Business Objectives | A-Level Economics Notes

These revision notes cover everything you need to know about Business Objectives for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.

What is the condition for profit maximisation?

Profit maximisation occurs when a firm produces at the quantity where MC=MR.

What are two reasons why profit maximisation is the main business objective?

Profit can be used to pay shareholders,

Profit can be re-invested which can lead to innovation.

Explain why profit maximisation occurs at MC=MR

Profit is maximised where MC = MR because at this point, the cost of producing one extra unit exactly equals the revenue it generates.

If MR > MC, the firm should increase production as each additional unit adds more to revenue than costs, increasing total profit.

Conversely, if MC > MR, the firm should reduce output as each additional unit costs more than it generates in revenue, reducing total profit.

What is the condition for revenue maximisation?

Revenue maximisation occurs when a firm produces at the quantity where MR=0.

What is the main benefit of revenue maximisation?

Revenue maximisation can be used as a strategy to increase market share. This can allow firms to benefit from increased brand loyalty and economies of scale,