Key Diagrams - Sales Maximisation as a Business Objective

In this short video we work through an analysis diagram to show growth maximisation as a business objective.

Growth maximisation occurs when AR=AC (or Price = AC). At this output and price, the firm is achieving normal profits and it is the highest output consistent with this minimum requirement.

Growth maximisation often means lower prices for consumers in the short run – and we can show in an analysis diagram by labelling the area of consumer surplus. But it might also be a tactic to increase a firm’s market share which will then give them greater monopoly pricing power in the long run.