1.

An Offer
An offer is a business letter. It includes all the specification of the product which will be
offered. As for example:
Price: The total price of a pump is $10 which includes packing and delivery CIF Soviet port

Delivery: Delivery of the pumps will begin 3 months after the contract is signed and will be
completed within a period of 4 months

Validity: This offer is valid for 90 days from the date of this letter

Payment: Payment is to be made in cash within 30 days of receipt of the following shipping
documents an Invoice, a Bill of Lading, an Insurance policy and Packing List

The quotation and the guarantee of the supply is also suggested in the offer. The offer is
submitted between firms, companies and businessmen for purchasing, selling of goods,
description of the details.

2. Agents
According to world-wide statistics over half of the world’s foreign trade is handled by
agents. Selling firms turn to commercial agents for their services mostly when they try to
develop a new marker for their goods in a foreign territory. The agents are instrumental in
distributing the principals product as they know the commercial conditions and changes in
market of their country. They have their own storehouses, showrooms, repair workshops, service
stations, etc, for providing after-sales service.
There are basically 2 types of agency agreements. They are agreements for:
1. merchant firms
2. sales agents
An agreement for merchant firms stipulates that they become the owners of the goods and
can dispose of them at their option. Payment to the selling firms by the merchant firms may be
effected by a Letter of Credit, for collection or by other methods.
A sales agent comes as an intermediary between the principal who sells and the customer
who buys. Sales agents may conclude agency agreements on a consignment basis which means
that the goods sent on consignment remain the absolute property of the principal until livered to
the Buyers.
The agents may be granted the exclusive right to represent the principals within the
contractual territory.
Agents are interested in obtaining the exclusive rights as it is profitable for them to be the
sale representatives of the principals and it enables them not to compete with other agents of the
same principal.

3. Taxation
Everyone knows that taxation is necessary in a modern state: without it, it would not be
possible to pay the soldiers and policemen who protect us; nor the workers in government offices
who look after our health, our food, or water, and all the other things that we cannot do for
ourselves, nor also the ministers of members of parliament who govern the country for u. By
means of taxation we pay for things that we need just as much as we need somewhere to live and
something to eat.
But though everyone knows that taxation is necessary, different people have different
ideas about how taxation should be arranged. Should each person have to pay a certain amount
of money to the government each year? Or should there be a tax of things that people buy or
sell? If the first kind of taxation is used, should everyone pay the same tax, whether he is rich or
poor? If the second kind of taxation is preferred, should everything be taxed equally?
In most countries, a direct tax on persons, which is called income tax exists. It is arranged
in such a way, that the poorest people pay nothing and the percentage of tax grows greater as the
tax payer’s income grows.
But countries with direct taxation nearly always have indirect taxation too. Many thing
imported into the country have to pay taxes or “duties”. Of course, it is the men and women who
buy these imported things in the shops who really have to pay the duties, in the form of higher
prices. In some countries, too, there is a tax on things sold in the shops. If the most necessary
things are taxed, a lot of money is collected, but the poor people suffer most. If unnecessary
things like jewels and fur coats are taxed, less money is obtained, but the tax is fairer, as the rich
pay it.
Probably this last kind of indirect tax, together with a direct tax on incomes which is low
for the poor and high for the rich, is the best arrangement.
4. Contract
A contract forms the basis of a transaction between the Buyers and the Sellers and great
care is exercised when the Contract is being prepared that all the legal obligation have been
stated. As a rule the Contract contains a number of clauses, such as:
1. Subject of the Contract
2. Price
3. Terms of Payment
4. Delivery
5. Inspection and test
6. Guarantee
7. Packing and Marking
8. Arbitration
9. Transport
10. Insurance, and other conditions

