Cover
Half Title
Title Page
Copyright Page
Table of Contents
Chapter Summaries
Preface
1 Introduction to Economics for Business
1.1 Introduction
1.2 What Is ‘The Economy’?
The Macro- and Micro-Economy
1.3 How the Economy Impacts On Business
1.4 The Management of Risk
1.5 How Changes in Consumer Incomes and Spending Affect Business
1.6 The Impact of Changes in Interest Rates On Business
1.7 Some Key Economic Concepts That Appear in this Book
The Opportunity Cost of Making a Choice
The Importance of Incentives in Decision-Making
The Importance of the Market
Economic Efficiency
1.8 Summary
Further Reading
2 Quantitative Analysis for Economists
2.1 Introduction
2.2 An Econometric Approach
Benefits of Applying Econometrics
Criticisms of Overuse of Econometrics
Using Regression Analysis
The Interpretation of Economic Data
2.3 Using Diagrams and Simple Statistical Relationships
Values That Change Over Time
Illustrating Trends
Moving Averages
Seasonally Adjusted Figures
‘Smoothed Data’
Eliminating Random Fluctuations
2.4 Making Predictions
Establishing the Trend
Establishing the Seasonal Variation
Estimating the Random Variation
2.5 Relating Two Variables
‘Line of Best Fit’
Correlation Coefficient
Leading and Lagging Indicators
Economic Models
2.6 Index Numbers
Calculating Percentage Changes
Example – a Simple Price Index
Weighting an Index
2.7 Share Price Indices
2.8 Summary
Further Reading
3 How Markets Work
3.1 Introduction
3.2 The Nature of the Market Economy
The Economy as a System
The Market
Demand and Supply
Benefits of the Market
3.3 The Relationship Between Price, Demand and Supply
Price, Demand and Supply
The Two Laws of Demand
The Two Laws of Supply
3.4 The Construction of Demand and Supply Curves
Demand and Supply Curves
Supply Curves
Combining the Demand and Supply Curves
Ceteris Paribus
The Determinants of Demand and Supply
Movements Along a Curve
3.5 Changes in the Conditions of Demand and Supply
Changes in the Conditions of Demand
Tastes and Fashion
Income
Number of Buyers and Population
Price of Other Products
Expectation of Price Changes
Changes in the Conditions of Supply
Causes of Changes in Supply Conditions
Rising Or Falling Production Costs
Changes in Technology
Physical Conditions
Taxation and Subsidies
Joint Supply
Number of Producers
Effects of Changes in Supply On the Market
Equilibrium Price
The Effect of Changes in Demand and Supply On the Market
Changes in the Market Equilibrium
3.6 How to Measure Elasticity of Demand
Price Elasticity of Demand
Measuring Price Elasticity
How to Make Simple Calculations
The Impact of Altering Price On Sales Revenue
Income Elasticity of Demand
Cross-price Elasticity of Demand
Price Elasticity of Supply
Factors Influencing Price Elasticity of Supply
Making Simple Calculations
3.7 The Role of Firms in the Market
Size of UK Companies
Types of Enterprise
3.8 Summary
References
4 Costs and Revenues
4.1 Introduction
4.2 The Nature of Cost–volume–profit Analysis
A Business Model
Cost–volume–profit Analysis
4.3 The Average Cost of Production
Average Cost
The Law of Increasing and Diminishing Returns to a Factor of Production
Average Variable Cost
Average Fixed Cost
Total and Average Costs
Average Cost
The Shape of the Average Cost Curve
4.4 Costs at Different Levels of Output
Costs and Output
Total and Average Cost
Fixed Variable and Total Cost
4.5 Illustrating Revenues
Total Revenue
Average Revenue
Total and Average Revenue
4.6 Combining Cost and Revenue to Illustrate Profit
Making a Profit
Maximising
Marginal Cost and Marginal Revenue
4.7 A Marginal Approach to Profit Maximising
Deriving Average Revenue From the Demand Curve
Deriving Marginal Revenue From the Demand Curve
Average Cost and Marginal Cost
Combining Cost and Revenue Curves
When Is Marginal Costing Used in Business?
Raising Profit Levels
How Can We Raise Sales?
