Memo

To:

From:

Date:

Subject: budget preparation for property Management Company

As the manager of property Management Company, I would like to take this opportunity and welcome you in budget preparation for the coming year.  I would like all of us to take this time and plan our objectives, financial plan, and funds allocation in order to achieve important details and specifics and control our future operations. This is the high time our company should have a planning on resource constraints and projected cost on different areas. Generally, in preparing the operating budget for the company, property managers should focus on estimation the organization revenue and expenses. You should set the budget from bottom top and estimate how much expenses are required in operation into order to make revenue (Shim, Siegel, & Shim, 2012).   On this point, it is important you note that you should divide operating expenses in two categories namely manufacturing and non-manufacturing costs.  First, I would the like the property managers to prepare  a periodic report on  operating and financial budget in a  PowerPoint presentation and it will be  forwarded to me after one month  since  a monthly budget will  help in planning and control. When you approve the budget, release it with workflow approvals and in a controlled fashion. While preparing the budget, it is important you concentrate on cash flow forecasting and you can use the time period to extend budget and costs.    Also remember to keep the print of each project for conducting assessment with other periods (Shim, Siegel, & Shim, 2012).  For operating budget, you should provide sales budget, production budget, and budget for direct materials as well direct labor. On the same note, you should also provide an income statement expense which includes manufacturing expense such as indirect labor and depreciation expense. For financial budget, you should include cash budget and pro forma balance sheet.

  The important thing in property management budget is cost management; thus, you should forecast the financial success of the project. The budget should deliver a Web-based system which will be applied in budget development (Kohn & Katz, 2002).  Therefore, you should organize a detailed budget with scope breakdown and manage contracts. Note that a budget with accurate cost system will provide an accurate data. While preparing the budget, you should have an insight of anticipated cost in order to be in a position of tracking changes. On the same note, it is important you clearly understand the project activities and this will help you to show up all the financial metrics (Kohn & Katz, 2002).  For the company to forecast the project measurements, you should provide a clear cash flow budget and a one with Earned Value capabilities.  Focusing on project scope, the budget should include logical groupings which relates with scope of the scope.  Other thing which should be included is hierarchical coding and on this point you should create Work Breakdown Structures which line up with organizational principles. Note that each cost elements will acquire multiple codes if you create flexible coding.  While preparing the budget, you should put into effect the grouping capabilities so that you can come up with a flexible cost reporting.  The budget committee should take their responsibilities and estimate budge in each segment in order to make recommendations, necessary revisions and final approve of disapproval (Kohn & Katz, 2002).  During the process of preparing the budget, the committee should also provide any advice which may be needed in gathering financial data.

The other important part of the budget would be the administration of the budget. Each property manager shall be required to compile a divisional budget that shall be consolidated in a binder to make up the executive budget. The managers are requested to pick the budget instructions, forms and timetables at my office that have been designed in a simple format that is easy to follow. For further guidelines on how you shall prepare and present the budget, each manager shall be required to go through the budget manual which has detailed the budget requirements. The presentation of the individual budgets shall be done using information reports which shall assist the planning and formulation of expenditure strategies (Shim, Siegel, & Shim, 2012). On the reports, each person is required to present the costs, the income and the predicted profits in the various prescribed units. The cash flows should be in U.S. dollars while the profits shall be presented in percentage form. Informative ratio must also be included in the comprehensive summaries of each budget so as to give a clear distinction between the costs and the income. In addition, the informative summary shall include various variables including the percentage of capacity utilization the changes in the selling and marketing price as well as the variation of the sales volume (Shim, Siegel, & Shim, 2012). Cooperation of the highest standard shall be required implying that each person must comply with the policies and procedures of the company during the budget preparation. Lastly, each person is expected to provide a realistic budget that covers the broad range of the company’s objectives and the goals of the company with respect to the strategic and operational plan of the company.

Reference

Shim, J. K., Siegel, J. G., & Shim, A. I. (2012). Budgeting basics and beyond. Hoboken, N.J: Wiley.

Kohn, A. E., & Katz, P. (2002). Building type basics for office buildings. New York, NY: Wiley.

The Real Economy in the Long Run

Despite the government instability of the Islamic Republic of Mauritania, the country has fought so hard and powerfully towards gaining economic stability. Corruption, lack of skilled labor, underdeveloped infrastructure and high taxes posed on the citizens of the republic also affect5 the rate at which the country is able to realize their dream (Asia, D. I. M. F. M. E. C. 2015). The country recruited foreign investment in 2010 from which they realized a more than five percent improvement in their GDP. The country was still in the process of rephrasing a wide-ranging speculation program to standardize direct extraneous investment. This was expected to be realized by 2011.

It is also key to note that the Government does a mandatory screening of any foreign investor in their country (Aiyar, & International Monetary Fund. 2013). The government has guaranteed any legal entity or individual who wishes to undertake any business activities that goes hand in hand with the laws and regulations of the country. The microeconomics of the country is depends on the how the households are able to meet their requirements and also what they face as a household. However, in this case the macroeconomics which are all inclusive of both the domestic and foreign investors. The finance of the country also is better off compared to what they have been doing in the past (Asia, D. I. M. F. M. E. C. 2015). According to World Bank, the 40% of the population was having an income that is above the poverty level by the year 2004. In this case at that time the growth rate of the individuals or household consumption was growing at 4.1% per annum.

At this rate of growth in consumption especially any company is likely to experience great positive changes (Aiyar, & International Monetary Fund. 2013). The company Apple experienced an increase in the consumption of its products there is most probably a positive influence in the progress of the company as well as the whole economy. From this come the overall economic excellence which is counted as a positive or negative change. Economy be in a vicious cycle, it again contributes to the overall growth and even power of the whole economy inclusive of any investor whether foreign.

References

Top of Form

Asia, D. I. M. F. M. E. C. (2015). Islamic Republic of Mauritania. Washington: International Monetary Fund.

Top of Form

Aiyar, S., & International Monetary Fund. (2013). Growth slowdowns and the middle-income trap. Washington, D.C: International Monetary Fund.

Bottom of Form

Bottom of Form

            Economics

            Question 1

            The major short run potential cost benefit of these combinations is the thought that merging is crucial in creation of scales economies.  The idea of being massive has thus ensured that the merged banks holds lowered overheads with developed manpower assuage.  The improvement of manpower consumption permits the banks I saving cash in areas that are characterized by expenses through sources combination.  The small sized firms may not have held the capability of employing personal lawyers.  Therefore the merging helped in boosting their financial stability. This implies that having adequate financial resources they are able to obtain better services as well as save money. In addition the more the extended number of employees working for a firm the more the reduced health insurance cost that the firm is bound to incur based on every employee.

