Edexcel A-Level Economics Notes | 3.2

3.2.1 Business Objectives

• Marginal: only applies to the next unit e.g. the utility of your next chocolate bar
• Profit maximisation: MC = MR.
• Profit maximisation keeps shareholders happy, and profit can be used to invest and improve goods and services.
• Revenue maximisation: MR = 0.
• Revenue maximisation may be targeted by managers seeking recognition.
• Sales maximisation: AC = AR.
• Sales maximisation is useful for charities, or to gain market share e.g. free trials/ cheap products from Amazon when they were growing.
• Satisficing: earning just enough profits to keep its shareholders happy.
• Satisficing happens because workers/ managers don't have incentive to work extra hard to make profits but they may benefit from sales maximisation (personal recognition) or just from relaxing.
• Principal-agent problem: the principal sets the objectives (profit max) but the agent is in control of the work, and will have their own objectives e.g. relexation, revenue max).
• Other objectives: survival, market share, cost efficiency, return on investment, employee welfare, customer satisfaction, social objectives.