Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 11: The economic environment of business and finance - Coggle…
Chapter 11: The economic environment of business and finance
Macroeconomics
1.1. National Economy
Definition
4 factors of production
Land
Labour
Capital
Entrpreneurship
GDP: Gross domestic product
= the amount of expenditure incurred by those who purchase output
Consumer
Purchaser + Saving
Factor affecting
Changes in disposable income, marginal propensity to consume
Changes in the distribbution of wealth
Goverment policy
The development of major new products
Interest rates
Price expectations
Goverment
Purchaser + Producer + Invester + Transfer payment
Foreign buyers
Producer + Investing
Microeconomics
= Market mechanism
Demand
Quantity of goods purchasers would buy
Demand curve
Show demand at each price
Increase in price --> Decrease in demand
Determinant of demand
Price of itself --> move along on demand curve
Price of other goods
National income level ---> Increase
Income distribution
Fashion & Expectations
Supply
Quantity of goods suppliers able to provide
Supply curve
Show supply at each price
Determinant
Price of goods itself
Price of other goods
Price of related goods
Cost of making the good
Changes in technology
Other factors
Equilibrium price
Quantity in demand = quantity in supply
Price regulation
Set maximum price
Limit inflation
Ensure essential goods are affordable
Set minimum price
Protect suppliers
Black market
Max price < equi price
Demand > Supply
Elasticity
Formula
PED = change in demand/change in price
<1: inelactic
1: Elastic
= 0: Perfectly inelastic
=1: Unit elastic
= vô cùng: Perfectly elastic
Factors affecting PED
Availability of subtitutes
Time horizon
Competitor's pricing
Luxuries & necessities
habit-forming goods
Market structure
Perfect competition
many small buyers and sellers
no barriers, free entry to/exit from market
free access to perfect info on all market conditions, resulting indentical cost structure
homogenous products
no collusion between buyers and sellers
single selling price across the market
supplier = price taker: Can sell as much as they like but only at the market price
Monopolistic competition
Many buyers and sellers
Some differation of goods
Some customer loyalty
Few barriers to entry
Significant advertising
firms have freedom to set price --> market normal profit in the long run
Oligopoly
Few larger sellers but many small buyers
High degree of mutual interdependency
Product differentiation
Actions of competitors
Monopoly
1 supplier & many buyers
barriers prevent new entrants
supplier = price taker --> Supernormal profit
type of monopoly
Failure of perfect competition
when a free market fails to produce to optimum allocating of resources
Factors
Make imperfection
Externalities
Publlic goods
Economies of scale
Low unit cost when increasing in volume of single product
Type
Internal
Specialisation of labour
Division of labour
Large and more specialised machinery
Dimensional econimies of scale
buying economies
Indivisibility of operations
Holding inventory
External
A large skilled labour force
Specialised ancillary industries