I. Subject of the Contract

The Seller undertakes to sell and the Buyer to buy on the basis of the delivery FOB
London, Manchester (at the Buyer’s option) the complete equipment, technology and
technical documentation of the plant.
II. Price and Total Value of the Contract
The total value of the Contract including the cost of the complete equipment for the plant
as well as technical documentation, knowledge and experience (know-how), engineering,
after – guarantee spares and services is £ (pound sterling)
III. Terms of Payment
The total amount of £ stated in ________ shall be paid in English pounds by the Bank
accordance with the following terms:
 10% advance payment of the total Contract value shall be made within 30 days of
the effective date of the Contract
 80% of the total Contract value should be paid in accordance with the Credit
Agreement between the Banks (stated in the Contract)
 5% of the total Contract value shall be paid within 30 days of the date of the
receipt by the Bank
 The Guarantee amount of 5% shall be paid within 30 days of receipt by the Bank
of the Acceptance of the plant for commercial operation
IV. Time of Delivery
The delivery of the equipment under the present Contract shall begin in 8 months and shall
be completed in 26 months from the date of signing the Preliminary Project Acceptance
Protocol.
 5. World Exhibitions
The first world industrial exhibition was held in London in 1851. It was a great success.
It displayed exhibits of 40 participating nations and the number of visitors reached over 6
million.
Since then world industrial expositions have had a colorful history. Many such event
have been held, some of them on a large scale. They have changed not only in size and scope,
but also in character and overall purpose. Such events provided opportunities for exchanging
scientific, technological and cultural achievements of the people of Europe, America, Australia,
Asia and Africa.
Beginning with the early 60s, international exhibitions began to take new forms, trying to
emphasize not only technological process, but also other aspects of life. They became festival of
industry and culture.
Fairs and exhibitions provide an opportunity to establish profitable contacts among
different nations.
World exhibitions always attract 1000s of traders. The Fair in these days is a highly
festive occasion with colorful crowds filling the streets and much merry-making. On such days
the streets are packed with traders, many of whom arrive from far-away places.

6. Needs, wants and demands

A human need is a state of felt depuration. Humans have many complex needs. These
include basic physical needs for food, clothing, warmth, and safety; social needs for belonging
and affection; and individual needs for knowledge and self-expression. They are a basic part of
the human makeup.
When a need is not satisfied, a person will do one of two things – look for an object they
will satisfy if or try to reduce the need. People in developed societies may develop objects that
will satisfy their desires. People in less-developed societies may try to reduce their desires and
satisfy them with what is available.
Human wants are the form taken by human needs. Wants are described in terms of
objects that will satisfy needs. As a society evolves, the wants of its members expand. As people
are exposed to more objects that satisfy their desire, products try to produce more want-
satisfying products and services.
Human want to choose products that provide the most satisfaction for their money. When
backed by buying power, wants become demands.
Consumers view products as bundles of benefit and choose products that give them the
best bundle for their money. Thus, a Ford Fiesta means basic transportation, low price and fuel
economy. A Mercedes means comfort, luxury and status. Given their wants and resources,
people choose the product with the benefits that add up to the most satisfaction.

7. WHAT IS THE WORLD ECONOMY?

In many ways, we are all part of the world economy. When we drink our
imported coffee or hot chocolate in the morning, when we use a foreign-made
videocassette recorder, or when we travel abroad on holiday, we are participating
in the growing world of international trade and finance.
And it is not only as a consumer of foreign goods and services that we are part
of the world economy. The money that our pension funds or university
endowments earn from global investments may actually be paying for our
retirement or a new building on campus. Foreign investment in local real estate and
companies can also provide needed jobs for our friends and families. Even the
local athlete who has signed a contract to play abroad is part of the expanding
global economy.
The world economy is made up of all those interactions among people,
businesses, and governments that cross international borders, even the illegal ones.
We use the world economy to achieve specific political or ecological objectives
when we employ economic sanctions to fight racial segregation or the illegal
killing of whales.
Basically, whatever crosses an international border—whether goods, services,
or transfers of funds—is part of the world economy. Food imports, automobile
exports, investments abroad, even the trade in services such as movies or tourism
contribute to each country's international economic activity.

