Letters are the most common form of intercultural business correspondence. Rules and traditions of correspondence vary in time but some basic principles of a commercial letter remain unchanged. Intercultural business writing depends on the subject and purpose of your message, the relationship between you and the reader, and the customs of the person to whom the message is addressed.
Business letters include all kinds of commercial letters such as letters of inquiry, order letters, conforming an order, letters of claim and complaint, cover letter, letters requesting and providing information, reminder letters, personal business letters, replies to those mentioned above, etc.
A business letter should be as short as possible (better up to 1 page), intelligible, polite, and its language must be simple. A private business letter is written by hand, but if a letter is sent by an organization, it is typed on the form of this organization with a letter-head printed typographically.
A letter is composed of the following elements: a heading, a date, a receiver's address, a salutation, a text, a signature, etc.
In economic theory, demand means the amount of a commodity or service that economic units are willing to buy, or actually buy, at a given price. In economic theory, therefore, demand is always effective demand ,i.e., demand, supported by purchasing power, and not merely the desire for a particular commodity or service.
Obviously, demand is not only influenced by price, but also by many other factors, such as the incomes of the demanders and the prices of substitutes. In economic analysis, these other factors are frequently assumed to be constant. This allows one to relate a range of prices to the quantities demanded in what is called the demand function (with price as the independent and demand as the dependent variable) and to graph this relationship in the demand curve.
The demand curveis the graphical representation of the demand function, i.e., of the relationship between price and demand. It tells us how many units of a particular commodity or service would be bought at various prices, assuming that all other factors (such as the incomes of the demanders and the prices of substitutes) remain unchanged. The demand curve normally slopes downwards from left to right, which means that more is bought at low prices than at higher prices. A famous exception to the rule of a downward-sloping demand curve is the Giffen paradox . If the condition that all other factors remain unchanged is relaxed and the incomes of the demanders, for instance, are allowed to change, then the whole demand curve will shift its position.
The theory that uses the tools of supply and demand to explain differences in wage rates is called the traditional theory of wage determination. For example, many people can dig ditches or work as baby sitters.However, fewer have the skills to become professional managers. In other words, professional managersgenerally are scarcer than ditch diggers or baby sitters.
This can be expressed in terms of supply and demand. When the level of supply is large in relation to demand, wages generally are low. When the level of supply is low in relation to demand as with managers — wages generally are high. In most cases, the higher the level of skills, or grade of labour, the higher the average yearly wage rate. For example, semiskilled workers will receive more, on the whole, than unskilled workers. Skilled workers will receive more than semiskilled or unskilled workers. Professional workers will receive more than any of the others.
There are, however, some cases in which the traditional theory does not explain the variations in wage rates. Some unproductive workers, for example, may receive high wages because of family ties or political influence. Some highly skilled or productive workers may receive low wages because of race, sex, or where they live.
At times, wages are determined not by supply and demand but by the influence of organized labour and the collective bargaining process.
In these cases, unions do not try to get higher wages for their members on the grounds that labour is in short supply relative to demand. Nor does management push for lower wages when there is a very large supply of labour. This makes the price of labour-wages hard to define.
When negotiating for wages, unions want to know the wage rates in other plants for the same kind of work and what changes have taken place or will take place in the future in the cost
Business people think of demand as the consumption of goods and services. At the same time, they think of supply as their production. As they see it, supply means the quantity of a product supplied at the price prevailed at the time. Economists are concerned withmarket as a whole. They want to know how much of a certain product sellers will supply at each and every possible market price. Supply may be defined as a schedule of quantities that would be offered for sale at all of the possible prices that might prevail in the market. Everyone who offers an economic product for sale is a supplier.
The law of supply states that the quantity of an economic product offered for sale varies directly with its price. If prices are high suppliers will offer greater quantities for sale. If prices are low, they will offer smaller quantities for sale. Since productivity affects both cost and supply it is important that care can be taken in selecting the proper materials. Productivity and cost must be kept in mind in order to make the best decision. It means a business must analyse the issue of costs before making its decisions. To make the decision-making process easier we try to divide cost into several different categories.
