Business profit maximization theory pdf

Shareholders wealth maximization criterion proposes that a business concern should only consider the decisions that maximize the market value of the share or the shareholders wealth. In modern managerial economics business decision making by managers are guided by the objective of maximising value of the firm. The social responsibility of business is to increase its profits friedman, 1970. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Profit maximization is the process companies use to determine the optimal level of sales to achieve the highest profit. To find our point of maximum profit, we need to keep selling until the cost. Pdf several objectives have been proffered for decision making in a. More than 200 years ago he wrote in his theory, the theory of invisible. The objective of the firm is to maximise its profits where profits are the difference between the firms revenue and costs. Pdf profit maximisation as an objective of a firma robust.

Pdf profit maximisation as an objective of a firm a robust. The firm maximises its profits when it satisfies the two rules. The implication of profit maximization in the economic theory lies in. The theory attempts to draw a conceptual framework to better understand the objectives and strategies of corporations operating in a competitive marketplace. Corporate social responsibilities theories and related approaches. The profit maximisation theory is based on the following assumptions. Economic theory normally uses the profit maximization assumption in studying the firm just as it uses the utility maximization assumption for the individual consumer. According to conventional economists, profit maximization is the only objective of organizations. Profit maximization is the most important assumption used by economists to formulate various economic theories, such as price and production theories. The profit maximization rule applies both to firms that are able to sell their product at a constant price and to firms that find they must reduce the price of their product to increase sales. The market value of share is treated as an indicator of efficiency and effectiveness of the firm.

Among the multiplicity of objectives that a modern firm. Sales maximization theory is based on the work of american economist william jack baumol. This approach is taken to satisfy the need for a simple objective for the firm. A profitmaximizing firm will produce more output when marginal revenue is more than. Total revenue simply means the total amount of money that the firm receives from sales of its product or other sources. In accordance to the manual for monitoring and evaluating of csr there is a.

The concept of profit maximization profit is defined as total revenue minus total cost. They are the real owners of the company and not the society. Pdf to stay competitive by creating higher value for consumers firms are in. In the neoclassical theory of the firm, the main objective of a business firm is profit maximisation. It is regarded as the most reasonable and productive business objective of an. Objective, business, profit maximization, decision making, efficiency.

Tastes and habits of consumers are given and constant. Profit maximization theory and value maximization theory ijsdr. If their well being is not taken care of, then the company seizes to exist. In section 1, i examine the concept of business behavior including.