AMBAI Free Online Distance Course in Management and Business Administration

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For Enrolled Students only! For info on AMBAI Certificate Programas click HERE	Study Guide for the Certificate Program in Management and Business Administration.

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Study Guide	This is a Study Guide. As the name implies, it guides the student in the reading of the textbook, The Virtual MBA. The textbook is divided into 12 Chapters and each chapter into several Sections. Sections are numbered consecutively from the beginning to the end of the textbook. We will refer you to the textbook by citing the Section number. This Subject is based on Chapter VII of the textbook.
Definition. Is Economics a "real" Science?	The textbook gives a definition of Economics and discusses in what sense it is a science. Conventional economics is useful but should be examined critically. Let's quote Indian economist Amartya Sen, 1998 Nobel laureate in economics: "We must learn it, but not use it much" Now please read Sections 81. and 82. of the textbook and return to this point of the Guide. Please answer the questions
Self- evaluation questions	Question 1 In the definition of Economics it is stated that people and society have to make choices. Why is that a must? See Model Answer A1
	Question 2 Why does the textbook mention that Economics is a behavioral science? See Model Answer A2
Opportunity cost. A good solution may not be good for all	When at a given moment all productive resources of an economy are fully employed, choosing to produce a higher quantity of an existing good, or producing a new one, forces people to produce less or stop production of other goods. .The textbook also explains how the action taken by one or a few individuals may be beneficial for them if they are the only ones who take it. But if all or most members of an economy take this same action, the result may be neutral or even damaging for all. Now please read Section 83. of the textbook and return to this point of the Guide. Please answer the questions
Self- evaluation questions	Question 3 If a society chooses to produce good A instead of B, what is the opportunity cost of producing good A? See Model Answer A3
	Question 4 How does the textbook call the wrong conception that all behaviors beneficial for individuals must also be good for society? See Model Answer A4
Different economic organizations. Prices in free market economy	There are very few fully planned economies today. Most are mixed in varying combinations of government intervention and freedoms. The tendency lately has been towards freedom; in ex-communist countries, in still communist one (China) and in capitalist ones like Britain and France. Many state owned enterprises were privatized or will be soon. In free markets the price system is the mechanism by which people make all economic choices. Now please read Sections 84 and 85. of the textbook and return to this point of the Guide. Please answer the questions
Self- evaluation questions	Question 5 Adam Smith published The Wealth of Nations in 1776. This book is the origin of modern Economic theory. How did Smith call the mysterious process by which uncoordinated individual actions resulted in an organized economic system? See Model Answer A5
	Question 6 What does the expression consumers vote with their wallets mean? See Model Answer A6
Supply and Demand.	If the price of coffee goes up and the price of tea does not change, many people will buy less coffee and more tea. Demand for coffee will fall. This is the substitution effect. The price of tea will possibly go up somewhat due to the higher demand for it, and producers of tea will be willing to supply more at the higher price. The higher price will compensate them for the higher marginal cost of producing more tea. The basic concepts of economics, supply and demand, are explained in the textbook. Now please read Section 86. of the textbook and return to this point of the Guide. Please continue
Perfect markets. Types of imperfections. The tendency	The fact that supply and demand analysis works "beautifully" only in perfectly competitive markets does not mean that it is not also an useful tool in any market. The textbook describes several distortions of markets making them imperfect. Now please read Sections 87. and 88. of the textbook and return to this point of the Guide. Please answer the questions
Self- evaluation questions	Question 7 Look at the graphics in Section 86. Suppose that instead of imposing a new tariff on inputs the government eliminates an existing one. To what side (left or right) will the new equilibrium price move on the demand curve? See Model Answer A7
	Question 8 A) Why is the computer chip market not a perfect market? B) What type of organization is OPEC? See Model Answer A8
National Accounts	The name National Accounts is given to all types of measurements of an economy as whole. The most widely quoted is the GNP. The textbook explains how this indicator is calculated. Now please read Section 89 of the textbook and return to this point of the Guide. Please continue
Fiscal and monetary policy	Governments try, with varying success, to guide the economy in a growing path while avoiding inflation. The textbook explains the two main tools they use. Now please read Section 90 of the textbook and return to this point of the Guide. Please continue
Interest rates	.Apparently the concept of nominal and real interest rates is simple and easy to understand. In fact frequently people make decisions based only on the amount of the former. Now please read Section 91. of the textbook and return to this point of the Guide. Please answer the questions
Self- evaluation questions	Question 9 It was stated that GDP=TI=Total Expenditure (TE). This TE must go into 3 basic items. Which are they? See Model Answer A9
	Question 10 Country A makes a payment to Country B as interest on a loan. Does this transaction affect the Balance of Trade or the Balance of Payment accounts, or both? See Model Answer A10
Here we say: So long!	This is the End of the Study Guide for the Subject Economics. The Subject belongs to the Curriculum of the Certificate Program in Management and Business Administration offered by AMBAI as a Public Service.
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A2 - Because resources are always scarce. Back
A1 Because what actually happens in an economy depends very much on choices made by people, on how they actually behave at certain moments. Back
A4 - The fallacy of composition. Back
A3 - The benefits good B would have provided to that society. Back
A6 - By choosing which products and services they buy at a given price, consumers decide what and how much will be produced of these goods and services. Back
A5 - The invisible hand. Smith argued that in a free market the selfish, uncoordinated actions of people resulted in the general good. Back
A8 - A) Intel has a technological advantage difficult to attain by competitors. B) OPEC is a cartel. Back
A7 - To the right. The supply curve moves to the right and so does the intersection with the demand curve (the new equilibrium price). Back
A10 - The Balance of Payments only (of both countries) since there is no export or import of goods and services involved. Back
A9 - TE is either spent, saved or paid in taxes. Thus, Total Expenditure = (personal consumption + taxes + savings). Back