A* Economics Theme 3 Notes

Theme 3 Economics Nathan Millet




ECONOMICS
A-Level
Theme 3
- Nathan Millet -




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, Theme 3 Economics Nathan Millet


Business Objectives


Key Points:

1. Shareholders, managers, workers, government, consumers and others can influence
decision making in a firm.
2. Firms may pursue a variety of objectives including Profit Maximisation, Revenue
Maximisation and Sales Maximisation.
3. Firms which pursue other objectives than Profit Maximisation are likely also to pursue
an objective of profit satisficing in order to survive in the long term.

Profit = TR-TC
↳ normal profit = TR=TC
↳ supernormal profit = TR>TC

TC = TFC+TVC
TFC = sum of all fixed costs
AC = TC/Q
AVC =TVC/Q
AFC = TFC/Q

Key Terms:

Consumer Sovereignty - exists when the economics system allocates resources totally
according to the preference of consumers.

Revenue Maximisation - MR=0 or the peak of the TR curve

Sales Maximisation - where a firm sells as many units as possible without incurring a
loss. AR=AC or TR=TC

Profit Maximisation - MC=MR or the biggest gap between TR and TC.

Profit Satisficing - making sufficient profit to satisfy the demands of owners.




Revenue Maximisation Sales Maximisation Profit Maximisation
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