Fixed cost— the cost that a Business incurs even if the plant is idle and output is zero. It makes no difference whether the business produces nothing, very little, or a lot.
Fixed costs include salaries paid to executives, interest charges on bonds, rent payments on leased properties, local and state property taxes. They also take in depreciation — the gradual wear and tear on capitalgoods overtime.
Variable cost — a cost that changes with changes in the business rate of operation or output.
Total cost — is the sum of the fixed and variable costs. It takes in all the costs a business faces in the course of its operations.
Marginal cost — the extra or additional cost incurred when a business produces one additional unit of a commodity. Since fixed costs do not change, marginal cost is the increase in variable costs, which stems from using additional factors of production.
In economic theory, the term «supply» denotes the amount of a commodity or service offered for sale at a given price. Just as in the case of demand, supply is determined also by factors other than price, the most important being the cost of production and the period of time allowed to supply to adjust to a change in prices. In economic analysis, these other factors are frequently assumed to be constant. This assumption enables supply and price to be related in what is called the «supply function» (with price as the independent and supply as the dependent variable) and to be graphed in the supply curve.
The supply curve is the graphical representation of the supply function, i.e., of the relationship between price and supply. It shows us how many units of a particular commodity or service would be offered for sale at various prices, assuming that all other factors (such as the cost of production, the period of time involved) remain constant. The supply curve normally slopes upwards from left to right. This indicates that, other things being equal, more is offered for sale at higher prices.
There are, however, exceptions. For example, where goods are in fixed supply, the supply curve would be a straight vertical line. Another exception is the case where a fall in prices calls forth a larger supply because suppliers fear that prices might fall still further, and where, therefore, the supply curve actually slopes downwards. If changes in the other factors are allowed, this would be reflected not in a movement along the curve, but in a shift of the whole curve.
Economists classify markets according to conditions that prevail in them. They ask questions like the following: How many supplies are there? How large are they? Do they have any influence over price? How much competition is there between firms? What kind of economic product is involved? Are all firms in the market selling exactly the same product, or simply similar one? Is it easy or difficult for new firms to enter the market? The answer to these questions helps to determine market structure, or the nature and degree of competition among firms operating in the same market. For example, one market may be highly competitive because a large number of firms produce similar products. Another may be less competitive because of fewer firms, or because the products made by each are different or unique.
In short, markets can be classified according to certain structural characteristics that are shared by most firms in the market. Economists have names for these different market structures: pure competition , monopolistic competition, oligopoly, and monopoly.
An important category of economic markets is pure competition. This is a market situation in which there are many independent and well-informed buyers and sellers of exactly the same economic products. Each buyer and seller acts independently. They depend on forces in the market to determine price. If they are not willing to accept this price, they do not have to do business.
To monopolize means to keep something for oneself . A person who monopolized a conversation, for example, generally is trying to stand out from everyone else and thus attract attention .
A situation much like this often exists in economic markets. For example, all the conditions of pure competition may be met except that the products for sale are not exactly the same. By making its product a little different, a firm may try to attract more customers and take over the economic market . When this happens, the market situation is called monopolistic competition.
The one thing that separates monopolistic competition from pure competition is product differentiation. The differences among the products may be real, or imaginary. If the seller can differentiate a product, the price may be raised a little above the market price, but not too much.
Let us consider the most important terms and definitions in accounting.
To begin with, accounting can be defined as recording and measuring of all financial data concerning a given business or organization activity.
Financial Statements are the central feature of accounting because they are the primary means of communicating important accounting information to users. They, so to say, show business in financial terms.
