PROFIT MAXIMIZATION ME IIPM

“PROFIT MAXIMIZTION IS NOT THE MOST IMPORTANT OBJECTIVE”

Presented To :- M.E. Mam

Presented By :- Ajit Kumar

Kusum Lata
Nutan Sharma
Lovedeep
Roshan Pandey

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PROFIT MAXIMIZATION ME IIPM

Profit Maximization
Total Revenue—Total Cost

 Term in economics.
 It is the (short run) process.
 By this a firm determines the price and output level that returns the
greatest profit.
 There are several approaches to this problem.
 The total revenue–total cost method relies on the fact that profit equals
revenue minus cost.
 The marginal revenue-marginal cost method is based on the fact that
total profit in a perfectly competitive market reaches its maximum
point where marginal revenue equals marginal cost.

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Revenue :- Amount of money that a company

receives from its normal business
activities, usually from the sale of goods and
services

Total Cost :- Fixed cost & variable cost, combined, equal

total cost.
Fixed costs are incurred by the business
at any level of output, including zero output. These may include
equipment maintenance, rent, wages, and general upkeep.
Variable costs are change with the level
of output, increasing as more product is generated. Materials consumed
during production often have the largest impact on this category.

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Total Revenue-Total Cost Method :- Finding the profit-
maximizing output is as simple as finding the output at which profit reaches its
maximum. That is represented by output Q in the diagram.

Marginal Revenue- Marginal Cost Method :- If marginal

revenue is greater than marginal cost, marginal profit is positive, and if marginal
revenue is less than marginal cost, marginal profit is negative. When marginal
revenue equals marginal cost, marginal profit is zero (reach a maximum).

Total Revenue-Total Cost Method Marginal Revenue-Marginal Cost Method

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Importance Of Profit

 It is the forerunner goal of nearly every term, excluding gov. firms,

Australian banks and charities.

 Profit supplies the business with energy by supporting two basic functions:
marketing and innovation. Only a business action can create a customer, and
that means innovation, advertising, salesmanship, strategy, service, you name
it, and these business actions cost money which come from the difference
between buying low and selling high.

 The managers do this by increasing total revenue (TR) or reducing

total opportunity cost (TC) so that the difference rises to a maximum.

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Why profit maximization is not an appropriate goal for the firm?

 However, this does not mean that profit is the basic purpose of a business.
“Drucker” noted that the primary test of any business is not the maximization
of profit, but the achievement of sufficient profit to allow for the risks of the
financial activity of the business, and thus to avoid catastrophic loss leading to
failure.

 Profit is like oxygen for the human body. It is the right amount of oxygen that
the body needs. Too much oxygen can cause damage to cell membranes, the
collapse of the alveoli in the lungs, retinal detachment, and seizures. Too much
profit, without consideration of other elements in the business’s equation, can
cause problems just as too little profit. If the focus is solely on profit
maximization, the customer can be ignored or given secondary consideration.

 Bad thing for consumers as company starts to use cheaper products or decides
to raise prices.

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Other Objectives Of The Organization

 Business objectives are something which a business organization wants to
achieve or accomplish over a specified period of time. These may be to earn profit
for its growth and development, to provide quality goods to its customers, to
protect the environment etc.

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Purpose Of A Business

“is to create a customer”

Conclusion
Profit is needed but profit maximization is not only the purpose. It is bad
for society and hazardous to our organization’s health.
So Organization should concentrate on
-- creating customers for their product
-- and meeting shareholder expectations so as to
increase risky capital investment of the
shareholders.

This will be for the betterment of organization in long term………..

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DECLARATION

The Presentation has limitations that it has been made by group with a
limited Time and limited sources of information and for that its not a
full information but it’s a part.
It’s the best example for the presentation of profit maximization
and it has been made in April 2011

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