Products marketing and production Flashcards
Define vertical products diversificatio
Where a firm’s product differs from its rival’s product concerning the quality
Define horizontal products diversification
Where a firm’s product differs from its rival products although the products are seen to be of a similar quality
What are the two choices firms have when marketing in both a product setting and a market setting. (whats and where)
You can stay where you are or move Four marketing strategies: Market penetration Product development Market development Diversification
Define market penetration
Increasing the amount of the existing target market who buy the product
Explain market development
selling the existing product elsewhere
What is the marketing mix
Product - branding, packaging etc
Price - make the price as appealing as possible, good credit deals etc
Place(distribution) - where product is sold
Promotion - targeted advertising
Define opportunity costs
Cost of any activity measures in terms of best alternative foregone
Define explicit costs
Payments to outside suppliers of inputs (direct payment)
Define implicit costs
Costs which do not involve direct payment of money to the third party but which involve a sacrifice of some alternative
Define Historic cost
Mostly sunk costs - the original amount the firm paid for factors it now owns
Define replacement costs
What the firm would have to pay to replace factors it currently owns
What are the factors of production
Labour, Land/raw materials, Capital and Entrepreneurship
What is Total physical product or TPP
Total output of a product per period of time that is obtained from a given amount of inputs
Explain what difference between fixed and variable factors are
Fixed factors - An input that cannot be increased in supply within a given time period ex: rent short term
Variable factor - An input that can be increased in supply within a given time period ex: electricity
Explain the difference between a long term and short term factor
Short term - Period of time over which at least one factor is fixed
Long term - Period of time long enough for all factors to be varied
What’s the law of marginal diminishing returns
When one or more factors are held fixed there will come a point beyond which extra output from additional units of variable factor will diminish
Explain marginal physical product
Extra output gained by the employment of one more unit of the variable factor
Explain average physical product
TPP per unit of the variable factor
What are fixed costs
total costs that do not vary with the amount of output produced (TFC) Ex: rent
What are varibale costs
Total costs that do vary with the amount of output produced (TVC)
What are the total costs
Total Costs - The sum of the total fixed and variable costs (TC=TFC+TVC)
Formula for marginal cost
MC = Change in total cost/ change in quantity
Where does the MC curve cut the AC and AVC curves
At their minimum point
What are the three ways to think when scaling up production
Decreasing returns to scale
Constant returns to scale
Increasing returns to scale
Define economies of scale
When increasing the scale of production lead to a lower cost per unit of output - there is a limit to this
What are the reasons for economies of scale
Specialisation and division of labour Indivisibilities Container principle Greater efficiency of large machines By-products Multi-stage production Organisational & administrative economies Financial economies
Define economies of scope
When increasing the range of products produced by a firm reduces the cost of producing each one decreases - overall operation is more efficient
Define diseconomies of scale
Where costs per unit of output increase as the scale of production increases
Reasons for diseconomies of scale
Managerial diseconomies
Industrial relations
Interdependencies - more complex the firm is structure-wise the harder it is to manage
Define external economies of scale
where a firm’s costs per unit of output decrease as the size of the whole industry grows
Define external diseconomies of scale
where a firm’s costs per unit of output increases as the size of the whole industry increases
What does factor optimisaiton mean and what are some things to consider when analysing this
Examining what is the right balance between the different factors is optimisation
Location, Availability and cost of the factors of production, distance from suppliers and consumers, transport
Looking at LRMC and LRAC curves how to tell is there is is economies of scale or not
When there are economies of scale the average costs are more than the marginal costs and vice versa for diseconomies of scale
