revenue and profitz

Revenue	Revenue is the income that a firm receives from selling its products, goods and services, over a certain time period. (TR)- is the total amount of money that a firm receives from selling its products (ar)- is the revenue that a firm receives per unit of its sales. (MR)- is the extra revenue that a firm gains when it sells one more unit of a product in a given time period.
Basics	When PED is elastic an firm wishing to increase revenue should lower its price. When PED is inelastic any firm wishing to increase revenue should raise its price. When PED is unit elastic the firm should leave the price unchanged since revenue is being maximized.

Revenue and profit theory

Economists & Accountants	Profit = Total revenue minus total costs To an accountant total costs = fixed + variable cost Economic cost=explicit fixed costs + explicit variable costs +implicit costs
Profits	total revenue=total cost----- breaking even total revenue more then total cost----- profit total revenue less than total cost ----- making losses
Shut down price	The shut-down price is the level of price that enables a firm to cover its variable cost in the short run. Shut down price = P = AVC P less than AVC
Break even cost	The price at which a firm is able to make a normal profit in the long run. This means it will break even, covering all its cost, including opportunity cost (normal profit). Break even price = P = ATC
General graphs
The profit maximizing level of output	Mr=mc Tells the firm at which level of ouput produces the most profit
Firms and maximizing profit	• Revenue maximization: Entrepreneurs often measure success by the amount of revenue they make. • Growth Maximization: companies may set their target to achieve growth in the short run, rather than profits, in order to gain a large market share and then dominate the market in the long run. • Satisficing: They claim that what entrepreneurs do is “satisifice” (work hard enough to make a reasonable living [cover opportunity cost] but in most cases don’t push themselves further. • Corporate social responsibility (CSR): this is where a business includes “public interest” in it’s decision making. – Attract and keep a better workforce – Build reputation and develop brand loyalty – Reduce the need for government intervention in business activities. bad – Some adopt CSR approach to take attention away from their main (demerit) good products.