4.8 Summary
Further Reading
5 Different Types of Market Structures
5.1 Introduction
5.2 What Is Market Structure?
Extreme Market Structures
5.3 Types of Market Structure
Features of Market Structures (Institutional Arrangements)
The Number of Buyers and Sellers
Types of Goods
Freedom of Entry and Exit
Controls On Price
5.4 Perfect Competition
Price Takers
5.5 Monopoly
Price Makers
The Demand Curve for a Monopolist
The Features of a Monopoly
Sources of Monopoly Power
5.6 Market Structures in the Real World
Oligopoly
Concentration Ratios
An Approach to Analysing Competition in Oligopoly Markets
Game Theory
Monopolistic Competition
Profits Made in Different Market Structures
Porter’s Analysis of Competitive Forces
The Threat of New Competitors
The Bargaining Power of Buyers
The Bargaining Power of Suppliers
The Threat of Substitute Products
5.7 Price Setting in the Real World
Pricing Strategies
Competitive Pricing
Cost Plus Pricing
Penetration Pricing
Expansion Pricing
Sustainable Pricing
Destruction Pricing
Customer Pricing
5.8 Price Setting in Different Market Settings
5.9 Allocative Efficiency
5.10 Summary
What Is Market Structure?
Types of Market Structure
Perfect Competition
Monopoly
Market Structures in the Real World
Price Setting in the Real World
Pricing in Different Market Settings
Allocative Efficiency
Further Reading
6 Business Strategy in an Economic Context
6.1 Introduction
6.2 What Business Strategy Involves
6.3 The Ingredients of Strategy
6.4 The Criteria for an Effective Strategy
Suitability
Acceptability
Feasibility
6.5 How an Environmental Analysis Helps to Determine the Suitability of a Strategy
Quantifying Risk
6.6 The Nature of Strategic Vision, Objectives, Focus and Architecture
Vision and Objectives
Strategic Focus
Measuring the Effectiveness of Strategy
Strategic Architecture
Strategic Control
6.7 Business Strategy in an Economic Context
6.8 Summary
Reference
7 Government Regulation and Competition
7.1 Introduction
7.2 Government Intervention
7.3 The Government and the Market
Why Does Government Intervene in Markets?
