3.2.1 Revenue Maximisation (Edexcel A-Level Economics Teaching PowerPoint)
Last updated 28 Aug 2023
Here is a simple, editable PowerPoint covering the content of Unit 3.1.2 on Revenue Maximisation as a business objective.
Revenues are maximised at an output level where marginal revenue = zero (MR=0)
Marginal revenue is the change in total revenue from selling an extra unit
The coefficient of price elasticity of demand when revenue is maximised is unity (1)
Revenue maximisation occurs halfway down a linear (straight-line)n demand curve.
Main business motivations for choosing revenue maximisation as a key objective
- Market Penetration and Expansion: In the early stages of a business or when entering a new market, focusing on revenue can help the company gain market share, build brand recognition, and establish a customer base.
- Costs: Higher output and revenue may enable the business to achieve economies of scale and enhance competitiveness over the long term.
- Attracting Investors and Financing: Businesses with strong revenue growth can be more attractive to investors and lenders
- Business Valuation and Exit Strategies: Businesses aiming to be acquired might focus on revenue growth to enhance their valuation
- Business Survival: Cutting prices to increase revenue and improve cash-flow can be an important way of surviving in an economic downturn.
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