Economic and Business Environment

Scarcity requires choices; opportunity cost is the best alternative forgone. Demand and supply describe behaviour under stated conditions.

Worked example: Spending an hour on one activity prevents using that hour on another. The opportunity cost is the value of the best forgone alternative, not the sum of every possible alternative.

Organise indicators by output, prices, employment, trade and public finances. Distinguish nominal values from inflation-adjusted real values.

Worked example: If nominal output rises 10% and the price level rises 5%, real growth is approximately 5%; the exact multiplicative result is 1.10/1.05 - 1, about 4.76%.

A business operates within economic, social, technological, political and legal conditions. Separate controllable internal choices from external constraints.

Worked example: A firm can change its product design but cannot directly set national interest rates. A rise in financing costs is an external change requiring a business response.

A company is an organisation; a brand is an identity attached to products or services. Ownership, mergers and leaders are time-sensitive.

Worked example: A parent company can own several brands. A change in a brand's advertising does not prove a change in ownership; check company disclosures for that fact.

Separate revenue, profit, cash flow, assets and liabilities. Accounting profit does not guarantee enough cash to pay an immediate bill.

Worked example: A business sells goods on credit for 10000 with cost 7000. It may recognise a 3000 profit before receiving cash. Collection timing still matters to liquidity.

Exports sell goods or services abroad; imports buy them from abroad. Exchange-rate changes have different effects on importers and exporters.

Worked example: If one foreign-currency unit costs more domestic currency, the same foreign invoice becomes more expensive for an importer, other things equal. It does not mean every exporter benefits equally.