Photo AI
'Revenue maximisation is a more realistic business objective than profit maximisation for many businesses.' To what extent do you agree with this statement? Refer to an industry of your choice in your answer. - Edexcel - A-Level Economics A - Question 8 - 2017 - Paper 1
Question 8
'Revenue maximisation is a more realistic business objective than profit maximisation for many businesses.' To what extent do you agree with this statement? Refer to... show full transcript
Worked Solution & Example Answer:'Revenue maximisation is a more realistic business objective than profit maximisation for many businesses.' To what extent do you agree with this statement? Refer to an industry of your choice in your answer. - Edexcel - A-Level Economics A - Question 8 - 2017 - Paper 1
Step 1
Explanation of Revenue Maximisation
Answer
Revenue maximisation refers to the strategy of increasing total revenue without regard to the costs involved. This can be illustrated by the output position where marginal revenue (MR) equals zero (MR=0). In this position, businesses focus on maximizing their sales volume, which can often lead to increased market share and reduced competition.
Step 2
Contextual Industry Reference
Answer
For example, in the retail industry, particularly supermarkets, revenue maximisation can be crucial as it leads to greater visibility and potential long-term success. Large supermarkets often benefit from economies of scale and can afford to operate on thinner profit margins while still maximising revenue.
Step 3
Step 4
Counter-Arguments for Profit Maximisation
Answer
Profit maximisation may be preferred in smaller firms where ownership is closely held, allowing for direct control over decisions. Smaller businesses might focus on actual profits rather than just revenue to ensure sustainability and avoid cash flow constraints.
Step 5