8 Tips for Effective Time Management

Time is precious, particularly when it comes to running a small business. Yet there are never more than 24 hours in a day. Some entrepreneurs respond to this fact of life with focus and purpose. Others freak out.

Are you in the latter group? You don’t have to be. With the right approach, you can work efficiently, productively, and relatively stress-free.

Here are seven tips for effectively managing your time:

1. Know your goals.

Make sure you’re engaging in activities that support your business goals, both short- and long-term. Everything else is a potential time-waster. Your daily plan should revolve around working on tasks and activities that directly relate to generating income and growing your business.

2. Prioritize wisely.

Stephen Covey, co-author of First Things First, offers an organizational tool for your to-do list based on how important and urgent tasks are.

Looking at what goes into making up your day, where do your activities fit into these categories?

• Important and urgent — Tasks that must be done. Do them right away.


• Important but not urgent — Tasks that appear important, but upon closer examination aren’t. Decide when to do them.


• Urgent but not important — Tasks that make the most “noise,” but when accomplished, have little or no lasting value. Delegate these if possible.


• Not urgent and not important — Low-priority stuff that offer the illusion of “being busy.” Do them later.

Write down your three or four “important and urgent” tasks that must be addressed today. As you complete each one, check it off your list. This will provide you with a sense of accomplishment and can motivate you to tackle less essential items.

3. Just say no.

You’re the boss. If you have to decline a request in order to attend to what’s truly important and urgent, do not hesitate to do so. The same goes for any projects or activities that you’ve determined are headed nowhere: Be prepared to move on to more productive tasks. Learn from the experience to avoid wasting time later on.

4. Plan ahead.

One of the worst things you can do is jump into the workday with no clear idea about what needs to get done. The time you spend thinking ahead and planning your activities is trivial compared with the time you’ll lose jumping from one thing to the next (and rarely completing anything). Depending on your personality, try one of these options:

• The night before — At the end of the day, take 15 minutes to clear your desk and put together a list of the next day’s most pressing tasks. It’s a great decompression technique, and you’ll feel better sitting down at a clean desk in the morning.


• First thing in the morning — Arrive a few minutes early and assemble your prioritized to-do list (see #2). This may prove to be the most productive part of your day.

5. Eliminate distractions.

Start paying attention to the number of times someone interrupts you when you’re in the midst of an important task. Track self-induced interruptions, too, particularly those of the social media variety. Your smartphone is extremely useful, but it’s also addictive and among the most insidious time-wasters known to mankind.

It may take a massive exercise in will power, but shut the door and turn off your phone to maximize your time. Instead of being “always on,” plan a break in the day to catch up on email, call people back, talk with staff, etc.

6. Delegate more often.

If you’ve done a good job of hiring talented, dedicated employees, there’s always more work they can take off your desk. Running a successful small business depends upon the owner’s ability to think about what lies ahead and not get mired in day-to-day operations. Look for opportunities to pass responsibility for specific tasks to others on your team.

7. Watch what you spend

How many productive minutes are you packing in each week? Use this simple timesheet tracker by TSheets to quickly and easily clock in and out of various tasks or projects throughout the day. Switch jobs or tasks with just one click using the TSheets mobile app, or track time directly from your desktop. Then generate robust, real-time reports to see exactly where you’re spending your most valuable asset — and where it’s being wasted.

8. Take care of yourself.

Be sure to get plenty of sleep and exercise. An alert mind is a high-functioning mind and one that’s less tolerant of time-wasting activities.

Time management tips - how to do more in less time?

Importance of Time Management Tips

A tiresome topic - this time management tips. One of the most heard sentences in the exam time is "I have no time, I have to learn". This "having no time" is something very common. But why are there people who somehow always do better and make things better? The answer is to put time management in combination with priorities. But how is it possible to do more in less time? Here are 7 time management tips to help you make better use of your time and get more done.

Daily Planning

This is one of trivial time management tips, but still the most important of them all. If you want to be successful, you have to plan your day. Nobody can pass it. The most successful personalities, such as Apple founder Steve Jobs, have always done so.

There is no trick on how you can save time or how the clock runs slower. The only thing you can do is not live the day. In the best case, you should always sit down the evening before and plan the next day as detailed as possible. What are your appointments, when do you have lunch and dinner, how much cooking time do you have to plan, do you have to go shopping, when do you go shopping - all these questions should be answered in the evening.

How you do it is up to you. You can do it by hand, or on the computer. Helpful are also special software, such as Trello.

Important Tricks

Now a few important tricks that you should keep in mind when planning your day:

Pay attention to your priorities. Important and urgent activities should take up most of the time and be processed first. How to plan your priorities you will find in Tip # 4.

• Schedule buffering times. Best in the morning and afternoon 45 minutes. In this way, an unannounced phone call, an extensive homework assignment, or a squeezed presentation preparation will not mess up your entire daily schedule.


• Tarpaulin in blocks. Block times for specific tasks and include them in your daily schedule. For example Lecture "Accounting" 2:00 pm - 3:30 pm and then 3:45 pm - 4:30 pm follow-up of the lecture.


• Also, plan recreational activities such as sports and friends.


• Take enough free time during the day. Be it for half an hour in the morning and one hour in the evening. You should use this time to avoid stress. For a relaxed breakfast in the morning or a series in the evening.

2. Audit/learning plan

In addition to the daily planning, a learning plan is very important for the next 4-8 weeks. Especially if the tests are due in the coming weeks. This learning plan should include a daily overview of the coming weeks to the last exam. First and foremost, you enter your exam dates into this plan.

Subsequently, all other appointments that are due during this period will be entered. This can be, for example, a dental appointment or Grandma's birthday. Now you think about how much time you have to plan for each exam. Think again of sufficient buffer time. At least one day buffer time you should plan. If you start early enough (and you should!), Plan your study time so that you are through with the material about 3 days before the exam. So you could write each exam 3 days before the event. In this way, you will outsmart your brain and then have enough time, if something intervenes or in the best case of deepening.

