Profit maximisation 1


With the development of science and technology and the extension of online users, e-commerce platforms gradually and effectively gather social resources such as manpower, technology, production, and capital. More and more traditional enterprises combine online and offline business as their operation and trade methods. E-commerce, as a new channel, has become one of the main transaction modes in the society.

Under the background of reform of the supply side, and with the high-speed development of E-commerce, we will promote stock adjustment through incremental reform and optimize the structure of investment and financing in the process of increasing investment of e-commerce enterprises.

High-quality products and diverse trading experience are the new development pattern in e-commerce. There are different profit maximization strategies for e-commerce enterprises when they face different economic situations. Besides, cross-border business is an advised way to expand business when the enterprise is under bigger profit.

Finally, the e-commerce enterprise profit maximization will come true. The business development model developed from traditional offline physical stores to online shopping malls, and the economic market began to expand. Some e-commerce enterprises have gradually formed their own profit model, but some have not yet formed a stable profit model [ 12 ]. Although most of the domestic e-commerce enterprises are also developing rapidly, and several of them have successfully listed on the stock market, it can be seen from the financial reports and market survey reports that these enterprises have not achieved sustained profitability or low profitability.

As the profit subject, the ultimate goal of the development and operation of an enterprise is to maximize its profits. Although different types of enterprises have different profit models, they all follow the most basic profit formula, that is, profit increment equals the capital acquired by the enterprise minus the capital expended [ 3 ]. Through supply-side reform, China will lead the improvement of the level of demand.

And, based on this background conducted by the government, the relationship between e-commerce and supply-side reform has become the focus of the development of the e-commerce industry [ 4 ]. Supply-side reform provides new ideas and new models for economic development; there are four elements: labor, land, capital, and innovation, which correspond to the need.

12 Tips to Maximize Profits in Business

Figure 1 illustrates the connection of supply and demand [ 5 ]. The shortage of demand is only the appearance, and the mismatch of supply and demand is the essence.

Therefore, supply-side reform is aimed at adjusting the economic structure to achieve optimal allocation of factors and improving the quality and quantity stellaris a lost robot event economic growth [ 6 ]. Supply-side reform of our country moderately expand aggregate demand, and at the same time, production capacity and inventory, deleveraging, cost reduction, and short-board improvement are proceeding from strengthening the supply of high quality, reducing the invalid supply, expanding the effective supply, improving the supply structure adaptability and flexibility, improving the total factor productivity, and making the supply system to better adapt to the demand structure changes [ 7 ].

Based on the economic growth theory and new supply of the existing research results of the respect, such as economics, we must demand the raw power. Clear supply for demand response mechanisms is the key driving force of the development of the productivity level-up type contribution. The decisive factors affecting the long-term economic growth are summarized as six elements of the supply-side. Based on the supply side, the elements are labor, land and natural resources, capital, science and technology innovation, system including managementand data [ 89 ].

The six elements form a set of functions of economic growth, and the theoretical model can be expressed in the following formula:.

In which, represents economic growth, represents labor, is land and deequ pyspark resources, is capital, is scientific innovation, represents system, and means data and information [ 10 ]. Generally, in the early stages of economic growth, labor, land, and capital are the most obvious factors, the main elements of the economy entering the middle-income stage, science and technology innovation and system would show a great potential and important value of hedge support at the first three factors of landslide and even become the main contribution of the total factor productivity factors.

And the most important is, with the development of the Internet and technology transformation, data and information are inevitable [ 11 ]. The essence of informatization is networking and data flow.

To release the efficiency of informatization, we must rely on the network to make the data resource flow fully in a larger range [ 1213 ]. In different stages of economic development, the relative contributions of the six elements are also different. And these different elements are combined with each other [ 14 ]. The situation, to a great extent, affects and decides the economic growth situation and its comprehensive benefits from the perspective of production; the supply-side reform will lead to the rise of the proportion of tertiary industry, the decline of the proportion of traditional industries, and the rise of emerging industries in the secondary industry.

And from the perspective of the income, supply-side reforms will lead to the redistribution of the economy, which means that tax cuts will be led to the decrease of the net production taxes accounted [ 15 ]. Besides, accelerated depreciation and the capacity to change will lead to the depreciation of fixed assets of higher than short-term. What is more, reducing the cost and capacity will lead to the rise of enterprises operating surplus accounted, and the accelerating labor cross-regional, cross-sectoral circulation, and improving human capital will definitely lead to the raise of worker pay.A perfectly competitive firm has only one major decision to make—namely, what quantity to produce.

