Value Creation and Value Capture

These flashcards cover key concepts related to the lecture on value creation and value capture, focusing on definitions and explanations essential for understanding economic value in business.

Value

A judgment people make about the importance of goods for their lives and well-being.

Intrinsic Value

Value that is good inherently, not just for what it leads to.

Labor Theory of Value

Economic theory that states the value of goods and services is determined by the amount of labor required for production.

Willingness to Pay (WTP)

The maximum amount a buyer is willing to spend on a good or service.

Consumer Surplus

The difference between what buyers are willing to pay and what they actually pay.

Value Chain

The path through which goods and services flow from suppliers to firms and then to buyers.

Profit

The value captured by a firm, calculated as the difference between the selling price and the cost of the product.

Marginal Value

The additional value derived from consuming one more unit of a good or service.

Objective Economic Value

Value determined by the inherent features of items, not by human preferences.

Subjective Economic Value

Value shaped by the usefulness and appeal of a product to potential buyers.

Innovation

Improvements or new ideas that increase willingness to pay or reduce costs.

Luddite

A person opposed to technological advancements, originally referring to textile workers resisting labor-saving machines.

Average Cost

The total expenditure for production divided by the total number of units produced.

Utility

The usefulness of a product or service to a consumer.

Firm Value Creation

The process through which a firm generates economic value by converting inputs into outputs.

Extended Value Chain

A value chain that includes multiple parties, demonstrating the flow of value created and captured through various transactions.

Economic Value

The value that reflects the utility derived from goods and services, often affected by social and economic factors.

Revealed Preferences

Consumer behaviors that indicate preferences based on observed buying decisions.