Like the daily schedule, the learning plan should be recorded either in writing or digitally. Place this in a place where you always see it. This could be over your desk, for example.

You should always carry another version with you either on the smartphone (App: Trello) or on paper. Of course, you can also transfer the data to your pocket calendar. As soon as an appointment comes up or shifts occur, you can note this on the go. In this way, nothing is lost or even forgotten.

3. Eliminate sources of interference

The people who have the least time are usually the people with the largest, unidentified sources of interference. Be it the little brother or the smartphone. If you want to be productive and learn, eliminate those sources of interference. Find a quiet place to study. Most people are unaware of what their sources of interference are. Therefore, it is important to have defined these in advance. What are your sources of interference?

Once you have analyzed and identified these, you can also make sure that they do not occur anymore. In addition, you should actively plan your time planning with your family or for Instagram. In this way, you plan your sources of interference, which incidentally happen actively in your day at a certain time. But this also means that the sources of interference must be limited in time.

4. Set priorities

A tip that you should do first. Think about what matters in the coming time your priority. You can, for example, write down these and assign priorities from A to C. If learning or upcoming exams are on your Priority List A, you should consider this in your scheduling and plan most of the time for learning accordingly. Priorities can change over and over again, so it is very important to question your own priorities on a regular basis.

Eisenhower Matrix

The difficulty lies in the allocation of priorities. To simplify this, Eisenhower matrix can help. This basically contains a 4-field matrix.

1. Do: important and urgent


2. Plan: important and not urgent


3. Delegate: not important and urgent


4. Eliminate: not important and not urgent

Using this matrix, each task can be questioned as to whether the completion is important and/or urgent. If it is important and important, the task should be checked first and in a timely manner. Urgent tasks should be done immediately while the important tasks can wait.

The following YouTube video explains the principle in a comprehensive and practical way: How to Prioritize Tasks efficiently and effectively.

[embed]https://www.youtube.com/watch?v=czh4rmk75jc[/embed]

5. Bundle of similar tasks

Another important trick to save time and to make the most of your energy. In Tip # 1 we already talked about planning in blocks. This you can combine well with this tip. For example, you should bundle medical appointments and do one afternoon in a 3-hour block. It's similar to phone calls you have to make. In this way, the brain can concentrate optimally on the respective task and you do not consume unnecessary energy.

Usually, the task does not take most of the time, but the preparation and follow-up. Bundling tasks into a block increase in working time, but the time for preparation and follow-up remains the same.

6. Biorhythm

Our biorhythm determines our entire life, our behavior, our productivity, and our success. Therefore, it is very important that you know exactly how your rhythm is going. To find out, write down for a week each day how you feel in the morning, noon, afternoon, and evening. How fit, balanced, motivated and productive are you at certain times of the day?

Most people are most productive in the mornings. Lunch and dinner is the most unproductive time. If you recognize yourself here, get up early!

Of course, it is important to get a good and adequate sleep, but you can get up at 6 in the morning. In this way, you have time in the morning and can be productive before the first lesson or lecture.

7. Eat the frog

A principle that you should consider in your daily planning. Always do the hardest or most important task first. In this way, on the one hand, you have the first sense of achievement as soon as this task is completed. And secondly, your brain subconsciously continues working on this task throughout the day. Brian Tracy wrote the book " Eat the frog " years ago. In this, he shows 21 ways to create more in less time. Eat the frog is one of the strategies and also the title of the book.

For example, if you give an important presentation the next day, preparing for this lecture should not only be a priority in today's daily planning but also be the first to be done. The reason for this is the application of importance and urgency.

Now it is up to you to implement all the mentioned time management tips. With the implementation, you will notice how much more productive your work. In this way, you will create more in less time. There is no secret recipe to establish good time management. You have to implement it.

Good luck with your own time management! Don't forget to review this article: 7 time management tips before you leave. Thanks.

If you like the above given 7 time management tips, please do like, comment and share.

Expenditure

Contents:

• When do expenses arise?


• Effort and operational service provision


• Expenses - Definition & Explanation – Summary

Expenditures are all expenses incurred on use of goods and services. The expenses are always periodized.

Expenses arise in a company through the "value-based consumption of goods and services". So, when a company removes materials from the warehouse and delivers them to production, it's an expense. Expenses influence the company's success.

Examples of expenses

1. Wages/salaries


2. Control


3. Energy / Water (consumption)

When do expenses arise?

In accounting, the expenses are practically a superordinate term, which always refers to the total assets of a company. Accordingly, this is understood to mean the assessed consumption of goods, whereby a specific billing period is used for this purpose. Expenses include all reductions in operating net assets that did not result from a payment of capital to the owners of the company.

It should be noted that expenses are always prioritized. For example, a company today can buy a machine for 1 million euros, which will then be used for 10 years. Accordingly, an issue of 1 million euros has arisen, but no expenses of 1 million euros. For the acquisition costs are distributed over the useful life and depreciated accordingly. Each individual depreciation then represents an expense.

Effort and operational service provision

Every company has a specific business purpose. For example, a furniture manufacturer produces furniture and a baker sells sandwiches. However, there may also be expenses that do not arise directly from business operations (neutral expenses). For example, a company may make donations to charitable associations, which is considered an expense but would not be included in the income statement.

Even extraordinary expenses, which arise only once and unforeseen, are not to be recorded as costs. For example, it may be uninsured disaster damage or theft. In the context of cost and activity accounting, the recorded expenses must, therefore, be analyzed and characterized accordingly as neutral or operational. Only then it is ultimately possible to determine an exact operating result.

Expenses - Definition & Explanation - Summary

Expenses are reductions in the net worth of a company

They can arise from both external and operational incidents

By contrast, costs always arise due to the business purpose itself

Expenses - Costs

Contents:

• What are expenses?


• What are costs?


• Difference expenses and costs examples


• Difference Expenses - Costs - Definition & Explanation – Summary

Expenses are all activities that reduce a company's equity in a given accounting period. It does not matter whether these expenses were incurred for non-operational and operational purposes.