            Question 2

Saying that a regional or national bank with the capital base of $300 billion is more likely to be efficient is a statement that is untrue.  The aforementioned statement can thus be stated as relative as the associated costs with larger corporations are mainly higher as compared to the capital base of the small corporations.

            Question 3

I believe that merges can be predicted by the scale economies.  This is mainly because most of those firms that are involved in merging are attentive to ensuring that they attain a competitive advantage over the market competitors through threat curbing of those corporations that operate globally.  This helps the firms in ensuring that they position themselves properly in order to gain the capability of competing globally.  Mergers can thus be termed as dominant in every industry where corporations are striving to remain competitive.  This therefore helps the firms in averting crisis which may be impending. With the economies scope corporations are thus able to share information as well as knowledge via increased merging in the global industry.

Reference

Hirschey, M. (2008). Managerial economics. New York:  Cengage learning.

Economy’s impact on crime

According to criminologists, bad economy creates room for more crimes as more people are willing to commit crimes. This means that there will be more property crimes and robberies as the criminals tend to steal good that they cannot afford (Roman, 2013). As a result of poor economy, there are more bad times in family which lead to an increase in domestic violence. Due to this, there are greater consumption mind-altering substances such as drugs and alcohol that generally lead to increased violence. According to economists poor economy reduces crimes (Roman, 2013). This is because when there is better economic time’s people tend to go out and show their flashy new Smartphone’s and tablets, new cars that are unattended to in the parking lots and big screens televisions which are subjected to theft. As a result of better economic times demand drugs and alcohol increases leading to increasing violence since people can be able to afford them (Roman, 2013).

It is true to say that crime rate increases as a result of the poor economy. The video shows theft of items such as Christmas presents and an increase in the number of shoplifters. This has been contributed by the downturn of the economy where people consider stealing as an alternative (CBS News, 2008). As a result of poor economy job opportunities decreases leaving a large number of people unemployed who come together and form gangs in order to steal. Macroeconomics factors tend to explain the relationship between crime and the economy (Siegel, 2008). It is true to say that even with a better economy crimes rates will exist but will poor economy crime rates tends to be higher.

Reference

CBS News (2008). The economy’s impact on crime. Retrived from http://www.youtube.com/watch?v=5xExwgTGEtU

Roman J (2013). The puzzling relationship between crime and the economy. Retrieved from http://www.citylab.com/work/2013/09/puzzling-relationship-between-crime-and-economy/6982/

Siegel, L. J. (2008). Criminology: The core. Belmont, CA: Thomson/Wadsworth.

FINANCIAL NEEDS
Is the school district in an actual financial crisis? (If yes, respond to questions a-e; if no, respond to questions f-j.)
            Yes- the reason for this is because there is the provision of sufficient funds from all the stakeholders of the institution. This finally makes it to be not in the position of meeting all the academic needs of not only the students but also the teachers too.
a) What is district enrollment this year compared to the last five years, and what did the district predict enrollment would be?

            50%. The prediction for the school was to be much better as compared to the previous year which was maintained at 42% enrolment. The reason for this scenario roused because of the motivation given to the teachers in ensuring that performance was to remain the key factor in making the institution to compete favorably with other regardless of the current constraints its facing.
b) What are the utilization rates of the district's school buildings?

            13%. The reason for this lower percentage arises from the parents perceptions. This is to say that majority of the parents prefer taking their children in privately owned academic institutions precisely coz of the poor academic results which have been recorded for the few years that have passed.
c) Has the district gone out for bids on non-educational services, such as custodial work, food services, transportation, and employee health insurance?

            Yes. This is largely brought about the existence stakeholders who do not contribute to the development of the institution as expected. For instance this makes the employee insurance not to be taken into greater consideration as expected hence lowering their working morale.
d) Is the school district sharing business, administrative and educational services with other districts or local government?

Yes. The prime reason for that is just to ensure that the stakeholders of the institution are given the capacity of learning what it takes from other institution to be developing academically.
e) How much does the district spend on wages and benefits – and are those costs open for discussion?
Only if "no," answer:

The district spent like 30% of its income on wages and benefits. The reason for this is because it embraces the inclusion of members from diverse communities hence the sharing of ideas. Moreover the inclusion of all members makes convenient in ensuring that all the cost to be incurred are open in the discussion.
f) What is the amount of budget surplus identified in the district?

g) What kind of programs, faculty, or services, if any, were cut to create this surplus?

h) Has student enrollment declined, and is this related to the surplus?

i) What are the identifiable sources of income for the district (including any recent property tax increase)?

j) What is the projected length of time for this surplus to continue?



Organization

Is the organization in an actual financial crisis? (If yes, respond to questions a-e; if no, respond to questions f-j.))

1. a) What is the organization’s bottom line this year compared to the last five years?

The division of labor which will result into the general acquisition of knowledge amongst its employees regardless of the rank one is in. Moreover, this is aimed at ensuring that there is the placement of workers in the right job which will increase efficiency, better work quality, time saving, enjoying the economies of scale hence less learning periods. Conversely there will be diverse innovations in the teaching capacity of the teachers which will result into less training strains

1. b) What are the utilization rates of the organization’s building(s)? Have they decreased or increased over the past year?

            95%. They have increased. The reason for this is because majority of the stakeholders have recognized the fact that in order for them to compete favorably with the already developed institutions in other districts, they need to join hands and learn all it takes in making students excel academically. Moreover there is the mutual sharing of the current academic trends.
c) Has the organization gone out for bids for services such as maintenance, food services, transportation, security, and employee health insurance?

            Definitely yes. The main reason for that was because a lot of time used to be wasted in such activities instead of concentrating in activities which makes the school to flourish academically. Furthermore the other reason for that is because academic excellence of the organization is the one which is perceived as being the main driving gear or the one which will foster all that in return.
d) Have sales or production demand declined in the past year?
No. This because its management authority has been ensuring that all the employees         is aware and reminded about the objective of its establishment. Equally, the mission of it establishment remains to be the motivating factor. That is to say that the entire institutions are expected to produce the best out of them regardless of the current economic needs.
e) How much does the organization spend on wages and benefits; are those costs open for discussion (union versus non-union facility)? Only if "no," answer:
25%. All of these wages and salaries are open for discussion. The reason for this is to       ensure that there is transparency in the organization. Moreover, in case there wasn’t the need of ensuring that all that is open for discussion; chances are that crisis which deals with fraudulent of academic funds was to arise.
f) What is the amount of budget surplus identified in the organization?

g) What cuts, if any, were utilized to create this surplus?

h) Has sales or production demand increased, and is this related to the surplus?

i) What identifiable sources were in place to aid to this surplus (new product, reduction in cost of product, etc.)?

j) What is the projected or forecasted length of time for this surplus to continue?

