Internal Market Forces: A Deep Dive into Supply, Demand, and Economic Policy
Internal Market Forces
The behavior of economic actors in a country is expressed by supply and aggregate demand.
Average Price Level
It is the weighted average of all prices in an economy.
Aggregate Demand
Represents the total expenditure economic agents are willing to make (expected spending):
- Family or private consumption
- Corporate investment
- Public expenditure
- Net exports
DA = C + I + G + (XM)
Aggregate Supply
The quantity of production enterprises are willing to sell at an average price level and given
Read MoreProduction Factors, Costs, and Efficiency in Business
Quoted Rates of Productive Factors
Natural resources and land: Raw materials, energy, and various supplies that contribute to the product.
Labor: Manpower or the time spent by workers on the production of a good or service.
Capital: Company funds and all capital goods needed for production, including machine tools, production plants, premises, and buildings.
Technology
A specific or concrete way of combining production factors to produce a good or service.
R&D+i
Expenditure on research, innovation,
Read MoreFinancial Statement Analysis: Inflation, Cash Flow, and Valuation
Effects of Inflation
Influence on Costs
Traditional accounting methods record asset additions to the income statement based on historical costs. Inventory values, diverse in nature and acquired at different times, are expressed in current monetary terms through the company’s ongoing operations.
Effects on Depreciation Costs
Setting depreciation based on the original purchase price during inflationary periods becomes problematic during asset replacement. The accumulated depreciation may be insufficient
Read MoreEconomic Systems: Capitalism, Market Economies, and Central Planning
Karl Marx and Economic Systems
Karl Marx, a German economist with extensive training in philosophy, developed a keen interest in economics thanks to his friend Friedrich Engels. Meeting in 1832, they collaborated on works like “The Communist Manifesto” (1848). Witnessing Germany’s industrial transition, Marx engaged in intense revolutionary activity, arguing that capitalism contained the seeds of its own destruction and laying the groundwork for a centrally planned economic system. His most important
Read MoreMicroeconomics, Macroeconomics, and Market Structures
Microeconomics Explained
Microeconomics focuses on individual economic agents like households, firms, and industries. Its importance lies in:
- Resource Allocation: Understanding how resources are distributed efficiently.
- Consumer and Producer Behavior: Gaining insights into market outcomes.
- Market Mechanism: Understanding supply and demand dynamics.
- Policy Formulation: Guiding government decisions on taxes and regulations.
- Business Decisions: Informing pricing and production strategies.
Returns to Scale
Returns
Read MoreStrategic Management: Environmental and Competitive Forces
Strategic Management: External Influences
Strategic management involves analyzing environmental forces, external events, and influences that can affect an organization’s decisions and actions.
General Environment
Factors such as the social and political environment and inflation often indirectly affect all organizations.
Economic System
- Social Market Economy
- Government: Participatory Democracy
Ecosystem
Environmental factors (weak system in Chile).
Demography
- National population: 16 million (concentrated