Costs are all expenses incurred during the operational performance process. Expenses of wages and salaries are, for example, also costs. (Logical that the employees who work in a company are integrated into the company performance process).

What are expenses?

Expenditure is always to be considered when the expenses of a company are periodized. Expenses are incurred (usually) within the scope of the company's service provision and are compared to the income.

Examples:

• A company pays its employees 150,000 euros in salary in January.


• For materials that are consumed directly in production, supplier bills 250,000 euros.


• Repairing a machine costs the company 1,000 euros.

However, a distinction must be made between operating and non-operating expenses. The former is always incurred when the expenses are related to the company's main business activities. For example, a furniture manufacturer could buy wood which is then used to produce chairs. On the other hand, non-operating expenses are incurred if the business transactions have nothing to do with the actual core business. For example, the company could rent apartments above office buildings and install a new heating system here.

What are costs?

Usually, the costs are derived directly from the expenses. Basically, it is the valued consumption of economic goods, which in turn serve the creation of other goods or services. Based on the expenses, the costs are calculated as follows:

Expenditure

- Neutral expenses

+ Additional costs (e.g. imputed company wage, imputed interest or similar)

+/- Conversion of imputed expenses into other costs (a form of imputed costs)

Thus, the costs related to the actual core business of a company, the aforementioned expenses such as rented apartments would not be included. The reason: In practice, the operational business of companies is crucial to their continued existence.

Difference expenses and costs examples

Example 1: A furniture producer decides to donate 100,000 euros to a charitable organization. This is undoubtedly an effort that cannot be recorded as a cost, however. Although the effort is related to the period, albeit external. After all, the donation is not directly related to the actual service provision of the furniture manufacturer.

Example 2: In the first quarter, a furniture producer buys raw materials worth 1 million euros. These raw materials are needed to subsequently produce chairs and cabinets. Because this effort is related to the period, not extraordinary and related to operational purposes, it also involves costs.

Example 3: In the factory of the furniture producer, a fire breaks out, causing a great deal of damage. There is a need to buy new production facilities worth 10 million euros, of which only 9 million euros are covered by insurance. Although the expenses are directly related to the provision of services, they are not costs. Because this effort is to be described as extraordinary and not on a per-period basis.

Summary

1. Expenses are incurred as part of the provision of services for goods or services


2. This is also the case with costs, but they are always period-related, operationally-related and not extraordinary

How does money work?

As a means of payment, money is nowadays indispensable. After all, who still operates today's traditional barter trade as one knows it from earlier times? It is simply more convenient to trade in a form of payment that everyone can use and that everyone accepts as a mode of payment.

What is money?

Money has become so integrated into the daily lives of people that hardly anyone could make a concrete definition about money. Basically, money is all liquid assets available to the state, businesses, and individuals. These include all three types of money, such as coins, banknotes and book money. A bank is a financial institution, which can be used for money transfer from one place to another.

What can you do with the money?

Actually, a rather superfluous question on which you usually get the answer "everything". It should be noted in this regard, however, that you cannot buy everything in life for a long time with the mere money. Affection, real friendships, and love, for example, you cannot buy using easy money in the world.

Difference between Efficiency and Effectiveness - An Easy Approach

Contents: Efficiency and Effectiveness

• 1. Definition of effectiveness


• 2. Definition of efficiency


• 3. Effectiveness and efficiency in everyday life (examples)


• 4. Summary

The difference between efficiency and effectiveness is not that easy to understand. We will try to light up the difference.

1. Definition of Effectiveness

Effectiveness is the measure of the achievement of goals. Which means the ratio of the desired goals to be achieved. The underlying effort does not matter.

Or:

Effectiveness is the completeness and accuracy with which a particular goal is achieved.

"Doing the right things"

This raises the question of whether the public or the customer benefits and whether "the right things are done".

The effectiveness has a greater political significance than economic efficiency. Efficiently doing wrong things does not lead to the goal, but is usually a waste of money.

2. Definition of Efficiency

Efficiency represents the ratio of input to output as well as performance to cost. Efficiency thus corresponds in many cases to cost-effectiveness.

Or:

Efficiency is the effort involved in achieving a specific goal in proportion to completeness and accuracy.

"Doing things right"

This raises the question of whether "things are done right" (effectiveness: "doing the right things").

Efficiency is without question very important. But if the wrong things are done efficiently, it's a waste. Hence, the effectiveness has a higher priority. Strategy goes before efficiency.

3. Effectiveness and efficiency in everyday life (examples)

Rico wants to clean his bike on a warm summer's day. However, if he just lazes and basks all day, he is not effective in the sense of the actual goal (to clean the bike). Hence, he (in terms of goal achievement) makes the wrong thing.

If he only cleans the bike with water and a rag, he is quite effective (since he is working to reach his goal), but not efficient. He would be efficient and effective if he does the right thing with the right means (suitable cleaning agent, brush, etc.) (Cleaning the bike).

4. Summary

Effectiveness is a measure of output - doing the right things. One possible sub-goal of effectiveness is efficiency. This represents a relation between "input" and "output". It also serves as a benchmark for resource economy - doing things right. Thus, efficiency is not a sufficient or necessary condition for effectiveness.

The difference between effectiveness and efficiency is not always immediately obvious. "Doing the right thing" answers the question of WHAT - What needs to be done to reach the goal? The right thing to do then, answers the question of HOW - How can it be implemented? Aligning one's own actions in everyday life in terms of effectiveness and efficiency guarantees a lasting success - private, professional and entrepreneurial.

Deadweight Loss

Deadweight loss is the fall in total surplus that results from a market distortion, such as a tax. In economics, a deadweight loss (also known as an excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable.

Under limited circumstances, it can be assumed that monopolies are the cause of welfare losses. The welfare loss, in this case, is based on the assumption that the monopolies cause one or more inefficiencies. Basically, the reduction of the consumer's pension is seen as a welfare loss. Marshall defines it that way, on condition that the optimality conditions of the comprehensive competition are disturbed.

