, materials, interest) before selling products, uncertain of the outcome.

Creating Wealth and Generating Employment

Businesses play a vital social role by contributing to economic development, creating jobs, generating income, and improving... Continue reading "Company Functions, Components, and Objectives in Market Economy" »