Macroeconomics and Market Structures Analysis

Introduction to Macroeconomics

Macroeconomics focuses on the study of the economic situation nationally and internationally. The set of goods and services generated by firms in a country is called the National Product.

National Product and Economic Indicators

Gross Domestic Product (GDP) is the value of all the final goods and services accruing to firms from a country during a given period. The formula is: PN = C + I + CP + XM.

Aggregate Supply is the total amount of goods and services that businesses in a country are willing to produce and sell in a given time period. Economic equilibrium occurs if, at a given level of aggregate supply, the price for producers and consumers meet.

GNP and NNP Calculations

Gross National Product (GNP) is calculated without taking into account the depreciation that capital equipment companies in the country have suffered. Net National Product (NNP) is used if you consider the loss of value suffered by these assets.

• GNP = Gross Investment + C + CP + XM
• NNP = Net Investment + C + CP + XM
• Net Investment = Gross Investment - Depreciation

GDP is the value of all goods and services produced within a country, considering both domestic and international factors. Per Capita Income (RPC) shows the share of national income that corresponds, on average, to each person in the country.

Short-term Economic Indicators

Short-term economic indicators serve to show the evolution that a number of economic variables have had in a recent time period (last month or quarter):

• Industrial and agricultural production activity indicators.
• Consumption indicators: Car registrations, cement consumption, etc.
• Labor market indicators: Persons affiliated with Social Security, unemployment rates, etc.
• Wage and price indicators: Consumer Price Index (CPI), wage increases, etc.

Factors Not Included in GDP

The following do not fall into GDP calculations:

• Labor developed in the underground economy.
• The deteriorating quality of life and the environment from uncontrolled production.
• The value of domestic chores.

Market Structures and Land Markets

Monopoly and Oligopoly

A Monopoly is part of imperfectly competitive markets and is related to the existence of barriers to entry. This occurs when there is a lack of competition or a slight limitation of it. One party has influence in the forced market price.

Kinds of Monopoly

• Monopoly of supply: The limitation is given by the supply side.
• Demand monopoly (Monopsony): One single plaintiff against many bidders.
• Bilateral monopoly: One single demander and one single bidder.
• Natural monopoly: When a company generates any level of production more efficiently than if several were to compete in the market.

An Oligopoly occurs in a market when, regardless of the number of vendors, several of them have a significant market share. Types of oligopoly include:

• Offer oligopoly: Few sellers.
• Duopoly: Two market vendors split the market.

The Market for Land

Land represents all natural resources in general. Companies producing raw materials act as suppliers, and those that need these resources are the applicants. The factor of land is of limited supply because the existing amount of land is fixed.

Demand for land will depend on its productivity and its price. The relationship between demand and productivity is direct, but it is inverse to the price.