To understand why this is so, consider the basic definition of profit :. Rather, the perfectly competitive firm can choose to sell any quantity of output at exactly the same price. This implies that the firm faces a perfectly elastic demand curve for its product: buyers are willing to buy any number of units of output from the firm at the market price. A perfectly competitive firm can sell as large a quantity as it wishes, as long as it accepts the prevailing market price.

Total revenue is going to increase as the firm sells more, depending on the price of the product and the number of units sold. If you increase the number of units sold at a given price, then total revenue will increase.

If the price of the product increases for every unit sold, then total revenue also increases. Total revenue and total costs for the raspberry farm are shown in Table 1 and also appear in Figure 1. In Figure 1, the horizontal axis shows the quantity of frozen raspberries produced. The vertical axis shows both total revenue and total costs, measured in dollars. The total cost curve intersects with the vertical axis at a value that shows the level of fixed costs, and then slopes upward, first at a decreasing rate, then at an increasing rate.

In other words, the cost curves for a perfectly competitive firm have the same characteristics as the curves that we covered in the previous module on production and costs. Figure 1. Total revenue for a perfectly competitive firm is an upward sloping straight line. The slope is equal to the price of the good. Total cost also slopes up, but with some curvature. At higher levels of output, total cost begins to slope upward more steeply because of diminishing marginal returns.

Graphically, profit is the vertical distance between the total revenue curve and the total cost curve. This is shown as the smaller, downward-curving line at the bottom of the graph.

The maximum profit will occur at the quantity where the difference between total revenue and total cost is largest. Based on its total revenue and total cost curves, a perfectly competitive firm like the raspberry farm can calculate the quantity of output that will provide the highest level of profit.

At any given quantity, total revenue minus total cost will equal profit. One way to determine the most profitable quantity to produce is to see at what quantity total revenue exceeds total cost by the largest amount. Figure 1 shows total revenue, total cost and profit using the data from Table 1.

The difference is 75, which is the height of the profit curve at that output level. In this example, total costs will exceed total revenues at output levels from 0 to approximately 30, and so over this range of output, the firm will be making losses. At output levels from 40 tototal revenues exceed total costs, so the firm is earning profits. However, at any output greater thantotal costs again exceed total revenues and the firm is making increasing losses. Total profits appear in the final column of Table 1.

A higher price would mean that total revenue would be higher for every quantity sold. Graphically, the total revenue curve would be steeper, reflecting the higher price as the steeper slope. A lower price would flatten the total revenue curve, meaning that total revenue would be lower for every quantity sold.

What happens if the price drops low enough so that the total revenue line is completely below the total cost curve; that is, at every level of output, total costs are higher than total revenues? In this instance, the best the firm can do is to suffer losses. However, a profit-maximizing firm will prefer the quantity of output where total revenues come closest to total costs and thus where the losses are smallest.Marginal profit is the profit earned by a firm or individual when one additional or marginal unit is produced and sold.

Marginal refers to the added cost or profit earned with producing the next unit. Marginal product is the additional revenue earned while the marginal cost is the added cost for producing one additional unit.

Marginal profit is the difference between marginal cost and marginal product also known as marginal revenue. Marginal profit analysis is useful for managers because it aids in deciding whether to expand production or to slow down stop production altogether, a moment known as a shutdown point.

Under mainstream economic theory, a company will maximize its overall profits when marginal cost equals marginal revenue, or when marginal profit is exactly zero. Marginal profit is different from average profit, net profit, and other measures of profitability in that it looks at the money to be made on producing one additional unit.

It accounts for the scale of production because as a firm gets larger, its cost structure changes, and, depending on economies of scale, profitability can either increase or decrease as production ramps up. Economies of scale refer to the situation where marginal profit increases as the scale of production is increased.

At a certain point, the marginal profit will become zero and then turn negative as scale increases beyond its intended capacity. At this point, the firm experiences diseconomies of scale. Companies will thus tend to increase production until marginal cost equals marginal product, which is when marginal profit equals zero. In other words, when marginal cost and marginal product revenue is zero, there's no additional profit earned for producing an added unit.

If the marginal profit of a firm turns negative, its management may decide to scale back production, halt production temporarily, or abandon the business altogether if it appears that positive marginal profits will not return. Marginal cost MCMC is the cost to produce one additional unit, and marginal revenue MR is the revenue earned to produce one additional unit. If a firm cannot compete on cost and operates at a marginal loss negative marginal profitit will eventually cease production.