The most important financial documents are:
1. Profit and Loss Accounts;
2. Balance Sheets;
3. Cash-flow Forecast;
Profit and loss accounts give a “history” of a company's finances during the previous year for some period. They have three sections:
1. Trading section. It shows the revenue from sales and the costs in producing those sales.
2. Profit and loss section. It shows the costs of general overheads such as administration and distribution.
3. Appropriation section. It shows how the received profit is distributed to shareholders and how much profit remains as reserves.
Balance sheets show the financial position of a company on a certain date. Figuratively speaking, a balance sheet provides the so-called “a snapshot” of a company's wealth at a very given moment of time. It has three sections:
1. Assets (fixed and current);
2. Creditors (current and long-term liabilities);
3. Capital and Reserves (company's issued share capital);
The term market, as used by economists, is an extension of the ancient idea of a market as a place where people gather to buy and sell goods. In former days part of a town was kept as the market or marketplace, and people would travel many kilometers on special market-days in order to buy and sell various commodities.
Today, however, markets such as the world sugar market, the gold І market and the cotton market do not need to have any fixed geographical location. Such a market is simply a set of conditions permitting buyers and sellers to work together.
In a free market, competition takes place among sellers of the same commodity, and among those who wish to buy that commodity. Such competition influences the prices prevailing in the market. Prices inevitably fluctuate, and such fluctuations are also affected by current supply and demand.
Whenever people who are willing to sell a commodity contact people who are willing to buy it, a market for that commodity is created. Buyers and sellers may meet in person, or they may communicate in some other way: by telephone or through their agents. In a perfect market, communications are easy, buyers and sellers are numerous and competition is completely free. In a perfect market there can be only one price for any given commodity: the lowest price which sellers will accept and the highest which consumers will pay. There are, however, no really perfect markets, and each commodity market is subject to special conditions. It can be said, however, that the price ruling in a market indicates the point where supply and demand meet.
Although in a perfect market competition is unrestricted and sellers are numerous, free competition and large numbers of sellers are not always available in the real world. In some markets there may only be one seller or a very limited number of sellers. Such a situation is called a monopoly, and' may arise from a variety of different causes. It is possible to distinguish in practice four kinds of monopoly.
State planning and central control of the economy often mean that a state government has the monopoly of important goods and services. Some countries have state monopolies in basic commodities like steel and transport, while other countries have monopolies in such comparatively unimportant commodities as matches. Most national authorities monopolize the postal services within their borders.
A different kind of monopoly arises when a country, through geographical and geological circumstances, has control over major natural resources or important services, as for example with Canadian nickel and the; Egyptian ownership of the Suez Canal. Such monopolies can be called natural monopolies .
They are very different from legal monopolies, where the law of a country permits certain producers, authors and inventors a full monopoly over the sale of their own products.
These three types of monopoly are distinct from the sole trading opportunities which take place because certain companies have obtained complete control over particular commodities. This action is often called «cornering the market» and is illegal in many countries. In the USA antitrust laws operate to restrict such activities, while in Britain the Monopolies Commission examines all special arrangements and mergers which might lead to undesirable monopolies.
Most people think of demand as being the desire for a certain economic product. That desire must be coupled with the ability and willingness to pay. Effective demand, that is desire plus ability and willingness to pay, influences and helps to determine prices.
In economics the relationship of demand and price is expressed by the Law of Demand. It says that the demand for an economic product varies inversely with its price. In other words, if prices are high the quantities demanded will be low. If prices are low the quantities demanded will be high.
The correlation between demand and price does not happen by chance . For consumers price is an obstacle to buying, so when prices fall, the more consumers buy.
The demand for some products is such that consumers do care about changes in price when they buy a great many more units of product because of a relatively small reduction in price. The demand for the product is said For other products the demand is largely inelastic. This means that a change in price causes only a small change in the quantity demanded. A higher or lower price for salt, for example, probably will not bring about much change in the quantity bought because people can consume just so much salt.
Even if the price were cut in half , the quantity demanded might not rise very much. Then too, the portion of a person's yearly budget that is spent on salt is so small that even if the price were to double , it would not make much difference in the quantity demanded.
