How Companies Maximize Profits

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Every company aims at maximizing its profit. This can be achieved by maintaining quality of services and goods, providing appropriate supply, and analysing consumers’ demands. However, there are number of economic factors that hinder this operation. These factors are government regulations, rate of interest, exchange rate, trade cycles, general price level, employment and income, economic growth, and supply and demand.
Economics consists of macroeconomics and microeconomics. The former analyses national economy and offers knowledge about the business environment (Samuelson & Nordhaus 2010, p.5). Macroeconomics centres on the overall economy rather than the fine specifics (Arnold 2011, p.). Here, there are a number of models that explain the relationship between international finance, international trade, investment, savings, inflation, unemployment, consumption, output, and national income. Trade cycles cause fluctuations in costs of services or goods. These cycles include recovery, depression, recession, and prosperity. The managing director will have to consider aspects such as deflation and inflation and macroeconomic policy (fiscal and monetary) to run the company efficiently. For instance, banking facilitates fiscal and monetary policies that affect consumers and businesses as well; that is, the policies influence inflation and economic activities (Arnold 2011, p.252).
The latter examines the market behavior of firms and individual consumers in order to understand the
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