NPV vs. IRR as a Capital Budgeting Decision Criterion Part 2

Response to student 1 S.W.

Student 1 S.W stated clearly one advantage of NPV as, providing a measure of contribution directly to the shareholders and the IRR shows the return of original money invested. These two advantages are important in the process of cash budgeting since they help in profit evaluation (Investopedia, 2016).  The student has also recommended the company owner to use the method suitable to him or her depending on the kind of investment specifying the one to use and at which time. The student used the concepts that are understandable to my company’s owner because these concepts are commonly applied in the company whenever a project is to be started. However, the student overlooked another important process of capital budgeting which is payback period. This method is simple and gives the company owner the period it takes to pay back the initial investment before undergoing a project. The student cited references to back up the recommendations.

Response to student 2 S.S

The second student addressed other advantages of NPV and IRR. One of the other advantages of NPV is that it reveals to the company how much money the project will make meaning the company owner is able to know whether the company’s value is increasing or not thus it can help the company owner plan very well (Akers, 2016). IRR on the other hand provides an overview of the project that will give the best return of the investment hence the company owner is able to selectively identify the best project. Therefore, the student in this case gave the company owner a direction when selecting a project. The student also used various references to support the recommendations.

References

 Gitman, Lawrence J., Zutter, C. J. (2011). Principles of Managerial Finance, 13th Edition. [VitalSource Bookshelf Online]. Retrieved from Investopedia . (n.d.). Advantages and Disadvantages of the NPV and IRR Methods. In Investopedia.com.

Akers, H. (2016). Advantages & Disadvantages of Net Present Value in Project Selection. Retrieved from Small Business: http://smallbusiness.chron.com/advantages-disadvantages-net-present-value-project-selection-54753.html; Lanctot, P. (2016)

STOCK MARKET GAME

Section

1. I) choose a method for picking stock
2. a) Method:

             “Buy what you know”

1. b) Favorite product and its manufacturer

1. II) Research these companies
2. a) The coca-cola company

The coca-cola company is a multinational beverage company and manufacturer, retailer as well as the ultimate marketer of.  The company was founded in 1886. This to say that has been in business for 130 years. It has for long remained to be the leader in the beverage industry because of its flagship product Coca-Cola. Despite of the above products, the company is in the position of introducing other new products for instance nonalcoholic beverages concentrates and syrup (Smith 202). As a means of remaining to be the leader of their industry, the company always offers customer value through the production of high quality products at an appealing price. The main competitor of Coca-Cola Company is Pepsi Company.

1. b) Nestle company _ this is a Swiss transnational company which produces both food and drinks. By considering is revenue, it is noted that it is the largest food company in the world. Such products include things like medical food, baby food, and dairy products and so on (Wilkins 229). It was founded in 1866 and it has lasted for 150 years. Because of its large revenue base, it remains to be the leader of the industry. Despite of the listed products the company still concentrates in the production of new cosmetic products. Although it continues to offer customer value in terms of high quality products at an appealing price, its main competitor is Uniliver Company.
2. c) P&G Company _ this is worldwide multinational industry which deals with the production of consumer goods and was founded in the late 1837. This means it has lasted in the business for 178 years. Its main products include food and beverages (Tung 34). On the other hand, it should be noted that it also manufactures new products like personal care and cleaning agents. Moreover, it continues to provide customer value through the production of goods of high quality which are at affordable prices. Despite that it is enjoying the economies of scale; its main competitor in the industry is Avon Company
3. d) PEPSICO Company _ this is an American multinational beverage, snack, and food company. Its main interest is the manufactures, marketing, as well as the distribution of beverages, all kinds of grain-based snack foods and other products (Balakrishnan et al 140). It was founded in the late 1965 and it has lasted for 118 years. Since then it has expanded to a wider range of beverage brands and food. The acquisition of Tropicana and Quaker Oats makes it to be leader in the industry. Although it does not concentrate in the production of new products, it also deals with supporting of charitable activities. Its main competitor is the Coca-Cola Company.
4. V) Uniliver Company _ this is an Indian consumer goods corporation which is based in Mumbai, Maharashtra. It produced a wide range of products for instance beverages, foods, water purifiers, personal care products, and cleaning agents. It was founded in the late 1932 and it has lasted for about 83 years. Although it is not the leader in the industry, it is one of the top 100 companies which produce goods which meets the consumer demands (Sherrow 282). Its main competitor is Proctor and Gamble (P&G) Company.

III. From the five stocks you’ve researched, choose your THREE favorite companies

1. b) Coca-Cola Company
2. b) Nestle Company
3. c) Pepsico Company
4. Look up the stock symbols and the current stock price

1. V) Buy your stock

1. IV) EXPLANATION FOR CHOOSING THESE STOCKS
2. a) Coca-Cola Company stock – The reason for choosing this company’s stock is due to the fact that it has a long dividend history. Currently, the company has recorded more than fifty track record of progressive growth. What mainly led to the choosing of this stock is because it certain that shareholders have the possibility of receiving generous additions to the company’s dividends as time progresses. The current economic trends and conditions which majorly entail strong competition will have the possibility of resulting into the production high quality and affordable products.
3. b) Nestle Company stock – the reason for selecting this stock is because of the efforts of the company which have paid off hence experiencing a steady increase in returns and margins over a decade of time. As much is like majority of their products what led me into this stock is because of the earnings of the company are extremely of high quality. Moreover, the current economic conditions and trend in the industry is likely to force all the companies in this industry to produce goods which will enable them to compete favorably.
4. c) PEPSICO Company stock- Commonly, PepsiCo stocks are the most attractive to own at this period. Typically, what led into the selection of this stock is also the existence of a more attractive and efficient valuation of their stock. Nonetheless, as much I am in the position of consuming one of their products, the current trend and condition in the can force the company to come up with newer products or improve the existing ones so as to remain in the industry or enjoy the economies of scale.

On the other hand, the prime reason for not choosing the other two stocks is because they do not have a more diversified business base unlike the other three. Moreover, their cash inflow is not perceived as being efficient hence making their dividends not to be paying adequately as the others.

