Buisness Objectives And Growth Flashcards
4 influences of firms
Shareholders
Workers
Directors and managers
Consumer
objectives of shareholders
maximise profit
objectives of directors and managers
maximise sales or revenue
objectives of workers
higher wages and job security and improved conditions
consumer objectives
lower prices and high service quality
what point is maximum revenue
Productive efficiency
Why might firms want to maximise revenue
An increased revenue will lead to a greater percentage market share which will increase the prestige of managers and directors of that firm
Sales Maximisation point on revenue and costs diagram
Price = AC meets AR
Advantages of sales maximisation
Break even to increase sales
Profit satisfying
making enough money to satisfy the firms 4 influencers
What does profit satisfying mean for a firm
When a firm has made a decreased rate of profit and then satisfies other objectives.
lego has profit satisfied and has invested in making its product recyclable
Reasons why a firm grows
- more sales profit
- more market power
- diversified product
- economies of scale
- objectives of owners
Reasons why a firm may not grow
- not financed
- legal restrictions
- niche markets
- personalised products
- diseconomies of scale
- profit satisfaction
Examples of diseconomies of scale
Alineation
Beauroacy
Communication
Divorce of ownership and control
When shareholders own businesses which are controlled by differnt people, usually managers and directors
Principle agent problem
principle (person in charge) is the shareholder(s)
Agent is the director
This leads to an asymmetrical information over the running of the firm
Agent may pursue goals which are different to the goals of the principle.
Such as giving increased bonuses rather than more profit to the shareholders
Public sector firms
firms owner by the government
NHS, BBC
Private sector firms
Owned by shareholders
For profit firms
looking for profit
- apple
- Barclays
not for profit firms
firms not looking for a profit
oxfam
velocity of money
how fast money moves around the economy
3 factors setting the interest rate
- wage rates
- saving rate
- external shocks
4 sections on the economic cycle
slowdown
boom
bust
recoverty
definition of a recession
2 or more consecutive quarters of economic growth
why does GDP tend to increase
long run increases in improvements in technology increase the potential of an economy
growth of technology
potential trend GDP
the sustainable rate of GDP growth caused by productive improvements
are output gaps possible in the long run
no
as workers can be given overtime in the short run
5 charachteristcs of a boom
increase in animal spirits
increase in economic growth
demand pull inflation
low unemployment
low benifits increase in income tax decrease budget deficit
characteristics of a bust
low animal spirits
low economic growth
low inflation
unemployment
worsened budget deficti
speculators
people who buy an asset thinking it will increase in price
asset price bubble
speculation and heading
hence the price of an Asset is determined by its predicted future price
such as property leading to 2006
how can asset price bubbles lead to a boom
2006 house price bubble
increased demand for houses
intervention policy
when the government increases its intervention in the economy
2 types of supply side policy
- interventionist
- market based
consumption % of AD
65%
Quantity theory of money
because velocity and quantity of money is equal in money which means that money supply leads to an increase in inflatino
fishes equation
money supply X velocity = Price Level X Quantity
main policy instruments
benifits
corp tax
income tax
healthecare education
VAT
healthcare