Monopolies can have positive effects and are not always the cause of a welfare loss. A technical advance or a short-term maximization of profit may have beneficial effects, but will not be considered in this analysis.

A loss of welfare occurs when the number of goods produced deviates from the optimal amount. The balance in the competitive market would be disturbed. In theory, welfare losses can be calculated. Taxes, duties, and prices, as well as monopoly formations, are included in the calculation. A consideration of the welfare loss is never complete. Future effects cannot be included in the calculation because the market and the behavior of the consumers are subject to a certain dynamic.

Calculate welfare loss

Welfare loss, also called deadweight loss , can be calculated using the following formulas:

Function of market demand: D (p) = 200 - 2p
Function of the market offer: S (p) = 50 + p

First, this function can be compared and calculated in lockstep:

200 - 2p = 50 + p = 150 = 3p
p = 50; x = 100

Finally, the quantity tax is included in the calculation. Here we assume a tax rate of 7.5 percent:

200 - 2 (p + 7.5) = 50 + p = 200 - 2p - 15 = 50 + p
135 = 3p

Including the quantity tax, p = 45 and x = 95. The welfare loss can be calculated as follows:

W = 0.5 * taxes * (x without quantity tax - x with quantity tax)
W = 0.5 * 7.5 * (100-95) W = 18.75

Business Combinations

 

A business combination will transform legally and economically independent companies into larger business entities. As a result, the economic and legal independence of individual companies can be lifted. But it is also a loose cooperation without loss of independence of individual companies conceivable.

An overview of the forms of business combinations

A merger results in a merger of several independent companies. This merger can take place, for example, in the following form:

• through the formation of a cartel


• through the formation of a group


• by entering into a merger


• through the formation of an association


• through the formation of a community of interest


• through the formation of an occasional society


• through the formation of a joint venture

In all these forms of business combinations, there are certain special features. In a merger in the form of cooperation, such a form of the merger is, for example, in a community of interests, the merged companies remain legally independent and lose their economic independence is not complete.

By contrast, a merger in the form of concentration leads to the loss of the economic independence of individual companies.Legally, companies, if, for example, a corporation should be formed, can remain independent. Likewise, it is also possible that the individual companies lose their legal independence. This is the case, for example, when a merger is entered into.

The legal aspects of a business combination

Business combinations can give businesses an economic advantage. In some cases, a merger gives companies the opportunity to acquire a dominant position. To prevent this, German competition law provides for restrictions on business combinations.More detailed information on the restrictions can be found in Germany in the Law against Restraints of Competition.

Business combinations can give businesses an economic advantage. In some cases, a merger gives companies the opportunity to acquire a dominant position. To prevent this, German competition law provides for restrictions on business combinations.More detailed information on the restrictions can be found in Germany in the Law against Restraints of Competition.

Supply Curve | Definition | Explanation | Graphical Representation

Supply Curve Definition

The supply curve is a graphic illustration of the interaction of price and supply. The principle is that the higher the price, the greater the supply of producers.

The term supply curve comes from the field of economic theory and describes the natural relationship between supply and price of a product or service. The fundamental consideration behind the term is the fact that the higher the price to be paid for it, the higher the quantity supplied of a good. 

The supply curve is therefore usually rising more or less - depending on the product concerned. The course of the supply curve is also influenced by the so-called supply elasticity. This indicates how strong the relative quantity change is in relation to the corresponding price change.

Explanation of the supply curve

The supply curve graphically illustrates the relationship between the price and the quantity supplied for a good. The key idea: the higher the price of a good, the higher the quantity supplied. Thanks to the higher price, the producers can generate higher profits, which serves as an incentive for the expansion of the production volume. On the other hand, if the price is comparatively low, the production is hardly or not at all worth it. In addition, higher production quantities, in theory, are usually associated with higher marginal costs.

Classically, the supply curve goes up from the origin at a 45-degree angle. However, displacements of the curve are also conceivable. If the curve does not originate from the zero point, but on the Y-axis, then the production of the good pays off only from this point or price.

Important statements of the supply curve - displacement, elasticity, marginal costs

The supply curve not only indicates the quantity produced at a given price. It has the following important information ready:

• Elasticity: The slope of the supply curve allows a statement about the supply elasticity. It measures how much supply changes when the price is lowered by 1 percent. If the quantity supplied decreases more than 1 percent, then one can say that the product has an elastic supply. The supply curve is very steep in this case.


• Marginal cost: The supply curve always shows the marginal cost of the producer, if it is a market with perfect competition.


• Shift: Changes in the market composition or the market situation can be identified by shifts in the supply curve. If the general production costs fall, the supply curve shifts to the right or down. Because then, at the same price, significantly more goods can be produced cost-effectively.

 

On the open market, goods and services are offered and demanded. On the supply side, depending on the type of good or service there are different providers. The supply quantity of these goods depends on the price, the corresponding graphical representation is the supply curve.

The supply curve shows the quantity of a specific good or service as a function of the price, with the offer quantity being plotted on the abscissa. The providers will offer more goods of this kind at a higher price, or at lower prices, they will offer less.

Other courses of the supply curve are rather rare, for example, perishable goods. In that case, the supply can increase even with falling prices. Classic goods and services, such as a property, are then offered more frequently when prices rise, or the other way round, the price has to rise until another provider decides to offer their property to the market.

Shift of the supply curve

Under certain conditions, the supply curve may shift. In the case of real estate, this could be the case if the state subsidizes new housing construction and, accordingly, more new buildings are built. The supply curve shifts to the right, in this case, more suppliers will offer the good at the same prices. A shift to the left can occur when raw materials for the construction of real estate become more expensive.

Do you know Accounting - What is the accounting?

Demand Function

In economics, the demand function represents consumer demand for a commodity as a function of price. The graphical representation is made on a coordinate axis (Y-axis is price / X-axis is quantity) which is known as demand curve.