Work cited

Wilkins, Mira. The History of Foreign Investment in the United States, 1914-1945. Cambridge, Mass: Harvard University Press, 2004. Internet resource.

Balakrishnan, Melodena S, Ian Michael, and Immanuel A. Moonesar. Actions and Insights-Middle East North Africa: East Meets West. Bingley: Emerald Group Publishing Limited, 2013. Print.

Smith, Andrew F. Food and Drink in American History: A "full Course" Encyclopedia. , 2013. Internet resource.

Sherrow, Victoria. Encyclopedia of Hair: A Cultural History. Westport, Conn: Greenwood Press, 2006. Print.

Tung, Rosalie L. Learning from World Class Companies. London: Thomson Learning, 2001. Print

Introduction to the Stock Market

 "KISS"--Keep It Simple, Stupid! 

The Ten Parent Companies That Make Your Favorite Brand

 http://money.msn.com

 http://finance.yahoo.com/ marketupdate

The New York Times

 The Wall Street Journal

http://investing.money.msn.com/investments/find-symbol

NPV vs. IRR as a Capital Budgeting Decision Criterion

The appropriate method of evaluating the new capital investment projects for this company can be found by conducting a comparative analysis between IRR and NPV. Focusing first on their advantages, the NPV method provides a direct measure in terms of dollar contribution it brings to the stakeholders of the company (Rich & Rose, 2014). IRR on the other hand has an advantage of showing the returns of the original money which was invested. It also expresses the required capital and the profits in terms of percentage which gives a clear record of rates and changes appropriately.  However, the NPV method does not allow the measurement of the project size (Rich & Rose, 2014). NPV also has a weakness of not giving clarity of the duration within which the project may take. The accuracy of cash flows calculations is also very difficult to coordinate and handle.   The IRR is on the other hand disadvantageous in that the outcome answers might be conflicting. The other challenge of IRR is usually experienced when mutually exclusive projects are run at the same time (Rich & Rose, 2014).

For these new capital investment projects I would recommend NPV method because the advantage surpasses the disadvantage and would best fit this company. The recommendation is based on the fact that the NPV is useful for comparing different projects (Rich & Rose, 2014). For instance, the NPV is able to calculate the present value for several cash flows series at certain period intervals of time. The formula =NPV (rate, value1, value 2,...) could best demonstrate this claim. As the Chief financial officer of this company, I would recommend the owner to deploy the NPV method of investment to realize a smooth coordination of his projects (Rich & Rose, 2014).

Reference

Rich, S. P., & Rose, J. T. (2014). Re-examining an Old Question: Does the IRR Method Implicitly Assume a Reinvestment Rate?. Journal Of Financial Education, 40(1/2), 152-166

Why China can maintain decent economic growth during 2008 world-wide financial crisis

Introduction

The current economic crisis has a number of dimensions that are crucial. During this time there was a moment to represent break up to form interlocking arrangements to govern the world economy. There were several attempts to resolve the crises that arose from the central contradiction[1]. This was within capitalism between the creation of profits and the realization of those profits in the sphere of production, circulation and exchange. These crises have led to a build-up of debts for both corporate and household debt. The crises also destabilized the returns of the international monetary resulting in trading deficit even with the most powerful nations. The crises also affected the low commodities prices ecologically. In an attempt to maintain these crises through strategic management policy they were a drastic change that affected the economy in a more severe manner in 2008[2]. This was far the worse economy crises that affected many countries seeking for survival tactics. For China, it was a different case as it shows a remarkable growth in its economy despite the crises that threatened the economy globally[3].

During 2008 the economy experienced the worst recession which began in 2007 when the western nations especially the United States started experiencing an increase in home prices which made the sales of the houses decrease. This affected the entire American financial markets and other global financial sectors. Banking industries, investment institutions, and charted organizations were not spared. Government institution was also affected by the economic crisis that threatened any progress hence no development took place. The crisis was severe to the extent that loan and savings institution together with commercial banks were affected. Organizations and companies that relied on operated on credit facilities had their business affected. There was an erosion of market confidence which made the lending institution increase their interest rate in order to discourage borrowing as a result of high rates that were unbearable. In order to carry on with business, the American auto industry had to seek a federal bailout. This clearly shows that the crisis was the worst.

As a result of the economic crisis experienced worldwide share prices were affected.  American and the western countries industries value was affected. There was a loss of industrial value of approximately 33.8 % in America industries during the recession period that had developed globally.  According to a report of a research carried out the economic recession was considered the longest and the worst. During the recession period, various countries such as America, Germany, and Japan matched the economy of small nations globally. For having mooched the American real estate securities the Europeans countries suffered a blow. The Chinese economy to exclude its self from the heavy and large drawback but it exports was not spared from its manufactured goods as its main markets were affected by the crisis. As a result of the recession, demand decreased resulting in more products being held by the manufacturers since no one was able to buy the goods. This means that a lot of capital was held in goods affecting cash flows in various companies.

The economic crisis did not spare the less developed countries as they lost markets abroad, lowering foreign investment. The foreign currency gain that was gained from the foreign market attributed the capital growth in the less developed countries but it was withered due to the recession that affected these economies[4]. With the trend in 2008, none of the most powerful and strong economies was prospering in order to pull out the world from the recession. The government and the private economist predicted a rough path to recovery.

As a result of the recession in this economy policy makers together with financial institution had to take some action in order to respond to the threat. This was because even with china not being affected by the crises the world leading economy had to come up with ways to restore the economy to avoid deterioration. They took broad steps such as giving a wide range of collateral and extending the terms of liquidity, cutting down on the interest rates and improving on the fiscal measures to mitigate the downdraft in the mortgage market. This was meant to boost the American and the European markets and ensure that recapitalization and takeovers happened. This saw the pressures on liquidity, deleveraging and the assistance package improving. There was also the concern of the vulnerability in the global financial systems to create a self-sustaining spiral in growth and credit. This was meant to lower rising defaults due to the recession.

In 2008 the overall global growth had declined by 4.9 percent that made the euro currency to decelerate below 1.6 percent[5]. As a result, inflation increased and a majority of commodities prices went up without really gaining the value of it. Industrialized countries experienced a slow growth resulting to spillovers of the economy due to the limited market[6]. Emerging markets remained skewed to the downside which hindered their growth. Similarly, the equity markets suffered higher risk as their valuation was under more pressure both in advanced and emerging economies.

