goals of firms

Goals of firmschapter 4

1. Sales Revenue Maximization

- when a firm makes as much revenue as possible

1. Sales Revenue Maximization

- easy for firms to raise finance - cheaper to sell in bulk

2.Growth aka Sales Maximisation

- managers, directors and chief executives want - their business to grow by maximizing their sales

- their status and pay depend on the size of the they run

3.Profit Satisficing- managers, directors and chief executives need to keep their shareholders happy- they offer dividends

4.Improvement of the environment and social responsibility

- firms try to clean up their production processes- ensure that they source their raw materials from firms that don’t employ child labour

4.Improvement of the environment and social responsibility

4.Improvement of the environment and social responsibility

CSRhttps://www.youtube.com/watch?v=cSNUyKV1ybo

https://www.youtube.com/watch?v=Nly_OdvORQY

5. Profit Maximisation

• encourages more firms to enter a competitive market

• when the possible gap between Revenue and Cost is greatest

• provides firms with more finance to update their capital equipment and expand their business

• enables firms to obtain external finance, to recruit top managers and directors

5. Profit MaximisationWays of Increasing ProfitA. Reduce Costs of ProductionB. Raise Revenue

A. Reduce Costs of Production

• reducing waste and inefficiency

5. Profit Maximisation

A. Reduce Costs of Production

• increasing the productivity of factors of production

high costs in the short run but lower average costs and increased revenue in the long run because of improved quality

5. Profit Maximisation

A. Reduce Costs of Production

• increase the size of the firm through mergers and takeovers (represent the cost reduction)

5. Profit Maximisation

A. Reduce Costs of Production5. Profit Maximisation

5. Profit MaximisationB. Raise Revenue

• Changing the Price

Elastic Demand -> Decrease the PriceInelastic Demand -> Increase the Price

5. Profit MaximisationB. Raise Revenue

• Increasing Demandimprove the quality of the products

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Homework- Text BookActivity 2-page 262Multiple Choice Questions page 298

Homework- Workbook: Structured Questions: 1. Ryanair’s profits fall (page 42)

Multiple Choice Questions

Answers: 1. C, 2. D, 3. B, 4. A, 5. B, 6. D