Elasticity of supply , as a response to changes in price, is related to demand. Economists define demand as a consumer's desire or want, together with his willingness to pay for what he wants. We can say that demand is indicated by our willingness to offer money for particular goods or services. Money has no value in itself, but serves as a means of exchange between commodities which do have a value to us.
People very seldom have everything they want. Usually we have to decide carefully how we spend our income. When we exercise our choice, we do so according to our personal scale of preferences. In this scale of preferences essential commodities come first (food, clothing, shelter, medical expenses etc.), then the kind of luxuries which help us to be comfortable (telephone, special furniture, insurance etc.), and finally those non-essentials which give us personal pleasure (holidays, parties, visits to theatres or concerts, chocolates etc.). They may all seem important but their true importance can be measured by deciding which we are prepared to live without. Our decisions indicate our scale of preferences and therefore our priorities.
Elasticity of demand is a measure of the change in the quantity of a good, in response to demand. The change in demand results from a change in price. Demand is inelastic when a good is regarded as a basic necessity4, but particularly elastic for non-essential commodities. Accordingly, we buy basic necessities even if the prices rise steeply, but we buy other things only when they are relatively cheap.
The third factor of production is capital — the tools, equipment and factories used in production of goods and services. It is a produced factor of production, a durable input which is itself an output of the economy. For example, we build a textile factory and use it to produce shirts, or assemble a computer and then employ it in educating students.
As noted earlier, such items are also called capital goods . This is to distinguish them from financial capital , the money used to buy the tools and equipment used in production.
Capital is unique in that, it is the result of production. A bulldozer may be an example of capital goods used in construction. At the same time , it was manufactured in a factory which makes it the result of earlier production.
When the three inputs — land, labour and capital — are present, production or the process of creating goods and services, can take place. Even the production of the service called education requires the presence of land, labour and capital.
Entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services, is the fourth factor of production. The entrepreneur brings together the other three factors of production — land, labour and capital. When they are successful, entrepreneurs earn profits , the return or reward for the risks, innovative ideas and efforts put into the business. When they are not successful, they suffer losses .
Just as economists study the amount of goods and services brought to market by a single producer, they also study the total amount of goods and services produced by the economy as a whole. Thus, they examine aggregate supply — the total amount of goods and services produced by the economy in a given period, usually one year.
A number of factors affect an economy's aggregate supply. Two of these are the quantity of resources used in production and the quality of those resources. For example, an economy must have an adequate supply of natural resources and capital goods to be productive .
It also needs a skilled and highly motivated labour force. A third factor affecting aggregate supply is the efficiency with which the resources are combined. If they are combined in a productive way, aggregate supply will increase.
In order to measure aggregate supply, statistics must be kept. To keep with this task economists use national income accounting — a system of statistics, that keeps track of production , consumption, saving and investment in the economy. National income accounting also makes it possible to trace long-run trends in the economy and to form new public policies to improve the economy.
The most important economic statistics kept in the national income! accounts is Gross National Product (GNP). This is the dollar measure of the] total amount of final goods and services produced in a year. It is one of the most important and comprehensive statistics kept on the economy's performance .
The reason people cannot satisfy all their wants and needs is the scarcity of productive resources. These resources or factors of production are called land, labour, capital, and organization or entrepreneurship . They provide the means for a society to produce and distribute its goods and services.
As an economic term land means the gifts of nature or natural resources not created by human efforts. They are the things provided by nature that go into the creation of goods and services. Land has a broad meaning. It is not only land itself, but also what lies under the land (like coal and gold), what grows naturally on top of the land (like forests and wild animals), what is around the land in the seas and oceans and under the seas and oceans (like fish and oil). It includes deserts, fertile fields, forests, mineral deposits, rainfall, sunshine and the climate necessary to grow crops.
Because there are only so many natural resources available at any given time, economists tend to think of land as being fixed or in limited supply. There is not enough good farmland to feed all of the earth's population enough, sandy beaches for everyone to enjoy, or enough minerals to meet people's expending energy needs indefinitely.