The turbulent year 2008 was amid the world financial crisis but the Chinese economy marked a success of their economic reforms after 30 years[7]. Even with the success China endured severe snowstorms when in 2008 there was a devastating earthquake that leads to many lives being lost and millions being left homeless. When the crisis hit the US and the western countries china was fighting natural disasters and most of it people focused on the relief work and the Olympics games. During this time the government turned down on preventing economic overheats but emphasized the importance to reduce inflation majoring on the export growth, the GDP growth, the import growth, the inflow of foreign direct investment and the CPI to contribute to success[8]. The success was also attributed to a successful Beijing Olympics in 2008. The central and the local government did not shy away from investing enormous amount on the games. The government did investment heavily on the infrastructure and the air quality in the direct running of the games and the construction of sports venue. With the heavy investment of the Olympics, the game makes it the most expensive game in history as it was three times more costly that Athens games which were held in 2004 contributed to a 1 percent in GDP growth. The operational side of the game organizers contributed to the growth of the GDP during the economic crisis worldwide[9]. With the heavy investment by the government, there was a construction boom in several other cities in china that were to hold the games. Properties were built to meet the demand that came with hosting the games. The demand resulted in high economic growth which resulted to rapid urbanization of the other cities in china. The game attracted large numbers of spectators that led to spurred growth in other areas such as tourism and environmental improvement. With the sustainable development plan for the Beijing games, there was a ripple effect in Chinese economy growth that added a 2.5 % in annual growth since the year 2002[10]. Before the Olympic Games, the government realized that there was a potential risk of their economy due to the western economy recession. Before the games started there the state council called for changes in china monetary policy. This was meant to safeguard its own economic growth and contain inflation. With the policies, china was able to contain inflation but there were thousands of workers who had to be laid off because tens of thousands of factories had been closed down due to lagging demand from the foreign markets. In the wake of the worse global crisis, the biggest Chinese economy worry is the serious rate of unemployment for both the unskilled and skilled workers.

Nevertheless, china managed to achieve a tremendous growth in GDP growth of 9 percent[11]. It managed to surpass Germany and the American economy which were huge at this time. When the largest economies were hit by recession china was able to maintain and strengthen its position in the world economy as the third largest. It GDP measures in current values were 4.42 trillion US dollars[12]. The fiscal revenue of china economy increased up to 19.5 percent. As a result of its growth during this year china also got a boost in its foreign investment which increased by 11.3 percent. Even with this great and respectable growth China faced deterioration in macroeconomics in the second half of 2008.

Nonetheless, the impact of the world worse economy had a smaller impact on china compared to the impact it has on the USA, the UK, German and Japan together with other key industrialized economies. The large industrialized economies were experiencing a negative growth while china economy was on an upward trend growing at a fast rate. China was able to withstand the tough economic times due to various reasons. China’s monetary and fiscal policies played an important role. These policies have been designed to achieve an 8 percent growth against any deeply depressed world economy. With the crisis, china economy created opportunities for speeding up economic convergence together with the industrialized world. The world largest economies suffered the most as they dealt with an issue that did not affect the Chinese economy. The industrialized economies have significantly underestimated the effect of the financial crisis as they place forceful monetary policies that placed a strong expansionary to the economies. They introduced large rescue plans that would prevent major banks and large car makers from collapsing. As a result, the major world leading automobiles went to a brink of bankruptcy worsening the situation. China economy did not experience the heavy impact as it did not deal with automobile industries. China fiscal plan was committed to investing heavily in agriculture, science, infrastructure to enhance growth. The fiscal policy also addresses the need to invest in environment protection, healthcare services, and education. With the fiscal plan in place, the economy realized growth that led to more investment in the particular areas. With this development, China’s economy became vulnerable to the external shocks which in turn made the Chinese economy have influence to other countries.

In 1997 china managed to avoid the Asian financial crisis which helped china in the 2008 world economy crisis. This made China not to be hit as hard as the western economies due to the relatively lower level of development in China. The crises enabled china to shorten the time required in its economy[13]. China also undertook preventive measures that helped them in their development to enhance better methods to cope with such crisis.  The national balance of china foreign exchange maintains China as the world largest holder of the foreign reserve. This has helped China to maintain a symbolic level of the trade surplus for the foreign market.

In addition to coping with the current financial crisis, china has plans to invest heavily in its infrastructure especially the high-speed railway system. The budget of the system is of 1.8 trillion Yuan that is out of the 4 trillion Yuan that will be spent on the transportation infrastructure and power grid construction. With the commitment of developed forms of transportation such as highway, waterways and civil aviation will assist in coping with the financial crisis. The government has also placed on large-scale policies to support agricultural production and improving the rural living standards of its people[14]. With the plans and development China is able to overcome the challenges and make its self a prosperous and fair society[15]. Amid the bleak of the economic situation, the government has made improvements to increase energy efficiency to save on energy consumption in order to get hold of the GPD fall in this sector. The plans involve reducing the benchmark in order to create a momentum of development of the economy resulting in more energy efficiency and environmental friendliness.

The prosperous china’s housing market has had strong gains. Though there was a sharp decline in house prices in big cities the inland cities in China still managed to get high and strong houses in 2008[16]. The price trend in china’s real estate did correspond with that of the US and the UK market. The cause for the price drop in the housing market in china was different from that of the underlying US and UK market. The housing bubbles were caused by low borrowing cost and the flaws in the financial regulatory systems. The system allowed mortgage products that led to a subprime crisis in the western countries while in china the housing boom was brought by the vast and fast economic expansion and urbanization. In China, the mortgage holders were mostly the high income and the urban middle households which were a different case in the western market. The Chinese banking system also had a regulation that required at least a minimum down payment of 30 % of the home values. Though there were adjustments made of a reduction in down payment to 20 % to respond to the sluggish housing market in China, China economy still managed. Therefore the mortgage lenders in the Chinese market exposed a smaller default risk in mortgage compared to their western counterparts[17].

With the ability of Chinese economy to withstand the world economic crisis and record a growth in its GDP there are possible future outcomes that can be seen[18]. This means that china economy has a chance of becoming the most influence economy in the world.by this china will be consulted as major stakeholders regarding the world economy due to its best acknowledged fiscal policies and the success attributed to it[19]. The Chinese economy also stands a chance the second largest economy. This means that the Chinese performances is at par and contribute to the world economy of 3.7 an average growth. 1.4 percent will be attributed to industrialized countries and 6.6 percent to the unindustrialized and emergent economies.

