Profit maximization is the process of obtaining the highest possible level of profit through the production and sale of goods and services. Profit is the difference between the total revenue a firm receives from selling output and the total cost of producing that output. Profit-maximization means that a firm seeks the production level that generates the greatest difference between total revenue and total cost.
Profit Satisfying
In many firms separation of ownership and control is present as the shareholders who run the company often hardly ever get involved in the day to day running of the firm. However this is a problem as although the owners want to maximise profits, the managers will have less motivation to do this as they won’t get the same rewards. Therefore most managers will create a minimum level of profit just to keep the shareholders happy but also enjoy work and get on with others. However this could be overcome, to some extent by giving managers share options and performance related pay yet this could be difficult to measure in some industries.
Sales Maximisation.
Most firms often seek to add to their market share even if this means that they will turnover less profit, this could happen because of various reasons for example: an increase in market share increases the monopoly power and may enable the firm to put up prices and make more profit in the long run. Another example could be that managers often prefer to work for bigger companies at it will lead them to a higher salary. The final reason could be that increasing the firm’s market share could force their rivals out of business e.g. the big supermarkets have led to an decrease in local shops, this is because there is more supermarkets about therefore people will choose to go to them as they offer more products and normally aren’t that far away.
The Essay on Normal Profit Firms Run Price
The market system determines what, how and for whom goods and services are produced. The consumer determines what to produce. An increase in consumer demand will lead to a rise in price and producers will respond to higher price by raising production- to make more profits. Competition between producers determines how to produce- if they do not want to produce as cheaply as possible they will go ...
Social/ Environmental concerns.
Firms which have put in place these strategies have been successful; therefore this has encouraged more firms to consider putting in place similar objectives. However others may argue that they can see it as another opportunity to increase profits.
Economic Objectives of the Government
The four major objectives are full employment, price stability, a high, but sustainable, rate of economic growth, and keeping the Balance of Payments in equilibrium
Growth and low inflation
Growth and low inflation have always been important. Without growth peoples’ standard of living will not increase, and if inflation is too high then the value of money falls negating any increase in living standards. Nowadays these are definitely the two most important objectives of UK macroeconomic policy. The Chancellor is always going on about ‘sustainable growth’, meaning growth without inflation. Probably the biggest piece of economic news each month is the decision taken by the Monetary Policy Committee (MPC) over interest rates, th`eir sole objective being the 2.5% target for the growth in RPIX (plus or minus 1%).
Maintain a low level on unemployment
Although this objective was not considered so important in the 80s, when unemployment rose to over 3 million, it is still considered important by most economists, and the current Labor government have certainly made the goal of full employment more major.
It is important to keep unemployment levels as low as possible as high unemployment is expensive for the government therefore this means it is expensive for the tax payer. For every unemployed person, there are two costs to the government. First, the unemployed worker will be entitled to benefit/benefits, and if he/she is young, or older but remains unemployed for a long period of time, he/she will be offered training under the ‘new deal’. There is also the less obvious cost of the loss of income tax revenues the worker would have paid for if they were in work. These workers would have been paying VAT as well through their purchases. Put together, some economists have estimated that the cost to taxpayers of each unemployed person is up to £9,000 a year.
The Essay on Construction Industry Growth Economic Unemployment
Put simply, a business's goal is to maximize profits. This requires any company to remain competitive in its market and this in turn requires management to make decisions. These decisions are influenced by the 'business environment'. Macroeconomic factors including economic growth, unemployment, and inflation are part of the business environment and highly influence the decisions of the business. ...
Price Stability
Some would say that the main reason why the control of inflation is so important is that if inflation gets out of control, the economy stops growing. If inflation rises, the Monetary Policy Committee (MPC) is forced to raise interest rates. Consumers will stop borrowing to spend and firms will stop borrowing to invest. The housing market will slump, and along with it all the home improvement consumption that goes with it. Manufacturer’s exports will become less competitive. The economy may well drop into a recession.
Economic Objectives of individuals
Employees
On the whole in economics we make the assumption that employees are interested in maximising the wages that they earn. In reality this may be a simplistic approach and it is recognised that workers will be interested not just in the pay, but also the working conditions, the perks, holidays and the nature of the job itself. However in economics we assume that workers will try to maximize the rewards they get, and balance this against the time and effort spent working.
Consumers
Consumers have a limited amount of income and therefore need to make choices. Their main objective is to maximize their own well being or economic welfare. Most of economic theory is based on the idea of rational consumers who make decisions based on attempting to maximize their own welfare. This doesn’t mean that we cannot give to charity or do things for other people, however it may mean that we get satisfaction from doing it which makes it worthwhile. Economists in the 19th century tried to measure just how much satisfaction people got by asking them to express how much they enjoyed different products. ‘Utils’ were invented as a unit of satisfaction. This approach did not work out too well because while in a subject like mathematics it is straightforward to agree on what a centimeter is, because we all have rulers with identical scales, but there is no way in economics of agreeing what one unit of satisfaction feels like.
The Term Paper on Marketing Objective Consumer Product Model
Chapter 1 This chapter starts out by telling the reader that there are many different options for the ways that businesses can get their message out to consumers. Through various forms of communication, firms are able to establish and build a relationship with their customers. We then find the model of communication process. This is a model that describes the way that we encode and decode everyday ...
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