Unit 1 Flashcards
Goal of the company
Create value, money is just a consequence of creating value.
What is economics?
The studying of human behaviour as a rational activity to satisfy their unlimited needs with scarce resources.
What is the black box?
It is the business activity where you have put in land, labor and capital and out comes goods and services.
What is “need”?
The feeling of lacking something and you want to eliminate that lack. It is subjective & unlimited (always wanting more).
4 opposite descriptions of a good:
- Free (unlimited like the oxygen) or economic (scarce)
- Consumer good (final goods that are either durable or single-use) or producer (intermediate, capital goods)
- Material (storable) or immaterial (generally a service).
- First order (final) or second order (used for the 1st).
Utility
The satisfaction a product gives you, totally subjective. the same good have different utility for diff people.
Value
Depends on utility and scarcity. More utility and more scarce the more value it gives you.
Aim of consumer vs producer
Consumer wants to maximize satisfaction while minimizing the expenses. Producer wants maximize income while minimizing the costs. Always trade-offs.
Operation/plant/business
Technical unit referring to coordinated labor and capital. Specific place with only one management.
Company
Production- and decision-making unit. Person (legal or natural) producing in one or more places. This person is taking a risk with this company (of default and bankruptcy). Production takes place in the plants while the company is the entity financing it.
Ex of one company with many plants:
A simple diversified company could be LG for ex.
Ex of many companies but only one plant:
A composite company like Google. Only one business but contains many companies. (multi-part).
Ex of one comp and one plant
A local store.
Ex of both many companies and many plants
Nestlé for example. They do a lot of different products and own different brands/companies. (Complex company, conglomerate). Ex both Kitkat and Loreal…
Size
Small, medium, large
Activity
Manufacturing, services, tech…
Ownership
Private/public
Geographic area
Local, Regional, National, multi-national
