Economic Objectives of Indiviuduals, Firms and Government
1061 WordsFeb 12, 20135 Pages
The economic objectives of individuals, firms and government.
Economic Objectives of Firms
Profit maximization is the process of obtaining the highest possible level of profit through the production and sale of goods and services. Profit is the difference between the total revenue a firm receives from selling output and the total cost of producing that output. Profit-maximization means that a firm seeks the production level that generates the greatest difference between total revenue and total cost.
In many firms separation of ownership and control is present as the shareholders who run the company often hardly ever get involved in the day to day running of the firm. However this…show more content…
There is also the less obvious cost of the loss of income tax revenues the worker would have paid for if they were in work. These workers would have been paying VAT as well through their purchases. Put together, some economists have estimated that the cost to taxpayers of each unemployed person is up to £9,000 a year.
Some would say that the main reason why the control of inflation is so important is that if inflation gets out of control, the economy stops growing. If inflation rises, the Monetary Policy Committee (MPC) is forced to raise interest rates. Consumers will stop borrowing to spend and firms will stop borrowing to invest. The housing market will slump, and along with it all the home improvement consumption that goes with it. Manufacturer’s exports will become less competitive. The economy may well drop into a recession.
Economic Objectives of individuals
On the whole in economics we make the assumption that employees are interested in maximising the wages that they earn. In reality this may be a simplistic approach and it is recognised that workers will be interested not just in the pay, but also the working conditions, the perks, holidays and the nature of the job itself. However in economics we assume that