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Study notes

Sales Revenue Maximisation

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

The objective of maximising sales revenue rather than profits was developed by economist William Baumol whose work focused on the decisions of manager-controlled businesses.

Maximising total revenue - revision video

His research found that annual salaries and perks were more closely linked to sales revenue rather than operating profits

Companies geared towards maximising revenue are likely to make frequent use of price discrimination to extract extra revenue and marginal profit from consumers

A business might also aim to maximise sales revenue rather than profits because it wishes to deter the profitable entry of new firms / rivals into an industry

If a firm decides to aim to maximise sales revenue rather than profits, one consequence can be a reduction in the price of the firm’s shares since operating profit is likely to be lower

Analysis diagram to show price and output hen a firm maximises sales revenue

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