Direct Or Indirect Participation
Types of Government Intervention in the Market
Regulation
Subsidies and Taxation
Government as Influencer
Government as Market Maker
Public Procurement
Government as Supplier
7.4 Creating a Competitive Environment
7.5 UK Competition Law
The Competition and Markets Authority and Consumer Law
7.6 Other Forms of Government Regulation
7.7 Summary
Note
Further Reading
8 The Wider Role of Government in the Economy
8.1 Introduction
8.2 Government’s Multiple Roles and Policies
8.3 The Government as Producer and Employer
The Government as an Employer
8.4 The Government as a Stabiliser of the Economy
Stabilising Demand
8.5 The Government’s Role in Encouraging Competitive Markets
8.6 The Government’s Role in Combating Market Failure
8.7 The Government’s International Role
8.8 The Government as Debt Manager
8.9 The Government and Inequality
Redistributing Income
8.10 Industrial and Regional Policy
Industrial Policy
Regional Policy
8.11 Macro-Economic Policy Tools
8.12 Summary
References
9 Economic Ideas and Policy
9.1 Introduction
9.2 The Development of Economic Thinking
9.3 The Classical Economists
9.4 The Marxist Economists
9.5 The Neoclassical Economists
9.6 Keynesian Economics
Keynes’ Aggregate Supply Curve
Keynes’ Aggregate Demand Curve
Combining the Aggregate Demand and Aggregate Supply Curves
9.7 The Neoclassical Consensus
9.8 The Free-Market Revival and Monetarism
9.9 The ‘Third Way’
9.10 New Ways of Thinking About the Economy
Green Economics
9.11 Summary
Further Reading
10 Economic Indicators
10.1 Introduction
10.2 What Are Economic Indicators?
10.3 Indicators That Show the Growth of the Economy
The Output Method
The Expenditure Method
The Income Method
GDP Per Head
Growth in GDP
The Impact of Recession
Comparisons of Living Standards
Criticisms of Using GDP as an Economic Indicator
A Happiness Indicator
The Human Development Index
10.4 Employment Indicators
Recent Trends in Employment Indicators in the UK
An Increase in the Proportion of Part-Time Jobs at the Expense of Full-Time Jobs
Disproportionate Numbers of Female Workers in Part-Time Jobs
Changes in the Relative Proportion of Public and Private Sector Workers
Participation Rates
The Industrial Structure
10.5 Inflation Indicators
A Basket of Goods
A Price Index
Inflation
Calculating Average Price Changes
Problems Involved in Using a Price Index
The Impact of Inflation On Business
10.6 Population Indicators
The Optimum Population
10.7 The Interest Rate
10.8 The Exchange Rate
10.9 Summary
Recommended Reading
References
Further Reading
11 The International Economy
11.1 Introduction
11.2 Advantages of International Trade
Ways in Which Firms Can Enter Foreign Markets
Exporting
Joint Venturing
Direct Investment
11.3 Comparative and Absolute Advantage
11.4 The UK as a Trading Nation
11.5 The Balance of Payments
11.6 The UK’s Main Trading Partners
11.7 The Importance of Trading Blocs
11.8 The UK and the EU
The Structure of the EU
An Economic Union
A Political Union
A Social Union
Development of the EU
The European Coal and Steel Community
The European Economic Community
The Single Market
The Maastricht Treaty and the Social Chapter
Enlargement of the EU
11.9 Exchange Rates
Exchange Rate Systems
Exchange Rate Fluctuations
Appreciation of the US Dollar Against the Indian Rupee
Devaluation and Revaluation
Consequences of Exchange Rate Fluctuations
Price Elasticity of Demand for Exports and Imports
The Consequences of a Depreciating Currency
11.10 The Euro
The Birth of the Euro
11.11 Crisis in the Eurozone
11.12 Terms of Trade
11.13 Summary
Further Reading
12 The Economics of Globalisation
12.1 Introduction
12.2 What Is Globalisation?
12.3 Who Is Involved in the Globalisation Process?
Multinational and Transnational Companies
International Consumers
International Governments
International Financial Institutions
International Institutions Including the WTO, World Bank, IMF and New Development Bank (NDB)
Trading Blocs
12.4 The Economic Institutions of Globalisation
The World Bank
The International Monetary Fund (IMF)
The World Trade Organization (WTO)
The BRICS Bank
12.5 The Nature of Protectionism
Non-tariff Measures
Quotas
Import Licences
Administrative Complexity
Subsidies
Exchange Control
Exchange Rate Manipulation
Embargo
Product Standard Regulations
Arguments Used to Justify Protection
12.6 Foreign Direct Investment
Why the BRICS Succeeded
The Importance of Economic Indicators
12.7 Strategies for Entering Global Markets
Exporting
Licencing Or Franchising
Global Strategic Alliances (GSAs)
Foreign Direct Investment (FDI)
Direct Operations
12.8 Summary
Further Reading
Useful Websites
13 Money, Banking and Finance
13.1 Introduction
13.2 The Significance of the Financial Crisis
13.3 The Functions of Money
13.4 Commercial Banks
13.5 Central Banks
13.6 The Creation of Credit
The Quantity Theory of Money
13.7 The Supply of Money
13.8 Monetary Policy and Inflation
13.9 Summary
Further Reading
14 Government Fiscal Policy
14.1 What Is Fiscal Policy?
14.2 Government Spending, Taxes and Borrowing
14.3 Types of Fiscal Policy
14.4 Types of Taxation
Progressive, Regressive and Proportional Taxes
Common Taxes
14.5 The Impact of Direct and Indirect Taxes
Where Knowledge of Elasticity Is Useful
14.6 The Impact of Government Subsidies
14.7 Summary
Further Reading
15 Green Economics and Sustainable Development
15.1 Introduction
15.2 The Environmental Challenge
15.3 Reappraising Simple Economic Theory
Reshaping Economic Tools
Questioning the Production Possibility Frontier
15.4 Sustainable Development
15.5 Doughnut Economic Model
15.6 Different Forms of Capital
15.7 Cost–benefit Analysis
Criticisms of Cost–benefit Analysis
15.8 The Sustainability Spectrum
15.9 Taking a Wider View
15.10 International Collaboration for the Commons
15.11 Ecological Footprints
15.12 Sustainable Business Models
Environmental Management System (EMS)
The Importance of Mission, Values and Objectives
The Importance of Strategy
The Importance of Policies and Programmes
The Importance of Key Performance Indicators (KPIs)
The Importance of Reporting
The Importance of Reports
The Importance of Identifying the Negative Effects of Company Activities
Environmental Reporting: Incentives and Disincentives
Users of Environmental and Ethical Reports
Qualitative Characteristics of Ethical and Environmental Reports
The Global Reporting Initiative (GRI)
ESG Reporting
15.13 Summary
Further Reading
16 Business in the Economy
16.1 Introduction
16.2 Matching Business Strategy With the Organisational Environment
16.3 Uncertainty in the Economic Environment
16.4 Institutional Economics
16.5 The Importance of Competitive Advantage
Gaining and Maintaining a Competitive Advantage
Competitive Strategies
16.6 The Size of Firms in the Market
Why Do Small Firms Exist?
Why Do Large Firms Exist?
16.7 The Growth of Firms in the Market
16.8 Economies of Scale
Internal Diseconomies of Scale
External Economies of Scale
External Diseconomies of Scale
International Economies of Scale
16.9 Summary
Further Reading
Index
