When economic agents choose other aims
| English | 中文 | Pinyin |
|---|---|---|
| revenue maximization/ˈrevənjuː ˌmæksɪmaɪˈzeɪʃn/ | 收入最大化 | shōu rù zuì dà huà |
| profit maximization/ˈprɒfɪt ˌmæksɪmaɪˈzeɪʃn/ | 利润最大化 | lì rùn zuì dà huà |
A decision you can investigate
- A learner buys a familiar snack despite preferring a cheaper alternative in a blind taste test.
- A repair shop keeps an unprofitable emergency service because it wants to help customers.
Build the explanation
- The standard consumer assumption is choosing the greatest benefit within available resources. Poor calculation, habits and copying others can lead to different choices.
- The standard business assumption is maximum profit, not maximum sales or revenue. Sales maximization seeks the greatest quantity sold; revenue maximization 收入最大化 seeks the greatest price × quantity. Managers may seek revenue, owners may value customer care, and an enterprise may perform charitable work.
Work through the evidence
- Plan A earns revenue 1200 yuan and costs 900: profit = revenue − cost = 300 yuan. Plan B earns revenue 1500 and costs 1300: profit = 200 yuan.
- Revenue maximization favours B; profit maximization 利润最大化 favours A if these are the only plans. An owner might still choose B for a stated service aim, but that is a different objective.
Which plan has the higher profit?
Profit deducts costs. A earns 300; B earns 200.
Test the limits
- Habit is an explanation to investigate, not proof that every familiar choice is irrational: convenience or reliability may produce a real benefit.
- A charitable aim does not remove the need to pay costs. Separate the intended aim from whether the business can sustain it.
Which observation most directly supports imitation?
Copying a peer group is imitation; the other observations do not establish it.
The plan with the highest revenue must also have the highest profit.
Plan B has higher revenue but its higher costs leave lower profit than A.
Apply and explain your answer
- Which plan maximizes revenue, and which maximizes profit?
- B maximizes revenue; A maximizes profit among the two available plans.
Why can a revenue target differ from a profit target?
The additional costs can outweigh additional revenue.
Use the terms precisely
- revenue maximization: Choosing the greatest total sales revenue among available options.
- profit maximization: Choosing the greatest excess of total revenue over total cost.
Match the terms to their meanings.
Each term describes a specific mechanism in this lesson.
Plan A earns revenue 1200 yuan and costs 900: profit = revenue − cost = 300 yuan. Plan B earns revenue 1500 and costs 1300: profit = 200 yuan. Revenue maximization favours B; profit maximization favours A if these are the only plans. An owner might still choose B for a stated service aim, but that is a different objective.
Habit is an explanation to investigate, not proof that every familiar choice is irrational: convenience or reliability may produce a real benefit. A charitable aim does not remove the need to pay costs. Separate the intended aim from whether the business can sustain it.
The standard consumer assumption is choosing the greatest benefit within available resources. Poor calculation, habits and copying others can lead to different choices.