3.2 - Business objectives

• Business objectives:

  • profit maximisation
  • revenue maximisation
  • sales maximisation
• Profit maximisation occurs where marginal cost (MC) = marginal revenue (MR)
• Revenue maximisation occurs when MR = 0.
• Sales maximisation occurs where average costs (AC) = average revenue (AR)
• Another objective a firm might have is satisficing. A firm is profit satisficing when it is earning just enough profits to keep its shareholders happy.
• This diagram summarises each objective:

  A) Profit Max

  B) sales max

  C) revenue max