Conclusion

China is one country that possesses the best fiscal conditions worldwide. This has attributed to its strong economy making it the least affected country by the worst world economic crisis. It government has invested heavily in infrastructure creating sufficient room for the expansion of fiscal policies to ensure that there is growth in its economy. In order to overcome the world economic crisis, the world industrialized economies have to team up rather than compete to ensure that the loopholes in the economy crisis are addressed accordingly.

References

Bisignano, Joseph R., William C. Hunter, and George G. Kaufman. 2000. Global Financial         Crises Lessons From Recent Events. Boston, MA: Springer US.     http://dx.doi.org/10.1007/978-1-4615-4367-1.

Cai, Fang, and Virginia L. Conn. 2016. China's economic growth prospects from demographic    dividend to reform dividend. Cheltenham: Edward Elgar Publishing.      http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A    N=1164402.

Knight, John B., and Sai Ding. 2012. China's remarkable economic growth. Oxford: Oxford        University Press.

Lardy, Nicholas R. 2012. Sustaining China's economic growth after the global financial crisis.    Washington, DC: Peterson Institute for International Economics.

Nanto, Dick K. 2009. The Global Financial Crisis: Foreign and Trade Policy Effects. Ft.             Belvoir: Defense Technical Information Center.         http://handle.dtic.mil/100.2/ADA497762.

Ongena, Steven, José-Luis Peydró, and Neeltje van Horen. 2015. "Shocks Abroad, Pain at            Home? Bank-Firm-Level Evidence on the International Transmission of Financial             Shocks." IMF Economic Review 63, no. 4: 698-750. Academic Search Premier,         EBSCOhost (accessed July 7, 2016).

Pavlát, Vladislav. 2009. "Financial Stability, World Financial Crisis and Financial Markets'          Regulation: Some New Issues." Economic Studies & Analyses / Acta VSFS 3, no. 1: 48-           61. Business Source Complete, EBSCOhost (accessed July 7, 2016).

Song, Ligang. 2008. China's dilemma: economic growth, the environment and climate change.    Canberra ACT: Asia Pacific Press [u.a.].

Vamvakidis, Athanasios, Vivek B. Arora, and Athanasios Vamvakidis. 2010. China?s Economic             Growth International Spillovers. Washington, D.C.: International Monetary Fund.             http://elibrary.imf.org/view/IMF001/11136-9781455201761/11136-            9781455201761/11136-9781455201761.xml.

Zhang, Ping, Xiahui Liu, Fuhua Yuan, and Ziran Zhang. 2016. Annual report on China's economic growth: macroeconomic trends and outlook.

[1] Nanto, Dick K. 2009. The Global Financial Crisis: Foreign and Trade Policy Effects. Ft. Belvoir: Defense Technical Information Center. http://handle.dtic.mil/100.2/ADA497762.

[2] Ongena, Steven, José-Luis Peydró, and Neeltje van Horen. 2015. "Shocks Abroad, Pain at Home? Bank-Firm-Level Evidence on the International Transmission of Financial Shocks." IMF Economic Review 63, no. 4: 698-750. Academic Search Premier, EBSCOhost (accessed July 7, 2016).

[3] Lardy, Nicholas R. 2012. Sustaining China's economic growth after the global financial crisis. Washington, DC: Peterson Institute for International Economics.

[4] Pavlát, Vladislav. 2009. "Financial Stability, World Financial Crisis and Financial Markets' Regulation: Some New Issues." Economic Studies & Analyses / Acta VSFS 3, no. 1: 48-61. Business Source Complete, EBSCOhost (accessed July 7, 2016).

[5] Pavlát, Vladislav. 2009. "Financial Stability, World Financial Crisis and Financial Markets' Regulation: Some New Issues." Economic Studies & Analyses / Acta VSFS 3, no. 1: 48-61. Business Source Complete, EBSCOhost (accessed July 7, 2016).

[6] Cai, Fang, and Virginia L. Conn. 2016. China's economic growth prospects from demographic dividend to reform dividend. Cheltenham: Edward Elgar Publishing. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1164402.

[7] Zhang, Ping, Xiahui Liu, Fuhua Yuan, and Ziran Zhang. 2016. Annual report on China's economic growth: macroeconomic trends and outlook. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1177722.

[8] Lardy, Nicholas R. 2012. Sustaining China's economic growth after the global financial crisis. Washington, DC: Peterson Institute for International Economics.

[9] Knight, John B., and Sai Ding. 2012. China's remarkable economic growth. Oxford: Oxford University Press.

[10] Knight, John B., and Sai Ding. 2012. China's remarkable economic growth. Oxford: Oxford University Press.

[11] Knight, John B., and Sai Ding. 2012. China's remarkable economic growth. Oxford: Oxford University Press.

[12] Vamvakidis, Athanasios, Vivek B. Arora, and Athanasios Vamvakidis. 2010. China?s Economic Growth International Spillovers. Washington, D.C.: International Monetary Fund. http://elibrary.imf.org/view/IMF001/11136-9781455201761/11136-9781455201761/11136-9781455201761.xml.

[13] Vamvakidis, Athanasios, Vivek B. Arora, and Athanasios Vamvakidis. 2010. China?s Economic Growth International Spillovers. Washington, D.C.: International Monetary Fund. http://elibrary.imf.org/view/IMF001/11136-9781455201761/11136-9781455201761/11136-9781455201761.xml.

[14] Zhang, Ping, Xiahui Liu, Fuhua Yuan, and Ziran Zhang. 2016. Annual report on China's economic growth: macroeconomic trends and outlook. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1177722.

[15] Song, Ligang. 2008. China's dilemma: economic growth, the environment and climate change. Canberra ACT: Asia Pacific Press [u.a.].

[16] Song, Ligang. 2008. China's dilemma: economic growth, the environment and climate change. Canberra ACT: Asia Pacific Press [u.a.].

[17] Zhang, Ping, Xiahui Liu, Fuhua Yuan, and Ziran Zhang. 2016. Annual report on China's economic growth: macroeconomic trends and outlook. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1177722.

[18] Cai, Fang, and Virginia L. Conn. 2016. China's economic growth prospects from demographic dividend to reform dividend. Cheltenham: Edward Elgar Publishing. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1164402.

[19] Ongena, Steven, José-Luis Peydró, and Neeltje van Horen. 2015. "Shocks Abroad, Pain at Home? Bank-Firm-Level Evidence on the International Transmission of Financial Shocks." IMF Economic Review 63, no. 4: 698-750. Academic Search Premier, EBSCOhost (accessed July 7, 2016).