The second factor of production is labour — people with all their efforts and abilities. Unlike land, labour is a resource that may vary in size over time. Historically, factors such as population growth, immigration, famine, war and disease have had a dramatic impact on both the quantity and quality of labour.
Labour is the human input into the production process. It may be mental or physical. But in many tasks it is necessary to combine mental activity with physical effort. The price paid for the use of labour is called wages . Wages represent income to workers, who own their labour. Land and labour are often called primary factors of production . It is one whose quantity is determined outside the economy
Studying economics for the first time, it is necessary to know what economics is all about . Economics deals with production, distribution, exchange and consumption. Economics is also concerned with unemployment, inflation, international trade, the interaction of business and labour, and the effects of government spending and taxes.
Economics is a social science like history, geography, politics, psychology and sociology.
Economists study what is or tends to be and how it came to be.
For our own purpose, we shall define economics as the study of man in his attempts to gain a living by utilizing his limited resources.
To understand economics, a review of some key terms is necessary: needs , wants , and demands
A need is a basic requirement for survival. To satisfy this need, a person may want a pizza, hamburger or other favorite food.
The study of economics is concerned with economic products — goods and services that are useful, relatively scarce and transferable to others
The terms goods and services are used to describe many things people desire. Consumer goods are intended for final use by individuals to satisfy their wants and needs.
The other type of economic product is a work that is performed for someone. Services can include haircuts, repairs to home appliances and forms of entertainment like rock performances.
In economics the term value means something having a worth that can be expressed in dollars and cents. Someone may say, for example, that he or she has a valuable coin, the value, is determined by the price someone would pay for the collection.
But what makes some things worth more than others? The diamond-water paradox, also known as the paradox of value, helps answer this question. Early economists observed that some things like water were essential to life, yet had little monetary value. Other things, like diamonds, were not essential but had higher value.
Later economists decided that part of the reason was due to scarcity. For example, water is so plentiful in many areas that it has little or no value. On the other hand, diamonds are so scarce that they have great value. In order to have value, it has to be somewhat scarce. Scarcity, however, is not enough. If something is to have value, it must also have utility, or the capacity to be useful to someone. Utility is not something that is fixed and can be measured like weight or height. Instead, the utility of goods or services may vary from one person to the next. One person may, for example, get a great deal of enjoyment from a home computer, another may get very little. In the end, for something to have value, it must be scarce and have utility.
Another economic concept is wealth — the sum of those economic products that are tangible, scarce, useful and transferable from one person to another. Most economic goods are counted as wealth, but services are not. The reason for this is that it is difficult to measure the value of services accurately. For example, it is difficult to measure the contribution made by people's abilities and talents to a nation's wealth.
A country's total worth then is the stockpile of useful scarce, tangible things in existence at a given time. National wealth includes all such items as natural resources, factories, stores, houses, theatres, books, video games etc.
The study of economics is concerned with economic products — goods and services that are useful, relatively scarce and transferable to others. The important thing is that economic products are scarce in an economic sense. That is one cannot get enough to satisfy individual wants and needs . The fact that economic products command a price shows that they have these characteristics.
The terms goods and services are used to describe many things people desire. Consumer goods are intended for final use by individuals to satisfy their wants and needs. Manufactured goods used to produce other goods and services are called capital goods . An example of capital goods would be a computer in a school.
The other type of economic product is a work that is performed for someone. Services can include haircuts, repairs to home appliances and forms of entertainment like rock performances. They also include the work performed by doctors, lawyers and teachers. The difference between goods and services is that the services are something that cannot be touched or felt like goods.
Many other things — sunshine, rainfall, fresh air — are known as free products because they are so plentiful. No one could possibly own them, nor would most people be willing to pay anything for them. In fact, some are so important, that life would be impossible without them) Even so, free products are not scarce enough to be major concern in the study of economics.