ap business

organization/business

an organization is an entity formed to work towards a common goal. a business is an organization regularly engaged in the production or purchase and distribution of goods and services. businesses seek profit by selling their products for more than the cost of obtaining them,

customer vs consumer

a customer is the buyer of the good/service. a consumer is the user of the good. sometimes they can be the same person, like if you buy a sandwich you would eat it as well, but often they’re not the same.

problem-fit solution

a successful business seeks this, likely a close match between its products and the problems of intended customers.

value creation vs value capture

value creation occurs when a business offers a product that solves customers problems or satisfies their needs and wants (businesses have a direct incentive to create value because they can capture some of that value). value capture occurs when a business can charge customers a price that exceeds the cost of providing a product.

revenue vs. profit

when a customer pays the price for a product, the money received in exchange for the product is called revenue. some of the revenue is spent by the business, but the remaining portion is the value captured by the business. that value is a profit, which is revenue receieved minue the cost of making the product and operating the business.

customer surplus

the difference between the value of a product and its price is the value you hold onto