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

Industrialization Strategies

Integral Industrialization

Followed in core countries, where all industries are industrialized. The pattern is to re-diversify the industry. The economy is articulated with a domestic market. Specialization is low, meaning it is very diversified.

Import Substitution Industrialization

Applied in the periphery, this involves industrialization to substitute imports. Countries industrialize to replace products they used to import. Income from basic products is used to develop industry.

Export Substitution Industrialization

Aims to replace the export basket. Focuses on exporting high-tech products to increase profits. These countries manage to acquire some technology transfers developed by multinationals.

Trade Policy Debates

Liberalism

Professional Personality Traits

Understanding key adjectives used to describe professional characteristics is essential for effective business communication.

Defining Key Personality Adjectives

Sociable

Likes to spend time with other people.

Ambitious

Wants to reach the top in their career.

Creative

Has a lot of new ideas.

Reliable

Does what they promise to do.

Relaxed

Is usually calm.

Hard-working

Spends a lot of time doing a good job.

Punctual

Likes to be on time.

Motivating

Encourages other people to work well.

Helpful

Is good at making things work.

Practical

Likes to do things for other people.

Applying Personality Traits: Maria's Profile

Maria is good in a team and she gets on well with her colleagues. She is extremely sociable. She is never late for meetings—she... Continue reading "Key Business Adjectives: Describing People and Markets" »

Partnerships and Limited Companies

Partnership: A business carried on in common with a view to profit.

Advantages:

• Shared responsibility
• Economies of scale
• Private accounts
• Spread profit for tax purposes

Disadvantages:

• Shared profit
• Joint and several liability
• Disagreements
• All profits taxed

Limited Company: Owned by shareholders, run by directors. It can be a public or private company and is a separate legal entity that pays corporation tax.

Advantages:

• Limited liability
• Perpetual succession
• Corporation tax

Disadvantages:

• Running costs
• Personal guarantees may be required
• Filing deadlines
• Private transactions
• Owner vs. manager conflict (payout or reinvest)
• Privacy (public accounts)

Inheritance Tax - Agricultural Property Relief

Must be occupied for 2 years. Relief... Continue reading "Partnerships, Limited Companies, and UK Tax Reliefs" »

Distribution Strategies

Intensive Distribution

Producers of convenience products and common raw materials typically seek intensive distribution—a strategy in which they stock their products in as many outlets as possible. These goods must be available where and when consumers want them. For example, toothpaste, candy, and other similar items are sold in millions of outlets to provide maximum brand exposure and consumer convenience. Procter & Gamble, Coca-Cola, and other consumer goods companies distribute their products in this way.

Exclusive Distribution

By contrast, some producers purposely limit the number of intermediaries handling their products. The extreme form of this practice is exclusive distribution, in which the producer gives... Continue reading "Distribution Strategies: Intensive, Exclusive, and Selective" »

Market Type Comparisons

• Niche market is the smallest type of market. (Small)
• Luxury market is more expensive than other markets. (Expensive)
• Mass market is the most popular type of market. (Popular)
• Mass market is larger than niche market. (Large)
• Luxury market is the most expensive type of market. (Expensive)
• Home market is smaller than export market. (Small)
• Home market is the most boring market in Chile. (Boring)
• Technology market is the most modern market nowadays. (Modern)

Brand and Product Comparisons

• Dominos makes the best hot dogs in Chile. (Good)
• Apple is more interesting than Samsung. (Interesting)
• Volvo is the safest car. (Safe)
• Rolex is fancier than Casio. (Fancy)
• Mc Cola is worse than Coke. (Bad)
• Microsoft has the most stable computer. (Stable)

Factors Affecting Consumer Spending

A nation’s consumer spending is affected by:

1. Current Disposable Income: Measured using the Average Propensity to Consume (APC) and Average Propensity to Save (APS).
2. Permanent Income: Based on the life-cycle model, measured using the Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).
3. Wealth: Calculated as assets minus liabilities (e.g., home equity minus mortgage) of a country, representing the sum total of individual residents’ wealth.

Components and Influences on Investment

Investment is composed of:

• Purchase of buildings.
• Equipment (machinery and production tools).
• Additions to stock (or inventory) of inputs and output.

Investment decisions are affected by:

1. Revenues: Firms invest if they

**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

Types of Contracts

Fixed-sum contract

• Lump-sum contract – The contractor completes a package of work for a single lump sum of money.
• Unit-price contract – The contractor performs certain well-defined items of work for a fixed price for each unit.
• Cost-plus-fee contract – The client pays all the construction costs and a fee for construction services. Bonuses and penalties for efficiency may apply.
• Work-by-force account – The client is its own constructor:

• Working with own forces.
• Subcontracting some parts or the entire project.

• Turnkey contract – The client delivers the facility design requirements; the contractor delivers the key to the building.
• Build-operate-transfer (BOT) contract – An extension of the turnkey method:

• The contractor designs,

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