Definition / Explanation

The demand function is a function that shows the consumer demand for a good in relation to the price. Compared to the demand function is the so-called supply function, which defines the supply as a function of the price.

At the point where demand function and supply function intersect, the market equilibrium can be determined, i.e. the price/quantity combination in which the demand for the good corresponds to the quantity offered at this price.

As a rule, the demand function is displayed directly in a coordinate system. The so-called abscissa (X-axis) represents the offered quantity and the ordinate (Y-axis) the price.

It is usually a strict monotone and falling function. By this, it is meant that with falling prices the demand will increase and with increasing prices the demand decreases.

The demand is clearly limited to this model because it is calculated with a certain price, which starts with a value zero. So if a potential buyer is no longer willing to pay a certain price, the demand value is zero. In technical terms, this price is also referred to as the prohibitive price, which is recognizable as the intersection point on the Y-axis.

If the price drops, so does the demand for a product. However, the falling price will not necessarily lead to an infinitely high demand. The market is saturated from a certain point, which can be seen at the intersection on the X-axis.

Special Features and Characteristics

The demand or the supply depending on the price formation is processed in the functions. An intersection of the two components creates a market equilibrium in monopoly formation.

There are usually several suppliers for a particular product. The prices vary and have to be adapted exactly to the market situation. This is the responsibility of the demand function, which gives an optimal picture of what the current situation looks like.

Summary

• Demand function describes consumer demand for a good in relation to its price.


• With demand function and supply function, market equilibrium can be determined


• Representation: X-axis = quantity demanded and Y-axis = price


• usually strictly monotonous and falling function

Externalities

When one speaks in the national economy of so-called externalities, one basically means economically oriented decisions of companies that unintentionally hit uninvolved market participants.

The person causing the damage, ie the company here, does not compensate. The injured and uninvolved market participants are therefore not awarded any compensation for the inconvenience caused.

As a result, the cessation of the companies that accept such externalities is quite egotistical and only aimed at the highest possible profit. Social and ecological goals remain completely ignored. But what kinds of externalities are there in the economy and what could be practical examples?

Types and Examples of Externalities

In principle, an externality can be positive or negative. Not every externality has to be bad at the same time. A negative external effect is the so-called external cost. In rare cases, however, externalities can also be positive. Then one speaks of an external benefit .

There are countless examples of externalities that are often associated with the environment and with health.

For example, a coal-fired power station produces energy and as a waste product, pollutants are released during production, which are simply released into the environment. The inhabitants of the coal-fired power station could be harmed in health and need treatment. The costs that must be spent on the health recovery of the residents are the external costs. Under normal circumstances the coal-fired power station does not pay these costs, which is why it is an external effect, or more precisely an external cost.

Another example: a motorway is expanded by two additional bumpers and residents are bothered with additional noise by passing cars. If an appropriate noise barrier is built, it is an external effect. The highway is used by countless car and truck drivers. None of them paid for the noise protection.

Development of Externalities

If a company has to keep an eye on the costs of its production, ecological and social objectives are completely ignored. The social costs are, for example, passed on to society through the egoistic approach of the victims. A (financial) compensation does not take place. Since a large part of the companies almost always have the highest possible profit in mind, it often happens that externalities hit the company and thereby damage.

Amount of External Costs

The real difficulty is the exact amount of the external costs. In general, it is very difficult to define the amount of external costs. First of all, it is extremely difficult to find out which costs are an external effect and which costs would arise in any case. As a result, it is usually very difficult for the state to determine the cause for the externalities.

Externalities mean Market Failures

If there is externalities in an economy, you can basically say that the price mechanism has failed . As a result, a market failure occurs and the state is more or less compelled to intervene in the event. Especially in a social market economy, it is ultimately impossible for a company to simply harm other market participants, such as the company or other companies, without a corresponding compensation. In principle, here too, of course, the polluter pays principle applies: The person responsible for the externalities must be held accountable and justified for his actions.

Briefly Summarized:

• Externalities affect uninvolved market participants


• Externalities are basically a form of market failure as the price mechanism has failed


• Externalities can only be very difficult to assign to the polluter


• The amount of externalities can usually only be estimated


• There are positive and negative externalities
  


• Causes of externalities are mostly companies with particularly pronounced profit orientation

Perfect Competition

The principle of perfect competition is a theoretical idea in the economy, which in this form will probably not exist in the longer term.

In order for the condition of perfect competition to be fulfilled, certain conditions must be fulfilled. Both supply and demand are balanced in this market. It is assumed that there are always enough buyers who want to buy the product. At the same time, it is assumed that the supplier does not have to go under his price pain threshold because the demand is permanently high enough.

But what are the prerequisites for full competition and why is this form of competition so remote and therefore just a theoretical model?

Conditions for Perfect Competition

Complete competition requires that no company involved in the market has a market power and that no company has a significant impact on market prices . Moreover, a condition that must be fulfilled is that it must be homogeneous goods. This means that the products of the different suppliers are nearly identical and comparable to the customers. Not many products meet this requirement. An exception could be gasoline, for example. Because the quality of the fuel of a variety is always the same, it does not matter to the customer where he buys the product. The reality, however, is that most of the goods are not homogeneous, since there are, for example, differences in quality.

In addition, there must be a large number of suppliers and buyers in the competition. The consequence of this is that the action of the individual has no influence on the market price. If, for example, there are 1,000 vendors and a million customers, it is irrelevant whether there are only 999 vendors and 998,000 vendors in the next month. The situation would be different if there were only ten suppliers for the number of customers. Then a vendor would more or less have an influence on the market price.

The last condition, which must be fulfilled in perfect competition, is the market transparency , which must be present. This means that every market participant must know which goods are offered and demanded by whom and at what price. A truly theoretical assumption, which in reality is mostly only fulfilled on the stock exchange .

Reality of Perfect Competition

Since one can only speak of a complete competition, if all of the above-mentioned conditions are fulfilled without exception and in full, this model is to be described as very realistic. In reality, it would not be possible. This is much more a theoretical model, an ideal.