8. Business and private enterprise

In the private enterprise system by businesses are owned by private individuals, not by
public institutions like the government. Private enterprise is based on four principals or rights:
the right to private property; freedom of choice, profits, and competition.
The right to private property. In the private enterprise system individuals has a right to
buy, own, use, and sell property as they see fit. This right of ownership includes land, buildings,
equipment, and intangible property such as inventions.
The right of freedom of choice. The private enterprise system also provides the right of
freedom of choice. This freedom of choice applies to the individuals right to decide what type of
work to do, where to work, and how and where money is to be spend.
The right to profit. In the private enterprise system, the person who takes the chance in
start of the business by investing is guaranteed the right to all profits. This right is what attracts
people to begin businesses, and it’s the ultimate goal of business. Not all entrepreneurs are
successful, but the opportunity is there to start a business and reap the rewards.
The right to compete. Under the private enterprise system people have the freedom to
compete with others. Competition, makes for better products and more responsiveness consumer
needs.
The private enterprise system, as do all economic system requires resources for its
business for produce goods and services. The resources used to provide goods and services other
factors of production: land, labor, capital, and entrepreneurship.
One of the main decisions an entrepreneur must make is to determine which legal form of
business ownership to use in creating a business venture. There are 3 basic forms of business
ownership:
1. sole proprietorship
2. partnership
3. corporation
 9. Products
People satisfy their needs and wants with products. A product is anything that can be offered to a
market to satisfy a need or want. Usually, the word product suggests a physical object, such as a
car, a television set, or a bar of soap. However, the concept of product is not limited to physical
objects – anything capable of satisfying a need can be called a product.
We don’t buy food to look at, but because it satisfies our hunger. We don’t buy a microwave to
admire, but because it cooks our food.
Consumers obtain benefits through other vehicles, such as, persons, places, organization,
activities and ideas.
Consumers decide which entertainers to watch on television, which places to visit on vacation,
which organizations to support through contributions, and which ideas to adopt.
Thus, the term product covers physical goods, services, and a variety of offer, vehicles that can
satisfy consumers’ need and wants.
The consumer with the same need will want the new product.

10. Packaging
Many products offered to the market have to be packaged. Some marketers called packaging a
5th P, along with Price, Product, Place and Promotion.
Packaging includes the activities of designing and producing the contain or wrapper for a
product.
The primary function of the package was to contain and protect the product. Numerous factors
have made packaging an important tool. An increase of self-service means that packages now
must perform many sales tasks – from attracting attention, to describing the product, to making
the sale.
Companies usually consider several different packaging designs for a new product. To select the
best package, they usually test the various designs to find the one that stands up best under
normal use and receives the most favorable consumer response. In the past, a package design
might last for 15 years before it needed changes. But, in today’s rapidly changing environment
most companies must recheck their packaging every two or three years.

11. What is business?

What you think of “business” what picture do you have in your mind – XEROX,
American Airlines, American Telephone and Telegraph? If so, you are on the right track. But
business in America is more then the large corporations with which we are all familiar. Business
comes in all shapes and sizes.
Businesses are either goods – producing or service – producing firms. Goods – producing
firms, such as mining, construction and manufacturing firms, produce tangible products or goods
– commodities that have a physical presence. Service – producing firms provide services –
activities that benefit consumers or other businesses. Transportation firms, insurance companies,
beauty shops, and repair shops are all examples of services businesses.
But, regardless of whether a business produces a good or provides a service, the common
ingredient is profit. Profit is the difference between a business’s total revenues or sales receipts
and the total of its production costs, operating expenses, and taxes. In a bread bakery example
the bakery has to pay for its raw materials (flour, butter or shortening, yeast, salt), equipment
(mixers, ovens, wrapping machines), employers, and the energy it uses. When the bakery sells
the bread to the cost of making the bread that extra part of the selling price is profit.
Why do businesses want profit? Profit is the ultimate goal of business. It is the measure
of success for the businessperson and the reward for taking a chance. Each person who operates
a business is risking money. The baker does not the people will buy the bread when it is
produced: but money is invested in the business on the possibility that people will buy. The bake
is taking a chance, a rick. Were there no profits, it would not be worthwhile for the baker to risk
the money.
 12. THE BASIC ECONOMIC PROBLEM
The central problem of economics is to determine the most efficient ways to allocate the
factors of production and solve the problem of scarcity created by society’s unlimited wants and
limited resources. In doing so, every society must provide answers to the following three
questions:
1. What goods and services are to be produced, and in what quantities are they to be
produced?
2. How are those goods and services to be produced?
3. Who will receive and consume (get to use) those goods and services?
The solution of these questions depends on the economic system of each particular society.

13. MICROECONOMICS VS. MACROECONOMICS

Economists have two ways of looking at economics and the economy. One is the macro
approach, ai d th^
other is the micro. Macroeconomics is the study of the economy as a whole;
microeconomics is the study of individual consumers and the business firm.
Macroeconomics examines questions such as how fast the economy is running; how much
overall output is being generated; how much total income. It also seeks solutions to macro-
economic problems such as how employment can be increased, and what can be done to
increase the output of goods and services. Microeconomics examines cause- and-effect
relationships that influence choices of individuals, business firms and society.
It is concerned with things such as scarcity, choice and opportunity costs, and with production
and consumption. Principal emphasis is given by microeconomists to the study of prices and
their relationship to units in the economy.

