Business Operations of a Library; Economics Assignment 2 (Chapter 7)

This blog is the first of 3 parts. The assignment was to read a chapter, take the main ideas and key terms of economics and tie it in with our interest, in my case libraries.

A library is like a business firm, this is because a library is an organization that provides goods to the general public. Although the libraries only gets profits from the general public through fines, the library can still be considered a business because it provides goods at a very low cost. (Nothing!)

One thing about the organization of a library. A library system is run by a board of directors, but libraries can also be considered a sole proprietorship. This is because the library recieves its funds from the government. The city/county/state government, (depends where you are), are often run by a mayor, executive, or governor. That official would be considered the sole proprietor, because they provide the libraries with funds. As stated earlier, the library is controlled by more than one director, the library can be considered a partnership. However, the board of directors don't receive a large percent of the profits. This is because of the limited amount of profit, and the fact that the profit from fines and the money from the government fund the operation of the library. Unlike a partnership, the board of directors are not responsible for debts. Well, not completely. If their decision brought about a deficit, they are responsible. The board of directors produce decisions that help the libraries function to the best of their ability. Since the directors are employees, they receive a salary.

Shirking affects a library. If a page or a volunteer doesn't keep up with their shelving duties, the other pages and volunteers are swamped with cartloads full of books. This negatively affects the patron due to the fact that they can't find a book they are looking for because the book is hidden behind the circulation desk. Shirking also affects story hour. Story hour crafts have to be prepared in advance. If a volunteer or a page cannot cut out the shapes in time, other volunteers and pages have to work hard to get it done. If the pages and volunteers don't finish, there is a stressed out librarian trying to improvise and many annoyed kids.

Libraries are not corporations; this is because libraries don't have stockholders. Libraries get most of their funding from the government. Therefore, the government inadvertently tells the library how to control its assets, because it is the supplier of funds for the library. The government has limited liability, similar to the stockholders of a large corporation. If the government needs money, it can lower the money allotted to the library system. When they do this, they don't have to worry about financial repercussions.

There aren't many franchises in the many library systems throughout the country. This is because of the fact that franchises wouldn't be successful in a library system because of the lack of profit. Even though libraries aren't a part of a profitable franchise, the library system itself can be considereda franchiser. This is because library systems are connected through a network, and they share books and their other goods through that network. The head librarian at a local library would be considered a franchisee.

Libraries have social responsibilities. A libraries social obligation is to provide books and other goods and services at an affordable rate. Without that obligation, we wouldn't have libraries as we know it. If libraries were motivated by money instead of that social responsibility, our society would be, (in my opinion) worse off. This is because some wouldn't have the money to buy a computer, or a book. Without these keys to help open the gates of knowledge, the poor couldn't attempt to advance their careers or even their lives. This scenario makes the rich richer, and the poor, poorer.

Libraries produce a good at a fixed cost this is because the goods are supplied to the consumer at the same price. The price never changes; this is because the books are free to the patrons. If a library system wants more money for a materials budget, and the government won't allot any more money to the library system, the library would have to raise the fines and fees. This fluxuation is known as variable cost. The total cost is equal to the fines, fees and the books, (which is nothing). In the grand scheme of things, the total cost can be viewed as just the cost of the fines and the fees.

Libraries don't have an average total cost nor marginal cost because libraries are a supplier of goods, they don't produce goods. These terms involve the factories that make the books and other products that the libraries provide to the public.

There is no marginal revenue in libraries, this is because libraries don't receive revenue from their patrons. Libraries provide goods that are borrowed and returned, not sold and kept. The law of diminishing marginal returns doesn't apply to libraries, because of the same reason that marginal revenue doesn't apply to libraries, libraries don't produce good to be sold, like a factory does. They receive no profit for each book loaned out. Libraries exist only to help the public expand their knowledge.

If you want to learn about these topics in greater detail, post a question in the comment section, or visit your local library. The nonfiction section should have some interesting books on this topic. Remember libraries are a unique part of society, they exist simply for the advancement of human knowledge, they don't exist to fight other libraries and library systems in order to get money.

Key Terms to be used in Blog Assignment;
Business Firm, Shirking, Sole Proprietorship, Partnership, Corporation, Stockholder, Asset, Limited Liability, Board of Directors, Franchise, Franchisee, Franchiser, talk about ethics and social responsibility, fixed cost, variable cost, total cost, average total cost, marginal cost, marginal revenue, and law of diminishing marginal returns.