Briefly Summarized:

• Perfect competition is a theoretical and realistic ideal


• It is assumed that these are homogeneous, comparable goods (for example gasoline)


• It is assumed that there are a large number of buyers and sellers


• It is assumed that there is a complete market transparency.

Absolute Advantage

Definition: what is absolute advantage? Roughly speaking the absolute advantage is about division of labor and specialization. The basic idea behind the absolute cost advantage is to find out where a particular product can be produced more cost-effectively than in another country. On the other hand, comparative cost advantages are used when a country can produce a product at lower opportunity costs (= alternative costs) than another country.

Absolute cost advantages

The theory of absolute cost advantages was already developed in 1776 by the economist Adam Smith. In his opinion, each country should specialize in the production of goods, where it has an absolute cost advantage. In addition, he believes that the existence of absolute cost advantages would lead to the trade of nations with each other and the welfare of each individual national economy. In simple terms, one can say that every country is to produce what it can make cheaper or faster than the foreign competition.

Absolute cost advantage - example:

In Spain, a single wine can be produced in 10 working hours. In Germany it takes 15 working hours for a single wine. Spain therefore has the absolute cost advantage in wine production. For this, Germany only needs 30 working hours per unit when producing iron, while Spain needs 50 working hours per unit. Germany is thus much more effective in the production of iron, so it has the absolute cost advantage here.

For 10 units of wine and 10 units of iron, Germany needs 450 working hours (300 + 150). The Spaniards, on the other hand, have to spend a total of 600 working hours (100 + 500) for every ten units. Both countries would therefore need 1,050 working hours. On the basis of the absolute cost advantages one can now say that it would make sense that both nations specialize in producing a product because they are better and more effective in it. Spain has the absolute cost advantage in the field of wine production, Germany in the production of iron.

If Germany were to concentrate on the production of iron and almost produce iron for Spain, Germany would need a total of 600 working hours (30 hours per unit) for the production of 20 units of iron. Spain, on the other hand, undertakes the complete production of the 20 units of wine and needs 200 hours (10 hours per unit). Overall, both economies therefore only need 800 working hours. The division of labor and specialization on the basis of the absolute cost advantages thus results in a work saving of 250 hours.

Conditions and criticism

For the theory of absolute cost advantages to work as described above, however, it must be ensured, inter alia, that there are no trade barriers between the participating economies in the course of the division of labor. Such an obstacle to trade is represented, for example, by import duties and export duties. In addition, it is necessary that every national economy actually produces the goods which appears effective from absolute cost advantages. If in the above example Germany were to produce the wine and Spain the iron, the time expenditure for both would not fall, but would increase extremely.

The theory of the absolute cost advantages is criticized mainly because it assumes that participating economies have to produce a good, which can make them more cost-effectively, thus more effectively. If a country does not have the absolute cost advantage for any product, it does not take part in foreign trade, according to Adam Smith's theory. This approach, however, has been replaced by the theory of the comparative cost advantage of David Ricardo.

Allocation

[caption id="attachment_803" align="aligncenter" width="698"] Allocation[/caption]

An allocation is the distribution of the available production factors in the national economy to the different possibilities of use.

Available resources must, therefore, be used effectively in order to save costs and, on the other hand, save time or protect the environment. The difficulty, however, is to find the optimal allocation.

This is the best possible use of the production factors that are available. The allocation describes both the process of optimally utilizing and allocating resources as well as the respective state. In addition, the allocation is usually controlled by markets that are adaptable on the one hand and flexible on the other.

Allocation problem

In the case of allocation, a primary goal is to use existing resources efficiently. The reason: All resources, whether employees or raw materials, cost money. The more efficient and advantageous these are used, the more economically an economy can ultimately produce. As a result of such an optimal allocation, the economy remains competitive in the long term.

In addition, many resources are limited, so they are not available in any amount. This also requires the use of an optimal allocation. This "distribution problem" is also referred to as an "allocation problem" in the technical language. Scarce resources are distributed here in order to achieve an optimal welfare. The production factors or resources that are scarce are primarily raw materials, labor, and capital.

Methods of allocation

In principle, differentiation is made between two different methods. The first possibility is that the distribution of resources is taken over by the respective markets themselves. But this usually only works in theory, if one assumes a complete market. The reality looks rather different and therefore makes the intervention of the state necessary.

Method 1: Market Mechanism

This methodology of the market mechanism, which is oriented towards the theory, means that the markets distribute the resources themselves. Since this is a theoretical optimum, we benefit from various advantages. In this way, for example, buyers get exactly the resources they need. In addition, the market mechanism can also promote technical progress. Finally, demanders themselves determine the extent to which they use which resources. Accordingly, all market participants are flexible.

Method 2: Intervention by the State

As a rule, state intervention is necessary to ensure a functioning market. The primary objective of the state is to distribute the existing production factors fairly. This state regulation differs in many respects from the market mechanism. Thus, for example, means of production are nationalized and prices are also fixed by the state. The available resources are distributed through "commodity-economic plan balances". This means that the state is quasi-required to specify which resources are being given.

And again briefly summarized:

• Allocation is the distribution of existing resources to different usage possibilities


• The aim is to achieve optimal allocation


• Allocation is important in the following scarce resources: labor, capital, land, raw materials


• The allocation problem or distribution problem also describes the difficulty of efficient resource utilization


• In the market mechanism, a distribution of resources takes place through the market itself


• Regarding state regulation, the state sets the framework conditions

Budget Line

The budget line represents all combinations of prices and goods. The total expenditure must correspond to the total income. The goods have a fixed price and the buyer has a fixed income.

Values ​​above the budget line can not be acquired because the financial resources are not sufficient. Under the straight line the purchase is not optimized.