Profit maximization for a firm occurs, therefore, when it produces up to a level where marginal cost equals marginal revenue, and the marginal profit is zero. It is important to note that marginal profit only provides the profit earned from producing one additional item, and not the overall profitability of a firm. In other words, a firm should stop production at the level where producing one more unit begins to reduce overall profitability.

Variables that contribute to marginal cost include:. Fixed costsor sunk costsshould not be included in the calculation of marginal profit since these one-time expenses do not change or alter the profitability of producing the very next unit.If you're seeing this message, it means we're having trouble loading external resources on our website.

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Profit maximization worked example. Practice: Profit maximization. Next lesson. Current timeTotal duration Google Classroom Facebook Twitter. Video transcript - [Instructor] We've spent several videos talking about the costs of a firm. And in particular, we've thought about how marginal cost is driven by quantity and how average total cost is driven by quantity, and we think about other average costs as well. Now, in this video, we're going to extend that analysis by starting to think about profit.

Now, profit, you are probably already familiar with the term. But one way to think about it, very generally, it's how much a firm brings in, you could consider that its revenue, minus its costs, minus its costs. And a rational firm will want to maximize its profit. And so to understand how a firm might go about maximizing its profit or what quantity it would need to produce to maximize its profit based on this, on its cost structure, we have to introduce revenue into this model here.

And in particular, we are going to introduce the idea of marginal revenue. And we're going to assume that this firm is in a very competitive market, and so it is a price-taker. So regardless of how much this firm produces, the incremental revenue per unit of what it produces, maybe this is a doughnut company, the incremental amount per doughnut is going to stay the same regardless of how much this firm in particular produces.

So let's say that the marginal revenue in this industry, in this market, is right over here. So one way to think about it is this would be the unit price in that market.

So let me put that right over there, marginal revenue. Once again, for every incremental unit, how much revenue you're going to get, so it would just be the price of that unit. So how much would a rational firm produce in order to maximize its profit? If the marginal revenue is higher than the marginal cost, well, that means every incremental unit it produces, it's going to bring in some net money into the door.

Profit Maximisation 1

So it's rational for it to do it. So it would keep producing, keep producing, keep producing, keep producing.

Now, it gets interesting as the marginal cost starts to approach the marginal revenue. As long as the marginal revenue is higher than the marginal cost, it's rational for the firm to produce. But right at that unit where the marginal cost is equal to the marginal revenue, well, there, on that incremental unit, the firm just breaks even at least on the margin. It might be able to utilize some of its fixed costs a little bit. But then, after that point, it makes no sense at all for it to keep producing.Section C 4 of the Performance Management syllabus deals with pricing decisions and this topic can be conveniently divided into two parts:.

This article deals with the theoretical aspects of pricing and a second article deals with practical pricing. Demand curves show the relationship between the price per unit of a product, P, and the quantity of units sold, Q. In your exam you will be dealing with demand curves which are simplified and which can be represented by straight rather than curved lines.

They are always drawn with Q on the horizontal axis and P on the vertical axis. For example, here is a table showing price and quantity and the corresponding demand curve:. The demand line slopes downwards showing that as the price decreases the quantity sold increases. On the left-hand part of the revenue curve, as the selling prices fall from toto etc and quantity sold rises from 1, to 2, to 3, revenue increases: the increases in quantity outweigh the decreases in price. In this area, demand is said to be elastic as a relatively small proportional decrease in price causes a relatively large proportional increase in volume and so revenue increases.

On the right-hand part of the revenue curve, as the selling prices fall from 80 to 60, to 40 etc and quantity sold rises from 5, to 6, to 7, revenue decreases: the increases in quantity are outweighed the decreases in price being applied to all units.

In this area, demand is said to be inelastic as a decrease in price causes a relatively small increase in volume and so revenue decreases. If the price elasticity of demand is greater than 1 then demand is elastic.

This is so on the left-hand part of the revenue curve. If the price elasticity of demand is greater than one then a drop in price is more than compensated by the increase in volume and revenue increases.

If the price elasticity of demand is less than 1 then demand is inelastic. This is so on the right-hand part of the revenue curve. If the price elasticity of demand is less than one then a drop in price is not compensated by the increase in volume and revenue decreases. If the elasticity of demand is exactly 1 then any change in price is precisely compensated for Qbic hotel london an increase in volume and the revenue stays constant.

This is what is happening at the small section at the very top the revenue curve. Where the line changes from increasing to decreasing. Associated with the elasticity of demand is the concept of marginal revenue, which is the change in revenue when one extra unit is sold. If figures for one extra unit are unavailable the marginal revenue for say 10, or 1, extra units can be used instead.

If you look again at nandos font generator revenue curve, you can see that on its left side, revenue is increasing as more units are sold.

