Business economics (for firm) Essay Example | Topics and Well Written Essays - 1500 words

Business economics (for house) - Essay ExampleThe traditional theory of unswerving states that the same principles underlie each decision taken inside a firm and that the decision is influenced by who takes it, thus the theory abstracts from the peculiarities of the persons taking the decisions and from the organizational structure in which they were.Therefore according to the traditional theory of firm whenever a firm manager or board of directors of the firm, then as far as the theory takes decisions is concerned that person is the firm for the purposes of that decision. According to devine1985 he reinstated the traditional theory of firm, he viewed participatory economy system as a process in which the value and interest of people in a process of decision making through negotiation and cooperation.Extra-firm firm is concerned with the implication of generalized participation outside the firm for the process and criteria that determine which of the entrepreneurial or innovation o utput of firms are successful.Baumols gross revenue revenue maximizing model. Williasm Baumol developed the sales maximizing model he argues that firms attempts to maximize the revenue obtained from sales with or without a hit constraint. This is motivated by managers in a firm belief that their salaries are related to the size of the firm.This climax was developed by cyert and March in 1963. ... with the implication of generalized participation outside the firm for the process and criteria that determine which of the entrepreneurial or innovation output of firms are successful. head teacher 3Baumols sales revenue maximizing model. Williasm Baumol developed the sales maximizing model he argues that firms attempts to maximize the revenue obtained from sales with or without a profit constraint. This is motivated by managers in a firm belief that their salaries are related to the size of the firm.The diagram below demonstrates a firms total woo curve. add revenue curve and the prof it curve. Total revenue curve and the profit curve. Cost & RevenueTotal RevenueAt point P where total cost curve intersect total revenue curve. The profit value is zero.Where TC = TR then profits are equal to zero. Managers of a firm may be interest in maximizing variables other than profits.The diagram below shows a firms attempts to maximize sales revenue subject to a minimum profit and a firm not subjected to a profit constrain. A firm producing at point Qo maximizes profit this is the point where the profit curve is at it maximum.A firm that has no profit constraint in its production exit produce at pointy Q3.A firm with a minimum profit constraint will produce at point Q2, where the minimum profit line interest the profit curve.Section BBehavioural Approach of a FirmThis approach was developed by cyert and March in 1963. It emphasizes on explaining how decisions are taken within a firm. This approach is an alternative of the -profit maximization theory. According to Baumol (19 59), he suggests that managers would assay to maximize their own utility, managers interests are served by maximizing sales after achieving a