Why Does Volatility of Demand Have a Higher Effect on a Service

question 36

Essay

Why does volatility of demand have a higher effect on a service delivery system than on a manufacturing system?

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Definitions:

Short Run

A period during which at least one input, such as plant size or capital, is fixed and cannot be changed.

Maximum Profit

The highest possible financial gain achievable by a firm from its operations, after all costs have been subtracted from total revenue.

Output

The quantity of goods or services produced within a given time frame by a firm, industry, or country.

Long-Run Supply

The time period in which all factors of production and costs are variable, allowing firms to fully adjust to market conditions.