ECONOMIC DECISION MAKING

Question 4 (a)

When Mr. and Mrs. A purchased the first house they viewed, it is factual that they missed three of the six decision steps for a successful decision maker. They had defined the problem and the objective as getting the house that suits their demands.  Additionally, they made a choice although they did not consider the issue of alternatives. However, it is exhibited that they did not explore the available alternatives and from this, they failed to predict the consequences of they made a wrong an appropriate decision. Lastly, lack of alternatives resulted to failure to perform sensitivity analysis to assess the effectiveness of the optimal decision.

Question 4 (b)

For the firm B to invest 5 years and 6 million in a new product that they are not sure whether it will compete profitably in the market missed some steps of successful decision making. In making this choice, the firm had defined its problem and determined the objective. However, it is perceptible that the firm did not consider the alternatives, predict the consequences of investing immensely on a new product and perform the sensitivity analysis (Dlabay & Scott, 2010).

Question 4 (c)

Leaving the mattress that blocked one lane on the highway missed three major steps of appropriate decision making. To start with despite defining the problem and determining the objective as leaving the mattress there, this decision lacks consideration of the alternatives, prediction of the consequences in the traffic enlarges, and performing sensitivity analysis. Alternatives such as taking away the mattress from the road dispose it in another place and just keeping it beside the road are applicable in this case.

  Question 4 (d)

Banning the use of thalidomide and withdrawing it from the drug market missed a decision making step which is exploring the alternatives. Though it is not clear whether the government proposed for a replacement of the drug but it seems that they did not consider the alternatives such as removing the elements that made thalidomide defective for pregnant women (Stolberg, 1997).

PROBLEM #3  

The soft drink firm can employ the six decision steps in order to define its course of action. The following is the procedural steps of how the company should follow;

1. Define the Problem

According to Samuelson and Marks (2015), it is worthwhile to write down the problem that requires decision making though it appears to be obvious. Therefore, in this case, the problem that needs to be written down is to market a new carbonated beverage with 25% fruit juice. This will help the organization to adhere to the target of the firm during the decision making process (Mankiw, 2014). 

2. Determining the Objective

In determining the objective for this decision/problem, the firm might use the benefit-cost analysis to decide on the objective to adhere to (Samuelson & Marks, 2015). Therefore, in this case, the firm might use profit maximization as the objective since it is the major goal that every organization adheres to while marketing their products.

3. Exploring Alternatives

It is factual that the more complex the defined problem, the more significant this step becomes. Therefore, in this case since the problem is not complex, the alternative that can be explored is not to market new carbonated beverage juice. 

4. Predict Consequences

One the alternative has been defined and written down, the firm can assess the probable consequences of the alternative. On the other hand, the consequences of the problem are determined and later weighed and compared to those of the alternative. Thus, in this case, the consequences of marketing and not marketing the new carbonated beverage juice will be predicted and weighed.

5. Make a Choice

After predicting the consequences of both the problem and the alternative, the firm will figure out which among the two accomplishes the objective. Here, the firm can use different techniques such as benefit-cost analysis and mathematical models among others.

6. Performing Sensitivity Analysis

After making a choice, the firm needs to assess the appropriateness of the optimal decision. In this case, the firm will have to analysis the stableness of the choice particularly during the inevitable economic and market changes. These changes can be economic recession, change in consumer demand, or even stiff competition (Antonioni & Flynn, 2013).

References

Antonioni, P., & Flynn, S. M. (2013). Economics for dummies. Hoboken, N.J: John Wiley & Sons.

Dlabay, L. R., & Scott, J. C. (2010). International business. Mason, Ohio: South-Western.

Mankiw, N. G. (2014). Principles of economics. Stamford, CT: Cengage Learning.

Samuelson W.F. & Marks S.G. (2015). Managerial Economics. Hoboken, NJ: Wiley & Sons Inc.

Stolberg, S., G. (1997). Thalidomide, long banned, wins support. New York Times. Retrieved from http://www.nytimes.com/1997/09/06/us/thalidomide-long-banned-wins-support.html

Bottom of Form

Disability sport

Kai Lammert is the head coach and Chris Pyne is the Vice Captain of the Pararoos Elite Sports Mentor of the year 2012. Paralympic Football has no Offsides, can throw or roll in the ball and have 7 a side, play for sixty minutes while the goals are two or five meters. The field size is 75m/55m and player being 7m away from restart compared to the normal football where the players are 9.15m away from restart. On the contrary the normal football has offsides, plays for ninety minutes within a 105 by 68 meters field.

In classification and eligibility of the game the C5/C6 has all their four limbs affected by spasticity. The C7 has one sided hemiplegia influencing the way they play and may have arm contraction when under stress. C8 has mild hemiplegia which appears in muscle slight tending to favor one side, all these are signs of CP or ABI. However the scenes show that each group despite the defects is capable to play.

The Paralympics are funded by the FFA, donations through Australian Sports Foundation and the Sports Commission. To start the program makes contacts with the NFF for support and recognition. Have organized training equipment and a suitable field to train and play. Issues around involvement with disabled sports like being scared of injuries on the players make coaches not to involve them in playing. They find it hard to accommodate the players due to limited belief of their ability. However having them involved is the best way to help them exploit their abilities

INFORMATION ECONOMICS

            Over the years from the earlier years in 1970 when a significant string of economic investigation, also known as information economics has investigated the scope of the process through which markets and organizations transmit information. This topic falls under the major topic of micro-economics theory which is involved with ways in which information and information coordination affects the economy and economic decisions. Information therefore has unique characteristics which results to its influence on the economic decisions. This involves it being easy to formulate but it is as well hard to trust while it may be easy to spread but on the other hand it may be hard to control (Arnold 2006). Due to the complexity of the unique characteristics it has as well resulted to the complexity of many ordinary economic theories. The development of economic of information technology has lead to evolutional of the nature of both the economic sector and business practices through influencing the collection and data analysis. This topic explores the function of information technology in the present management of organizations and economics. It analyzes the fundamental economics of information with the impacts it has on the administration system.  It further studies the consequences attributed by digitization and technology on organization and business structure as it look into the pricing, packaging and versioning of goods that are digitalized which are inclusive of software, communication services and entertainment components such as music and videos. The course also puts into consideration, the managerial influence that is brought about by social media, search, individualism, advertising and privacy. This paper therefore will base its argument of some of the sub-divisions under this course such as Moore’s Law and economic development, asymptotically free goods, network effects and asymmetric information.

