Posts tagged profit

Profit

Jan 13th

We need to understand this according to the syllabus:

Distinction between normal (zero) and supernormal (abnormal) profit
Profit maximization in terms of total revenue and total costs, and in terms of marginal
revenue and marginal cost
Profit maximization assumed to be the main goal of firms but other goals exist (sales volume maximization, revenue maximization, environmental concerns)

First review the difference between normal and supernormal (or abnormal) profit explained in this video by mjmfoodie:

Then, mjmfoodie also introduces us to profit maximisation “in terms of total revenue and total costs, and in terms of marginal revenue and marginal cost” (IB Economics syllabus):

The MC=MR is a golden rule which you really need to understand and remember. See it action in this fast-aced example by ACDCLeadership:

For a light hearted recap, SpongeBob Squarepants and Mr Crab discuss these principles (thanks to EdwardBahaw):

We must remember however, that profit maximisation is assumed to be the number one goal of firms. What about other goals?

Research / Discuss what other goals a firm might have – share them with others in your class.

Now, for each of the additional goals, discuss whether or not they in fact do in some way link to profict maximisation.

pajholden demonstrates that the profit maximising level can be different from output maximising level. Watch the video here:

objectives of firms

microeconomics, profit, theory of the firm

Output, Costs, Revenue and Profit

Feb 1st

Posted by James Penstone in Economics

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[Image: nDevilTV Some rights reserved]

The Cambridge IGCSE syllabus requires us to have a good understanding of the following:

define total and average cost, fixed and variable cost and perform simple calculations;

analyse particular situations to show changes in total and average cost as output changes;

define total and average revenue and perform simple calculations;

describe the principle of profit maximisation as a goal.

We have seen useful videos on YouTube before, particularly MJMFoodie’s very visual explanations (which are often aimed at higher stages of education, such as IB). One of her useful videos (on fixed and variable costs) is here:

Another useful video by MJMFoodie gives an introduction to the topic and explains the idea of the law of diminishing returns.

A great idea for a learning activity to really understand this topic is for you to work with one other person towards producing your own video, MJMFoodie style. It should be simple – create a PowerPoint (or similar) with images. These images can be your own that you have drawn on the computer, scanned into the computer, or other images produced by other people. It is obviously preferable to use images that are not copyrighted, so some good places to visit for non-copyright images are here:

http://www.everystockphoto.com/

http://search.creativecommons.org/

As you assemble your slideshow, make sure you are working on your script to go with each slide. Later on you will want to record your voiceover while playing the slideshow. In that case, planning the video out is essential and you should start with your partner by story-boarding the video.

Your video should summarise this theory on costs, revenue and profit as outlined in the syllabus above. It should summarise it in a highly visual and accessible way. Your video should ideally last somewhere between 5 and 10 minutes.

A good starting point is to consult the relevant chapter in the text book you are using. A good text book is this one, which introduces the idea using Sue’s Teddy Bear Firm.