, UNIT 6 The Firm :
owners and employees
. , managers
Background
-
many firms who are profit maximising ,
see to use suppliers that provide inputs
(components and labour) at the lowest cost , regardless of how far
away the manufactured input is
-
These suppliers will compete globally for large firms
-
These firms then charge a large mark-up on the final product
L
outsourcing or
offshoring
Reason for
importing
1) Labour costs
2) specialisation
3) cost of raw materials
4) Availability of materials
5) Production costs
1) THE FIRM major in the
actors
economy
They :
employ people : purchases inputs to produce goods and services for the market :
generally sets prices greater than the cost of production to ensure a profit
Division of labour
↳
The specialisation of producers to
carry out different tasks
during production
-
In a capitalist economy ,
division of labour is coordinated in firms and
markets
1 .
Firms
-
Power is concentrated in the hands of owners or
managers and allows them
to issue commands to workers
.
2 markets
-
power is decentralized so
buyers and sellers decisions are autonomous and
voluntary
, structure of the firm
Board of directors :
decide long-term strategies Board of Directors(owners
and oversee the
↓
managers
managers :
Implement owners decisions , order issued manager
↓
down by the chain of command and they assign
tasus to workers Workers
Flow of Information
things managers do
()
-
workers know not managers
know things owners do not
Y
-
Asymmetric information between employers
--
and employees
+
&
one person in the exchange knows more than the other
Contracts
-
a legal document or understanding that specifies a set of actions that
parties to the contract must undertake
an employer can issue commands
one
way
-
-
Firms and markets differ in the contracts that form the basis of exchange
L contracts for products sold (markets) permanently transfer ownership of the
good from the seller to the
buyer
L
contracts for labour
(generally firms) temporarily transfer authority over a
a
person's activities from employer to manager/owner
owners and employees
. , managers
Background
-
many firms who are profit maximising ,
see to use suppliers that provide inputs
(components and labour) at the lowest cost , regardless of how far
away the manufactured input is
-
These suppliers will compete globally for large firms
-
These firms then charge a large mark-up on the final product
L
outsourcing or
offshoring
Reason for
importing
1) Labour costs
2) specialisation
3) cost of raw materials
4) Availability of materials
5) Production costs
1) THE FIRM major in the
actors
economy
They :
employ people : purchases inputs to produce goods and services for the market :
generally sets prices greater than the cost of production to ensure a profit
Division of labour
↳
The specialisation of producers to
carry out different tasks
during production
-
In a capitalist economy ,
division of labour is coordinated in firms and
markets
1 .
Firms
-
Power is concentrated in the hands of owners or
managers and allows them
to issue commands to workers
.
2 markets
-
power is decentralized so
buyers and sellers decisions are autonomous and
voluntary
, structure of the firm
Board of directors :
decide long-term strategies Board of Directors(owners
and oversee the
↓
managers
managers :
Implement owners decisions , order issued manager
↓
down by the chain of command and they assign
tasus to workers Workers
Flow of Information
things managers do
()
-
workers know not managers
know things owners do not
Y
-
Asymmetric information between employers
--
and employees
+
&
one person in the exchange knows more than the other
Contracts
-
a legal document or understanding that specifies a set of actions that
parties to the contract must undertake
an employer can issue commands
one
way
-
-
Firms and markets differ in the contracts that form the basis of exchange
L contracts for products sold (markets) permanently transfer ownership of the
good from the seller to the
buyer
L
contracts for labour
(generally firms) temporarily transfer authority over a
a
person's activities from employer to manager/owner