Calculation of the budget line

Variables are required to perform a calculation. This is once the budget and once the cost per product . The variables are listed below as examples.

budget	Price of good 1	Price of good 2
200 €	2.50 €	4,00 €

Finally, the budget line is the graphical representation of all purchase options . In this principle, demand is regarded as infinite and the purchase is to be optimized. To draw a straight line, only two points are required in the diagram. The calculation of these points is as follows:

Max purchase good = budget / price of good

At our selected prices of the goods and the budget, the following values ​​are obtained:

Max purchase Good 1 = 200 € / 2,50 € = 80 pieces

 

Max purchase Good 2 = 200 € / 4,00 € = 50 pieces

The results of the calculation are given in units as shown.

Drawing the Budget Line

A coordinate system contains an X and a Y axis. These are labeled with one of the two goods. The points are marked in the coordinate system at points (0/80) and (50/0).

These two points are connected with a straight line. This is the budget straight. This represents all possibilities for how these two goods can be acquired in different numbers. The budget is exploited according to the optimization principle.

If the budget is increased, the straight line can be shifted on the respective axes.

Alternative Calculation

The variables are usually given the following names:

• M = Budget (often referred to as income


• P1 = price of good 1


• P2 = price of good 2


• X1 = number of good 1


• X2 = number of good 2

The following formula can be used and solved for x2 in order to achieve the desired result:

X2 = - (p1 / p2) * x1 + (m / p2)

In this way the slope can be calculated in the form of - (p1 / p2) . The formula should be applied in particular if the price can change. This is possible, for example, by additional taxation or a simple price change.

Cartel | Definition | Types | Examples

If a cartel is generally speaking a contractual transaction between at least two companies in the same stage of production, with the aim to gain an advantage on the competition to achieve. From a legal point of view, the companies remain independent and independent. However, the situation is different in terms of profitability. In the case of a cartel, this is generally abandoned completely or at least partially.

Basically agree companies in a cartel agreement economic action consistent. In the case of violations of the previously agreed contract, contractual penalties are due, which are usually at a very high level.

The state is of course reluctant to make such economic arrangements, especially with regard to pricing. For this reason, there is also the Cartel Office, which is to detect and prevent possible illegal price fixing of large companies at an early stage. In the eyes of the supervisory authority, in particular mineral oil groups, which have often been suspected, are prohibited price agreements. However, proof of this is hardly possible.

Types of Cartels 

• Price / sub-pricing


• Quotation quota


• Area cartels


• Rationalization

Company Concentration

In the term (corporate) concentrations are in the national economy to the agglomeration of economic powers. The reason for this merger is usually the stipulation of one-sided terms of contract that one would like to achieve.

Performed Concentrations for example, by companies acquired or new companies are formed. The state is, of course, not interested in the formation of such concentrations in the form of economic powers. Accordingly, he endeavors to prevent the formation of such as far as possible by all legal means. In the worst case, a concentration leads to a monopolistic position of the respective company.

Basically, the term "concentrations" differs between different types:

• Horizontal concentration


• Vertical concentration


• Conglomerate concentration

Horizontal concentration

With a horizontal concentration, two or more companies join together that are located on the same production stage. Thus the same products are produced both in one company and in the other. As a result, only a larger number of work equipment and employees is needed.

Vertical concentration

Unlike the horizontal concentration is in the vertical concentration to a merger of companies with upstream or downstream products. The purchased company does not produce the same products as the parent company. Example: A ship builder buys a supplier who supplies the company with raw materials.

Conglomerate concentration

Another type of business combination is the so-called conglomerate concentration. This is an acquisition outside the sector companies. A concentration of this kind exists, for example, when an oil company buys a forwarding company. From a conglomerate concentration arise Conglomerates , ie companies that are active in completely different industries.

Advantages of concentrations

While bringing together a number usually many risks and dangers, such as an impending monopoly with himself, but there are also some advantages. For example, a concentration offers the possibility of rationalization. In addition, better conditions are possible with possible financing. The prerequisite for this is, of course, that both companies are financially sound.

Elasticity

Supply and demand regulate the price of a commodity . This is certainly true not only in theory but also in practice. Everyone has already had the experience and / or had to make that a scarce supply leads in principle to the rising price - at least with the same demand. However, a rising price also means a drop in demand.

From a market point of view, this is a completely natural behavior of consumers. Since, however, this behavior of the consumer is not always the same in practice and can not always be identical, so-called elasticity concepts exist . These describe the behavior of consumers for possible price changes.

It is about whether and how much the consumption behavior of the market participants decreases or increases . This is generally dependent on which goods are within the scope of the consideration. With not every commodity, consumers can afford to stop or reduce their consumption. This applies, for example, to fuel and fuel. For this reason we are talking about a rather inelastic demand in this context.

Scarce goods of the same high price

Both price increases and price reductions would only have a minor effect on the quantities purchased by the consumers. The reason for this is that fuel and heating means are, for most people, one of the basic goods essential for the daily life. Savings and storage are hardly possible.

Even evasive goods are hardly available or often require expensive investments. In the case of luxury goods , on the other hand, a rather elastic demand can be observed. This means that price changes have a strong impact on the overall demand. Four elasticity terms are to be examined and explained in more detail below.

Content in the category Elasticity

• Completely inelastic demand


• Inelastic demand


• Elastic demand


• Fully elastic demand

 

Market Failure

In certain circumstances, the functioning of the market may be imperfect , for example, if the production factors are not used to achieve the greatest success for the economy as a whole. The market out of supply and demand then leads to undesirable side effects.

If there is a market failure , for example in the case of public goods, external effects or monopolies, the state intervenes. It attempts to prevent disadvantages of suppliers or consumers or to achieve more meaningful results from a macroeconomic perspective.

Support from the state

The state supports financially development and research work by companies in order to convince them to carry out fundamental research. For an individual company, this can result in high costs. However, the know-how is improved throughout the national economy . And other companies are benefiting from this. Without these state measures, companies would presumably do less research because only the research company would bear the costs, which would also benefit the competitor if, for example, patent rights expire after a certain time. The development of the economy as a whole can however have a low impact on research and lead to disadvantages of locations in international competition.

Example financial crisis

At the end of 2007, there was a financial market crisis that grew into a global economic crisis. The market mechanism on the capital and money markets no longer led to an optimal result. The lending within the banks almost came to a standstill, which led to the collapse of the international banks.