Moore’s law and economic development

            This term of Moore was established in 1970 by Gordon Moore who was one of the founders of Intel Company who were involved in making of chips. He thus came up with a prediction that the number of electronic constituents which would be filled up into an integrated circuit were doubling annually (Brock 2006). This was later named as the Moore’s law which is accepted even up to date. The law in the current world is appealed to describe anything that is related to high technology. The law examined more on the rapid increase in the internet since the late years of 1990, the sudden improvement in the pricing of semi-conductors, and anything electronic, the continued technical advancement in information technology technique and the technical re-package in America’s economy (Gilmer et al 2005).

Moore’s law was not only concerned with decreasing the size of transistors but also on the economy which would ensure that the price would be cut off. Continued application of the law means that the progressing rate of semiconductors firm will overcome that of the other industries (Gilmer et al 2005). Future prospects of this law is that it will provide a magnitude of exponential ability improvement and increase resulting to essential shift in communication machines, computers and networking so as to be able to handle the overgrowing digital content. The law has shifted computers into being desktops to laptops and to tablets and phones which are carried along in the pocket (Brock 2006).

The development of IBM use of the integrated circuits in creating computers, was market oriented. With economic motivation, the manufacturers are in a position to manufacture and even crowd more of the components on every single integrated circuit.

Doubling the number of elements results to the doubling of speed within the integrated circuit since the electronic constituents are closely put together and the use of smaller transistors have shorter delays especially when switching (Brock 2006). Over the years, the electronic element use has been rapidly increasing while the cost of production has been decreasing with the doubling of the product produced and also with the doubling of the elements used. The rate of success in production determines the economic limit. With more packaging of elements in the integrated circuit, the rate of failure increases. So as to achieve economic success with the increasing number of elements, the rate of fixed cost of building up a new IC manufacturing facilities are increasing (Gilmer et al 2005). The fixed cost of creating a manufacturing foundry and the energy produced by the IC has increased over time hence resulting to the increase in cost of production of new facilities and this therefore becomes an economic factor.

Network effects

            Network effect is also viewed as a network externality which basically refers to the outcome that one user of a good or service has on the cost of that product to other people. Network effect is important when present as cost of a good or service is dependent on the list of other people using it (Kemper 2010). For instance, most people use Microsoft windows and telephone network thus making windows more demanded as most of the software uses the windows. This leaves most people purchasing windows while developing industries build their applications with windows within a virtuous circle. Most of the communication network uses the internet and in this the network effects occurs more. When the internet is limited, the network effects are few hence act as a strong barrier to the entry of goods and services in the market. The network effect is mostly applied to positive network externalities such as the phones.

 However, there are the possibility of the negative externalities occurring where more of the users produce a product that is of a lesser cost and results to congestion. Though most people may tend to think that network effects are similar to economies of scale but this is not the case as they are different. Network effect may affect new trades as a country may decide to support and specialize on the production of a specialized product which may result in making positive effects hence making the entire industry to be more efficient (Kemper 2010). With large network effects, there is the possibility of creation of incentives which helps to develop a monopoly. This enhances the dominance of production of one type of product so as to be efficient in meeting the demand of users.

Asymptotically free goods

            Asymptotically free goods are products that have no opportunity cost as they can be produced by the people at any quantity needed without any effort or with little of it. The goods are not scarce hence they are readily available. Sometimes, goods that are given out at zero prices are not necessarily asymptotically free goods since they require scarce resources (Flaschel 2010). However, ideas and works in which are produced at zero cost can be rated as free goods. For instance if an industry copies the works of other industry with zero danger of the resource running out of business then it fits to be a free good. Economists came up with another category of free goods where the goods are scarce but yet available at any given amount to anyone in nature such as air and sunlight. To some extent, asymptotically free goods are considered disruptive for instance; the government in a disruptive condition may tend to become associated with the adversary of change.

These goods are the latest economic forces where in solving of problems, labor and capital are not included but instead a research is carried out as well as development and in its completion the solution is reached and the cost of factors of production is relatively low (Flaschel 2010). The goods also raise issues between the conservatives and the liberals in the public. Liberals are those who believe that the government has a role in the preservation of the free goods since they economically encourage the researchers and the developers by providing them with direct government funds, delineating and implementing patent laws. Their support results to a better outcome of these free goods and better preservation (Flaschel 2010). Efficient pricing or cost for this operation is highly needed to prevent the cost being high above that of the marginal cost. Conservatives on the other hand advocate for private research and development as they think that the government is slow to identify and to curb this failures (Flaschel 2010). Therefore they advocate for private sector intervention in preserving the free goods which uses lower cost as they implement the use of cost-saving projects with an aim of providing their customers with the best benefits.

Asymmetric information

            Information asymmetry involves the study of the decision making while transacting where either of the party has more knowledge on the market than the other. This is the situation in which there exists imperfect knowledge and results to inefficient results in the market (Indian Economic Association et al 2006). This creates a disproportion of power in the transaction which can result to market failure.  Information failure results when only one side of the transaction has the perfect knowledge while the other side fails to have that knowledge. This results to misallocation of the resources where the consumers may end up overpaying or else underpaying or overproducing or under producing for firms. Markets are at their best when both parties are well informed hence an efficient transaction takes place.

 Asymmetric knowledge is economically a problem since one participant in the market may end up exploiting the other participant due to their greater know-how. Asymmetric information is applied in financial markets but it is dangerous as the borrower has more knowledge on the financial state than the one lending him (Arnold 2006). Also applied in insurance where in this case, the insurer is unaware of the way the insured person will take care of the product. This is a problem, as it can result to adverse selection.

References

Flaschel, P. (2010). Topics in classical micro- and macroeconomics: Elements of a critique of      neoricardian theory. (Topics in Classical Micro- and Macroeconomics.) Berlin: Springer.

Indian Economic Association., Nachane, D. M., Chatterjee, B., & Indian Economic Association. (2006).             Economics of asymmetric information. New Delhi: Deep & Deep Publications.

Arnold, R. A. (2008). Economics. Mason, OH, USA: Thomson South-Western.

Brock, D. C. (2006). Understanding Moore's law: Four decades of innovation. Philadelphia, Pa: Chemical             Heritage Press.

Gilmer, D. C., & Huff, H. R. (2005). High Dielectric Constant Materials. New York: Springer-Verlag Berlin             Heidelberg.

Kemper, A. (2010). Valuation of network effects in software markets: A complex networks           approach. Heidelberg [u.a.: Physica-Verlag.