The marginal revenues will be positive here. At the earlier, steep part of the curve, revenue is increasing quickly as each extra 1, units are sold: marginal revenue will be high. The steepness declines as you move along the curve until at the top the marginal revenue will be zero no change in revenue then the revenue line starts to fall meaning that for each 1, units revenue decreases and marginal revenue is negative.

The marginal revenue is obtained by calculating the increase in revenue for each increment in volume.Abstract : As the demand for mobile data services increases, telecom companies need to develop wise strategies to retain existing customers. For instance, in a multicast scenario, satisfying individual user's quality of service QoSdata demand at varying rates, etc. Earlier works on device-to-device D2D multicast have majorly discussed the cases of throughput maximisation without considering the individual user's data request rates.

In this paper, we propose two algorithms to maximise the telecom operator's profit collected from the users in a two-hop D2D multicast network, when users have different channel qualities and data request rates while receiving multicast data through a single transmission session. First, we model our multicast scheme for the proposed scenario as a budgeted maximum coverage problem.

Numerical results show that the proposed algorithms perform better than the other candidate algorithms and nearly approximates the optimal solution. DOI : Keywords : mobile data; multicast; approximation algorithm; device-to-device; D2D.Most users should sign in with their email address.

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It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide. Sign In or Create an Account. Sign In. Advanced Search. Search Menu. Article Navigation. Close mobile search navigation Article Navigation. Volume A Note on Profit Maximisation and its Implications.

Stillwater, Oklahoma. Oxford Academic. Google Scholar. Cite Cite T. Select Format Select format. Permissions Icon Permissions. Article PDF first page preview. Issue Section:. You do not currently have access to this article. Download all slides. Sign in Don't already have an Oxford Academic account? You could not be signed in. Sign In Forgot password? Don't have an account? Sign in via your Institution Sign in.

Purchase Subscription prices and ordering for this journal Short-term Access To purchase short term access, please sign in to your Oxford Academic account above. This article is also available for rental through DeepDyve. View Metrics. In economics, profit maximization is the short run or long run process by. One way to determine the most profitable quantity to produce is to see at what quantity total revenue exceeds total cost by the largest amount.

Figure 1 shows. One instance is that of discrimination, in which firms are interested in maximizing some function not only of profits but of other variables such as race or. This logic is illustrated in Figure "Profit-maximizing labor input". In particular, when the wage is w 1, the entrepreneur earns higher profit with. o Marginal revenue -- revenue gained by selling one additional unit.

Profit Maximization in Perfect Competition No one firm can influence price. The firm's problem then is to maximize profits by choice of x1 - the amount of input 1 to be hired. Notice that the firm cannot choose anything else here. 1. PROFIT MAXIMIZATION. [See Chap 11]. 2. Profit Maximization. • A profit-maximizing firm chooses both its inputs and its outputs with the goal of.

The vast majority of SMEs are profitable businesses with 80% of UK SMEs reporting making a profit in [1] – but how many of them are.

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When all commodities except one are natural inputs we have the familiar single-output case. Then the production function for the production set Z can be defined. A PRIMER ON PROFIT MAXIMIZATION. Robert Carbaugh.

Detailed Solution

1 and Tyler Prante order condition for profit maximization (marginal revenue equals marginal cost) for. in the economy, and thus provide the heterogeneity in the business culture. The existence of the uniformity property in managerial utility functions is one.

1 Cf. R. A. Gordon, 'Short Period Price Determination in Theory and Practice', profit maximization is one which is consistent with utility maximization. Let us take a look at the economics of profit maximisation. 1] MR=MC. As long as the cost of producing another unit remains less than the revenue. Profit Maximisation must be one of the most elusive, 11l-defined concepts in modern economics.

1). The entrepreneur is also the owner of the firm. The Geometry of Profit-Maximization The key goal for a perfectly competitive firm in maximizing its profits is to calculate the optimal level of output. Determining Profit Maximizing Level of Production -- Marginal Cost and Since no one will pay us an infinite price for our product, MC will equal MR at a. Making Profits · Profit Maximization: The Case of Losses · Perfect Competition: The Firm's Supply Curve REPLACE To maximize its profit, Beautiful Cars chooses a point on its demand Figure 1 The profit-maximizing choice of price and quantity for Beautiful Cars.

In the table quantity Q is increasing from 1 to 7. Marginal revenue (MR) is constant at 5 since the firm is under perfect competition (already told in the. If there are any outputs satisfing these three conditions, the one that has the highest profit is the optimal output for the monopolist.