Only by the state intervention with

 

• Guarantees,


• Participations in banks and


• Financial assistance to the credit institutions (financial market stabilization fund)

The "credit line" and ultimately the breakdown of the entire banking system could be prevented.

Market failure of public goods

In the normal case the market works like this: A good is manufactured and passed to another at a certain price. If this does not pay the price, he will not receive the good either.

Then there are some public goods that everyone can "consume" without consideration, such as:

• Street lighting


• Fireworks


• Lighthouses


• Dikes


• Peace, national defense


• Climate protection


• Education / knowledge

Nobody has to pay for it, since nobody can be excluded. A firework can be made not only for the people who have paid for it. They also see people who have paid nothing. If someone asked if he would pay 50 euros for the fireworks, he would probably say no because he will see it anyway.

The problem : If nobody is willing to pay for it, it is not offered by anyone. The result is that there is neither street lighting nor a fireworks. In order for the public goods are still available, they have partly provided by the state and the tax financed are.

Market failure for external effects

A market failure also occurs if the polluter does not bear all costs incurred in production. There are then external effects, where the market results have an adverse effect on third parties (not buyers and sellers).

In this case, the market mechanism can not ensure an optimal allocation ( allocation ) of the production factors since they do not reflect the prices or costs.

Example:

If the environmental impact resulting from aluminum production is not included in the cost function, the market is not optimal.

Market failure in competition restrictions

In general, people avoid competition, which is probably due to their nature. Nevertheless, they want to make profits. For this reason, tendencies to the abolition or restriction of competition are repeatedly reflected in the open market economy.

Some of the numerous restrictions on competition are:

• duties


• Quotation and price agreements


• Difficult labor market access


• Import quotas


• Cooperations with competitors


• Monopolies under the protection of the state

These restrictions on competition are responsible for the fact that less is offered for more money. This allows the providers to make above-average profits. The profits are not achieved here by increasing their own performance, but because of competition restrictions. Together with the reduced volume, this has the consequence that the social welfare declines. Economists speak here of "rent seeking" (search for uninvited income). The state can only increase the prosperity of society by limiting these restrictions.

Market failure in asymmetric information

In a model competition, all market participants have complete information about the qualitative characteristics of the products, their usefulness and the behavior of the exchange partners. In practice, however, many market players frequently have information deficits that ultimately contribute to a market failure.

How will you ask questions such as "Mr. Fahrlehrer, do I need even more driving hours to pass the exam?" Or "Frau Apothekerin, I should take a drug against my cough?" Answered? In any case, the respondents will have the incentive to give an answer that will enable them to make further revenue. As a rule, it is difficult for the customers to check the answers because this information is asymmetrical or unequally distributed.

Capital

Capital Definition

The term "capital" has different meanings. Economists speak of capital as a third economic factor for production as a whole. In business, the term appears as equity or debt in corporate balance sheets.

Capital in economics

In economics, capital is a production factor. In this context, the capital of an economy describes the stock of production resources that can be used to produce goods or services (capital stock). Capital also includes the following, and not only include money.

• machinery


• Tools


• Company buildings


• Infrastructures such as computer systems or created processes

The other two factors of production in economics are labor and land. The latter is fixed by natural conditions such as the availability of mineral resources. The labor, on the other hand, is variable: it brings together all potentially active persons of an economy.

The combination of labor, capital, and land comes in simplified ratios to produce the gross domestic product or the potential performance of an economy. This is known as optimal allocation of resources Because the land is fixed. Hence, labor and capital can be exchanged to a certain extent. The best example of this is industrialization. 150 years ago many farmers had to cultivate a single field. Today, thanks to machines, many fields are handled by a single person, just because capital has taken the place of labor.

Capital in the commercial sense

Capital also plays a major role in the business administration. In the balance sheet, capital is shown on the liabilities side and designated as claims on the assets of a company. For example, a company that owns shares is the capital investor for a stock corporation and is entitled to have the share in company profits or the redemption of its capital when the securities are sold.

Capital Must be distinguished from the liquidity. Liquidity describes the possibility of a company to properly fulfill its claims against third parties. An example will illustrate the difference between capital and liquidity:

• A company purchases goods from a supplier for EUR 15,000. The supplier then supplies the goods and makes an invoice, which must be settled within two weeks.


• The company has a lot of equity, a total of more than 3 million. The problem is that equity is in the form of machines and buildings. These three million euros are therefore not directly available to the company - if no machines or buildings are sold.


• The settlement of the account of the supplier can only be settled by means of capital, which has a high liquidity, i.e. availability. The company must have at least € 15,000 in the form of cash or bank deposits in order to settle the claims.


• If the liquidity is not available, the company is threatened with insolvency - even though on balance sheet, three million euros of equity are listed.

Types of Capital

There are important delimitations between capital types both in business administration theory and in the economic sense. In business economics, a distinction must be made between leverage and equity:

• The differentiation between the types of capital is justified by the legal position of the investors.


• Equity owners participate in the company's profits and leave their capital for an indefinite period within the Group. In the event of a company insolvency, equity investors are not entitled to repay the invested capital. Examples: transfer of private assets to individual companies, purchase of shares, participation in a limited liability company


• However, borrowers provide their capital only for a limited period of time. They receive their capital completely, including a consideration - usually an interest rate. If the company has to file for insolvency, the debtor's claims are fulfilled before anyone else. Examples: bank loans, corporate bonds

In the economic sense, we can differentiate between real capital and human capital. Both terms are also used in business administration. The Real capital describes all means of production such as machines or tools as well as money since this can be used directly to finance production resources.

Human capital, however, is the performance potential of the labor force, which is affected by training and education. Training and education increase the efficiency of this factor of production.

For example, the earning power of workers can be encouraged by a high degree of schooling or vocational training. Which requires high financial expenditures - that is, the use of capital. For this reason and because human capital is difficult to measure, economists consider both the concepts separately.