Business Economics

Economics from a business perspective

Interaction between business and practical economic problems

Comprehensive overview of businesses

Strategic management
Finance
Marketing

Comprehensive overview of 3 branches of economics

Market system
Macroeconomics
Globalisation

Society
Organised communities with shared laws, traditions and values.

Economy

The material manifestation of our social activities in a given geographical

area.
It involves any processes, activities and interactions which are related to
providing and distributing goods and services for people.

Monetary policy
The actions of national banks.

Fiscal policy
The actions of governments.

Aggregate supply and demand

Overall amount of products/services produced and bought.

Price level and inflation

Overall prices for a selected group of products.

Employment

Total number of jobs

Total number of people out of work

International economics
Deals with the interactions of economic goods and services through trade
between countries.

Free goods

not scarce enough to have monetary value

available for everyone without limits

often intangible

not necessary free of charge

Economic goods

tangible materials that satisfy human needs & wants

through their utility they represent value for customers

Commodities

marketable economic goods such as raw materials & resources

lack of differentiation across their supply base

Capital goods

tangible economic goods

processed but used as instruments in the production of other goods

equipment, machinery, office buildings etc.

Consumer goods (final goods)

purchased by individuals who are the end users

not used in any further stages of production

Services
intangible
typically produced and consumed simultaneously

Trade-off
A situation in which you must choose between or balance two things that are
opposite or cannot be owned at the same time. You lose something in order to
gain something.

Opportunity cost
The opportunity cost of a choice is the value of the best alternative forgone, in
a situation in which a choice needs to be made between several mutually
exclusive alternatives given limited resources.

Management
The science of organizing and allocating a firms scarce resources to achieve its
desired objectives.

Managerial economics
The use of economic analysis to make business decisions involving the best use
(allocation) of an organizations scarce resources.

Market economy
The market economy allocates resources through the decentralised decisions
of many households and companies.

Price takers
A large number of fully informed sellers and buyers with no significant influence
on the market

Price
It is the monetary value of a good or service at which the market participants are
willing to make a purchase.

Competition
It secures several major economic benefits through the rivalry of firms selling
their products and services.

Monopoly
There is only one seller who sets the price.

Oligopoly
There are only a few sellers and they sell their products under moderate
competition.

Monopolistic competition
They are unique but compete for the same customers.

Demand
Refers to the quantity of products or services that a household would buy, if
it could buy all it wanted at a given price in a given period.

Supply
Refers to the amount of products or services that producers and firms are
willing to sell at a given price in a given period, all other factors being held
constant.

The law of supply

The relationship between the price of a certain product and the quantity sold
by producers and firms at a given price level.

Pure monopoly

is an industry with a single firm that produces a product for which there
are no close substitutes

in which significant barriers to entry prevent other firms from entering

the industry to compete for profits.

Market power
The ability to increase the product's price above marginal cost without losing all
customers.

Natural monopoly
When scale economies are too large relative to the size of the market for more
than one firms.

Network externalities
The value of a product to a consumer increases with the number of that product
being sold or used in the market.

OPEC (Organization of the Oil Exporting Countires)

A cartel of governments to coordinate the policies of the oil-producing countries.

Product differentiation
A strategy to achieve market power, accomplished by producing products that
have distinct positive identities in consumers mind.

Firm
It is a collection of resources that is transformed into products demanded by
consumers.

Profit
It is the difference between revenue received and costs incurred.

Reshoring
Operations returning to the country where the offshoring occurred.

Profit maximization hypothesis

The primary objective of the firm (to economists) is to maximize profits.

Optimal decision
It is the one that brings the firm closest to its goal.

Leverage
It is the proportion of a company financed by debt.

Market Value Added (MVA)

The difference between the market value of the company and the capital that
the investors have paid into the company.

Economic profits
Economic profits are total revenue minus all the economic costs.

Regulatory framework
The administrative processes and rules required to start and operate a company,
including licensing, tax and labour market regulations.

Market framework
The availability of necessary inputs, transformation processes and customer
demand necessary to found and develop a venture.

Network access
Tthe availability of supporting partners, advisers and enablers who transfer
know-how and create opportunities for growth.

Creativity
It is the ability to develop new ideas and discover new ways of looking at
problems and opportunities.

Innovation
It is the ability to apply creative solutions to problems and opportunities that
enhance or enrich peoples lives.

The Creative Process

1. Preparation
2. Investigation
3. Transformation
4. Incubation (becoming more mature)
5. Illumination (clear understanding)
6. Verification (proving)
7. Implementation