Economics: Circular Flow of Income

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Questions and Answers

What is the primary purpose of pre-sales services?

To provide support to potential customers before they buy (correct)

To promote customer loyalty and sales

To focus on preventing product failures

To maximize customer satisfaction after buying the product

Which of the following is a characteristic of a good warranty service?

It only covers some components of the product

It is only provided by the sales team

It is difficult to understand and enforce

It is unconditional, easy to understand, and easy to enforce (correct)

What is the focus of a company with a 'Never Fail' warranty setting strategy?

Reducing product price below repair price

Providing quick repairs or replacements

Offering repair services from other firms

Preventing product failures (correct)

What is the primary goal of after-sales services?

To maximize customer satisfaction after buying and using the product Signup and view all the answers

What type of product is best suited for a 'Disposable' warranty setting strategy?

A low-cost product with a short lifespan Signup and view all the answers

Which of the following is a benefit of a company offering a mix of goods and services?

Customized products and services for customers Signup and view all the answers

What is the primary goal of the Production and Operation subsystems in a business?

To transform inputs into outputs Signup and view all the answers

What is the key distinction between Production management and Operations management?

Production management focuses on manufacturing goods, while Operations management focuses on delivering services Signup and view all the answers

What is the primary objective of the Service Factory Model?

To organize each sector of the firm as though they were providing services to internal customers Signup and view all the answers

What is an example of a Value-Added Service in the production management context?

Field support for repairs Signup and view all the answers

Which of the following is NOT a characteristic of a business as a system?

A self-contained entity that does not interact with the environment Signup and view all the answers

What is the role of industrial employees in the production management as a service context?

To act as advisers or consultants for customers using their knowledge in quality control techniques Signup and view all the answers

What is the primary benefit of the Service Factory Model in the production management context?

It enables manufacturing companies to organize each sector as though they were providing services Signup and view all the answers

What is the key characteristic of Essential Services in the production management context?

They are critical to the production process and include quality, flexibility, costs, deliveries, and environmental protection Signup and view all the answers

Study Notes

The Production System in the Enterprise: Goods and Services

The Circular Flow of Income model illustrates how money circulates in an economy between individuals, businesses, and the government.
Individuals spend income on goods and services (G&S), pay taxes, and invest in the stock market, generating income for businesses.
Businesses use this income to pay for capital, materials, and employee salaries, which in turn becomes the income of individuals.

Business as a System

A business is a complex and open system comprising interconnected components working together to achieve a common goal.
The production and operation subsystems aim to obtain goods and services using operational resources (plants, people, parts, and processes) to transform inputs into outputs.

Production Management versus Operations Management

Production management involves managing processes related to manufacturing goods.
Operations management encompasses managing all activities related to delivering services.

The Service Factory Model

Due to changing customer expectations, companies are organizing each sector to provide services to other sectors and to customers, increasing internal and external customer satisfaction.

Essential and Value-Added Services

Essential services include quality, flexibility, costs, deliveries, and environmental protection.
Value-added services include information about products, problem-solving, field support, and sales support.

Production Management as a Service

Industrial employees can act as advisers or consultants, using quality control techniques to advise customers on issue identification and problem-solving.
Companies can offer training courses to develop customer abilities to use products effectively.
Different sectors of the firm can interact to showcase and evaluate products, blurring the line between goods and services.

Customized Products and Services

Companies offer a mix of goods and services to cater to customer demands for customization.
Pre-sales services include support provided to potential customers, such as advice, information, and financing.
After-sales services aim to maximize customer satisfaction after purchasing, including warranty, product training, and customer support.

Warranty Services

Warranty services promote customer loyalty and sales, covering all product components under the company's control.
Warranty setting strategies depend on factors like repair and information costs (FC) and salaries and time costs (VC).
Strategies include Never Fail (high FC and VC), Repairable (high FC and low VC), Rapid Response (low FC and high VC), and Disposable (low FC and low VC).

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Description

Learn about the circular flow of income model, which shows how money circulates in an economy between individuals and businesses. Understand how income is spent and earned in the production system.