Understanding Firms, Business Survival, and Demand Elasticity
Understanding Firms and Business Dynamics
The Firm: A Focal Point of Production
A firm is a central element in a country’s production system. It uses its resources to produce goods, sometimes borrowing resources and paying for their use (e.g., land, labor, capital). A firm is an organizational unit, while a plant is a technical unit. The primary goal of a firm is to maximize profit.
In business economics, a firm is viewed from two perspectives:
- Theoretical: A firm is a fundamental component of production,
Monopoly vs. Perfect Competition: Key Differences
Formulas:
CMEV = CV / Q; CMET = TC / Q; MC = CT1 – CT0; CT = CV + CF
6 Elements to Differentiate a Product:
- Brand
- Local geographic location
- Package
- Attention (Courtesy)
- Credit
- After-sales care
- Warranty
For Existing Monopoly Firms:
Monopolistic companies already exist due to the following barriers:
- Economies of Scale: Better use of production factors, capital goods, human resources, and entrepreneurial ability. This tends to lower unit costs or average costs (a technological advantage).
- Natural Monopolies: Companies
Key Business & Economic Terms: Absolute to Economy
Key Business and Economic Terms
A
Absolute Advantage: Ability to produce a specific product more efficiently than any other nation.
Affirmative Action Program: Plan designed to increase the number of minority employees at all levels within an organization.
B
Balance of Payments: Total flow of $ into a country – total flow of $ out of that country over some period of time.
Balance of Trade: Total value of a nation’s exports – total value of its imports over some period of time.
Barter: System of exchange
Read MoreKey Economic & Business Terms: Definitions & Concepts
Economic & Business Terms: Definitions
Economic Community
An economic community is an organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies.
Economic Model of Social Responsibility
The economic model of social responsibility is the view that society will benefit most when business is left alone to produce and market profitable products that society needs.
Embargo
An embargo is a complete halt to trading with a
Read MoreSpain’s Ecclesiastical Confiscations: Mendizabal and Madoz Laws
Mendizabal’s Confiscation (1835-1844)
In 1835, facing a treasury deficit, Mendizabal returned to Spain and implemented several laws between 1835 and 1837 to confiscate church property. Royal decrees in 1836 dissolved and closed convents (secularization) and seized property of religious orders. This led to the nationalization and public auction of rural and urban properties, movable assets, and even libraries and artwork. Initially targeting the regular clergy, the 1837 Ley de Bienes Nacionales extended
Read MoreEconomic Principles: Systems, Market Dynamics, and Firm Production
Core Economic Objectives
The primary objectives include:
- Stable growth of national output.
- Full employment of resources and their efficient allocation.
- Price stability.
- Equitable distribution of income.
Public Sector Economic Tools
The basic tools used by the public sector and the state to influence private economic activity are: taxes, spending, and regulation. Taxes are established on income, economic activity, and property. Public spending includes purchases of goods and services, infrastructure investments,
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