Chapter 1 - Operations management (McGraw-Hill Cachon & Terwiesch) Flashcards | Quizlet

What is supply?

Product or service a business offers to its customers

What is demand?

The set of products and services our customers want

What is utility?

A measure of the strength of the customer preferences for a given product or service. Customers buy the product or service that maximizes their utility.

According to the principle of utility, which product or service do customers choose to buy?

Customers buy the product or service that maximizes their utility.

What is consumption utility?

A measure of how much you like a product or service, ignoring the effects of price and of the inconvenience of obtaining the product or service.

What two effects are ignored when measuring consumption utility?

The effects of price and of the inconvenience of obtaining the product or service

What is performance?

A subcomponent of the consumption utility that captures how much an average consumer desires a product or service

What is fit?

A subcomponent of the consumption utility to captures how well the product or service matches with the unique characteristics of a given consumption

Which two elements are identified as subcomponents of consumption utility?

Performance and fit

What is heterogeneous preference?

The fact that not all consumers have the same utility function

What is price?

The total price of owning the product or receiving the service

What is inconvenience?

The reduction in utility that results from the effort of obtaining the product or service

What are transaction costs?

Another term for the inconvenience of obtaining a product or service

What is location?

The place where a consumer can obtain a product or service

What is timing?

The amount of time that passes between the consumer ordering a product or service and the consumer obtaining the product or service

What is marketing?

The academic discipline that is about understanding and influencing how customers derive utility from products or services

What are compatibilities?

The dimensions of the customers utility function of firm is able to satisfy

What are trade-offs?

The need to sacrifice one compatibility in order to increase another

What is a market segment?

A set of customers who have similar utility functions

What does it mean for a firm to be Pareto dominated?

Pareto dominated means that the firm's product or service is inferior to one or multiple competitors on all dimensions of the customer utility function

What is the efficient frontier?

A set of firms that are not Pareto dominated

What is inefficient?

The gap between a firm and the efficient frontier

What is waste?

The consumption of inputs and resources that do not add value to the customer

What is variability?

The predictable or unpredictable changes in demand or supply process

What is inflexibility?

The inability to adjust to either changes in the supply process or changes in customer demand