14. What? How? Who?

Every society must provide answers to the same three questions:
• What goods and services will be produced?
• How will those goods and services be produced?
• Who will receive them?
Societies and nations have created different economic systems to provide answers to these
fundamental questions. Traditional economies look to customs and traditions for their answers
while others, known as command economies, rely upon governments to provide the answers. In
free enterprise systems, market prices answer most of the What, How and Who questions.
Because market prices play such an important part in free enterprise systems, those systems
are often described as «price directed market economies.» Supply and demand are the forces that
determine what prices will be.

15.Prices In A Market Economy

Prices perform two important economic functions: They ration scarce resources, and they
motivate production. As a general rule, the more scarce something is, the higher its price will be,
and the fewer people will want to buy it. Economists describe this as the rationing effect of
prices.
In a market system goods and services are allocated, or distributed, based on their price.
Price increases and decreases also send messages to suppliers and potential suppliers of
goods and services. As prices rise, the increase serves to attract additional producers. Similarly,
price decreases drive producers out of the market. In this way prices encourage producers to
increase or decrease their level of output. Economists refer to this as the production-motivating
function of prices. But what causes prices to rise and fall in a market economy? The answer is
Demand!
 16. LAW OF DEMAND
Demand is a consumer’s willingness and ability to buy a product or service at a particular
time and place.
The law of demand describes the relationship between prices and the quantity of goods and
services that would be purchased at each price. It says that all else being equal, more items will
be sold at a lower price than at a higher price.
Demand behaves the way it does for some of the following reasons:
More people can afford to buy an item at a lower price than at a higher price.
Let’s see the law of demand from the point of icecream selling
At a lower price some people will substitute ice-cream for other items (such as candy bars or
soft drinks), thereby increasing the demand.
At a higher price some people will substitute other items for ice cream.
How many ice-creams can a man eat? One, two, more? Some people will eat more than one
if the price is low enough. Sooner or later, however, we reach the point where enjoyment
decreases with every bite no matter how low is the cost. What is true of ice-cream applies to
most everything. After a certain point is reached, the satisfaction from a good or service will
begin to diminish. Economists describe this effect as diminishing marginal utility. «Utility»
refers to the usefulness of something. Thus «diminishing marginal utility» is the economist’s
way of describing the point reached when the last item consumed will be less satisfying than the
one before.
Diminishing marginal utility helps to explain why lower prices are needed to increase the
quantity demanded. Since your desire for a second ice-cream is less than it was for the first, you
are not likely to buy more than one, except at a lower price. At even lower prices you might be
willing to buy additional ice-creams and give them away.

17. The Factors of Production

The private enterprise system, as do all economic systems, requires resources for its
business to produce goods and services. The resources used to provide goods and services other
factors of production: lend, labor, capital, and entrepreneurship. These 4 factors are blended
together by a business to produce goods and services as shown in Figure. Let’s examine each.
Lend is a natural resources that can be used to produce goods and services. Natural
resources are all resources growing on and under the Earth’s surface, such as trees, minerals, oil,
and gas.
Labor is a total human resources required to turn raw materials into goods and services. It
would include all employees of the business from top management through the entire
organization structure.
Capital is the total of tools, equipment, machinery, and buildings used to produces goods
and services. In this case capital doesn’t refer simply to money. Money by itself is not
productive: but when it purchases drills, typewriters, forklifts, and the building to place them in
it becomes productive.
Entrepreneurship is a group of skills and nsk taking needed to combine the other 3
factors of production to produce goods and services. Entrepreneurship is a catalyst – like heat to
a fire. It is a supplied by an entrepreneur, and individual or individuals who are willing to take a
ricks in return for profits.

18. Retailing
Retailing includes all the activities involved in selling goods or services directly to final
consumers for their personal, non-business use. Many institution-manufacturers, wholesalers,
and retailers – do retailing. But most retailing is done by retailers: businesses whose sales come
primarily from retailing. And although most retailing is done in retail stores, in recent years non-
store retailing – selling by mail, telephone, door-to-door contract, vending machines and
numerous electronic means – has grown tremendously. Because store retailing accounts for most
of the retail business, we discuss it first