Understanding GDP, Inflation, and Economic Indicators
GDP (Market Price)
GDP mp = Household consumption + Investment + Public spending + (Exports – Imports)
GDP (Cost of Factors)
GDP cf = Wages + Interest income + Benefits + Business profits + Official grants
Nominal vs. Real GDP
- Nominal GDP: Calculated by multiplying the quantity of final goods and services by their current prices.
- Real GDP: Calculated using the quantities of goods and services in a given year, multiplied by the prices of a base year.
Deflator: Eliminates the effect of inflation on the
Read MoreEssential Business Terms: Definitions and Key Concepts
General Business Terms
- Business Plan: A formal report showing how a business sets out to achieve its aims and objectives.
- Consumer: The ultimate user of the product or service; the consumer may not have paid for it.
- Customer: A purchaser of a product or service.
- Customer Satisfaction: How happy the customer is with the product or service.
- Entrepreneur: An individual with an idea for a business.
- External Stakeholder: An individual or group outside the business who is indirectly connected with that business.
Understanding Bank Accounts, Loans, and Financial Operations
Liabilities
Liabilities are operations by means of which customers make funding available to banks and savings institutions. These are known as bank accounts. Deposits taken in any financial institution are:
- Demand Deposits (Checking Accounts): Against delivery, the deposited entity is committed to the custody of the same and agrees to make charges and payments on behalf of the depositor. Some banks agree to pay interest at the time of formalization.
- Savings Accounts: These are similar to checking
Production Cost Analysis: Scale, Efficiency, and Waste Reduction
Economies of Scale: Commercial and Financial Benefits
Economies of scale offer significant commercial and financial advantages. Commercially, they reduce per-unit costs, enabling competitive pricing and increased market share. Financially, they improve profit margins through lower variable costs and efficient resource use. Large-scale production also enhances negotiation power with suppliers, reducing input costs and improving financial stability.
Importance of Marginal Cost in Production
Marginal
Read MoreLabor Market Dynamics: Monopsony vs. Perfect Competition
In a perfectly competitive labor market, the supply curve of labor to firms facing job seekers is a horizontal line at the level of wages. Their hiring decisions do not influence the market wage. However, in the case of a monopsony, the labor supply curve is the labor supply curve in the market itself. Let us assume that this curve is upward sloping, as shown in the chart below:
A supply curve is also called the average cost of factors (ACF), and it indicates the average amount per employee to be
Read MoreCore Economic Principles: Resources, Costs, and Growth
Understanding Economics
Economics studies how individuals and societies act to allocate scarce resources to meet individual and collective needs. It deals with managing resources to produce goods and services and distribute them for consumption. Economics also addresses issues related to satisfying the needs of individuals and society.
Microeconomics
Microeconomics studies how families (consumers), businesses, and the public sector make decisions and how they interact.
Macroeconomics
Macroeconomics deals
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