Introduction to Advanced Economics.

What are the objectives of firms?• Maximise efficiency • Maximise profits• Revenue maximisation • Minimise costs (economies of scale)• Profit satisficing • Growth (indirect/ direct) higher power• Increase market share

Firms objectives.• Objectives depend upon particular stakeholders.   ‣ Owners- Profit maximisation    ‣ Managers- Revenue maximisation, profit satisficing, self interest (which cannot be quantised).   ‣ Workers- Earn more! Job security.   ‣ Government- More tax, possible subsidies.     However some monopolies may choose to avoid tax, and if not they may locate elsewhere.   ‣  Consumers- Low prices.

Stakeholder conflict.‣Different stakeholders are said to have different objectives, and these may cause conflict.‣Owners want to reduce costs whilst workers want higher pay.‣Consumers want lower prices but owners want higher profits.‣ Managers may not have the same view as directors to maximise profits as they may wish to maximise their own rewards as they too are workers.

Divorce of ownership from control.‣ 'plc' means public limited company and typically has 50 million shares.‣ There are however two types of investors:   ∙Private investor- Owns a tiny amount relative to the business.   ∙Institutional investor- Owns a high percentage relative to the business.Both types of investor are owners but may be unable to run and therefore have low control.

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