ucsp(handout 7)

• Nonmarket transaction


  Reciprocity, transfer, and redistribution - exchange of goods or labor, redistribution of income, or combination of transfer and reciprocity
• Reciprocity


  Exchange of goods or labor between individuals in a community, including direct barter or gift exchange
• Transfer


  Redistribution of income not matched by exchange of goods and services
• Redistribution


  Collection of goods from members, pooling, and then redistribution among the same members
• Market system

  Economic system with free flow of goods between private individuals and firms, with limited government participation
• Invisible hand


  Integrates self-interest and competition in the market to bring about socially optimum result without government intervention
• Market


  Mechanism that brings buyers and sellers together for transactions, not necessarily a physical place
• Prices


  Signaling device to indicate value of goods/services to buyers and sellers, guiding their actions
• Specialization


  Ability to produce goods/services efficiently, facilitated by division of labor
• Barter


  Traditional means of exchange by swapping goods for goods
• Market transaction


  Parties sell goods/services in exchange for cash from consumers
• Free-market economy


  Price of goods/services determined by supply and demand forces
• State role in market


  Regulates prices to protect consumer interests, sets minimum wage, exercises monopoly of legitimate force
• Command economy


  Government takes over market functions of production and distribution of essential goods/services
• Taxes


  Compulsory contributions to government for revenue and spending
• Market and economic organizations

  • Corporate environmental users
  • Financial institutions like banks
  • Corporations
  • Stock corporations
  • Nonstock corporations
  • Cooperatives
  • Trade/labor unions
• Civil society organizations

  • Academic and science-based
  • Mass media
  • Religious organizations
  • Nongovernmental organizations
  • People's organizations
• International organization


  Organization established by treaty or instrument governed by international law, with own legal personality
• Transnational advocacy group


  Self-organized advocacy groups across state borders, pursuing wider public interest
• Development agencies


  Formed in response to crises like war damage and industrial decline, to stimulate economic development
• Banks


  Institutions that conduct business purely on profit motive
• Primary functions of banks

  • Accepting deposits
  • Granting of loans and advances
• Types of deposits

  • Savings
  • Fixed
  • Current
  • Recurring
• Overdraft


  Advances given to current account holders, no separate account maintained, interest charged on actual amount withdrawn, granted against collateral security
• Cash credits


  Client allowed cash credit up to a specific limit, separate account maintained, interest charged on amount withdrawn in excess of limit, given against security of tangible assets and/or guarantees
• Loans


  Normally for short term (1 year) or medium term (5 years), repayment can be in instalments or lump sum, interest charged on actual amount sanctioned whether withdrawn or not, normally secured against tangible assets
• Discounting bills of exchange


  Bank advances money by discounting or purchasing bills of exchange, both domestic and foreign, bank pays bill amount to drawer/beneficiary after deducting discount charges, collects amount on maturity from drawee/acceptor
• Secondary functions of banks

  • Agency functions
  • General utility functions
• Corporation


  Most common form of business organization, chartered by a state and given legal rights as an entity separate from its owners, characterized by limited liability of owners, issuance of shares of easily transferable stock, and existence as a going concern
• Key responsibilities and functions of corporations

  • Selecting a CEO
  • Providing continuity
  • Managing resources effectively
  • Increasing profits
  • Social responsibilities
• Cooperatives


  Autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise
• Functions of trade unions


  • Militant functions
  • Fraternal functions
  • Social functions
  • Political functions
• International organizations


  Entities established by formal political agreements between their members who have the status of international treaties, their existence is recognized by law in their member countries, and they are not treated as resident institutional units of the countries in which they are located
• Principal international economic affairs bodies

  • World Bank
  • International Monetary Fund (IMF)
  • World Trade Organization (WTO)
• Transnational advocacy groups


  Advocates of principled causes, ideas, and values such as human rights or the environment, they do not work alone nor are they limited by national boundaries
• Development agencies


  Establish and support sustainability programs for the community, e.g. Economic Development Agency - its goals are to help create and support economic growth within a specified city, region, or state by providing necessary resources and assistance
• agency functions - The bank acts as an agent of its customers such as trustees, executors, advisers and administrators on behalf of its clients.
• Savings – This encourages saving habit among the public. The rate of interest is low.At present, it is about 5% per annum
• Fixed – Lump sum amount is deposited at one (1) time for a specific period.
• Current – It is also known as demand deposit because money can be withdrawn anytime without any notice. Interest rates are lower than those offered by savings accounts.