Business Objectives and the Conduct of Firms

This revision webinar video recording considers the different objectives that business might have in different markets. These range from profit and revenue maximisation to sales maximisation and satisficing behaviour in contestable markets.

Types of Firms Key Note Summary

AGENT OF A FIRM

Someone who agrees and is authorized to act (make decisions) on behalf of someone else – the Principal

DIVORCE OF OWNERSHIP AND CONTROL

When the owners of a business do not control key day-to-day decisions such as pricing, investment and marketing

FIRM

A business organisation such as a corporation that produces and sells goods and services in markets

NOT FOR PROFIT ORGANISATION

Businesses that are operated commercially but with social welfare and environmental aims in mind. Typically, the profits are reinvested for social purpose.

PUBLIC SECTOR ORGANISATION

Organisations that are owned and controlled by the state e.g. the NHS, social care, state schools, ther Police, HM forces

PRINCIPAL OF A FIRM

The principal of a firm is the owner – they have an equity stake in the business

PRIVATE SECTOR ORGANISATION

Private sector organisations are owned by private investors rather than the state. 84% of jobs in the UK are in the private sector

PROFIT

The excess of revenue over cost. Total profit = total revenue – total cost. Profit per unit = price – average cost