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Satisficing & Profitability Factors
The document discusses different objectives that firms may pursue such as normal profit, revenue maximization, and profit maximization. It also explains the concept of "satisficing" where firms aim for an acceptable level of profits rather than maximizing profits. Finally, it analyzes Stagecoach Group Plc, the largest bus operator in the UK, and discusses factors that are important for its profitability both internally such as costs and productivity, and externally such as demand, substitutes, and competitors.
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Introduction to microeconomics; firms' objectives include satisficing and profit maximization vs revenue maximization. Exploration of satisficing concept in pricing and cost structure; how firms balance profit and sustainable pricing.
Analysis of Stagecoach Plcs profitability importance including investment, expansion funding, and investor attraction.
Identification of internal and external factors impacting profitability including costs, demand, and competition.
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- 1. A2 Microeconomics -Tutor2u Satisficing & Profitability Factors
- 2. Alternative Objectives forFirms – Normal Profit Only Costs & Revenue MC AC AR MR Normal Profit where AR = AC Output
- 3. Alternative Objective: RevenueMaximisation Costs & Revenue Revenue Max: MR=0 MC AC AR Profit Max: MC=MR MR Output
- 4. Alternative Objective: RevenueMaximisation Costs & Revenue Revenue Max: MR=0 MC P1 AC AR Profit Max: MC=MR MR Output
- 5. Alternative Objective: RevenueMaximisation Costs & Revenue Revenue Max: MR=0 MC P1 AC C1 AR Profit Max: MC=MR MR Output
- 6. Alternative Objective: RevenueMaximisation Cost & Revenue Revenue Max: MR=0 MC P1 AC C1 AR Profit Max: MC=MR MR Output
- 7. Motivations for RevenueMaximisation rather than Profit Max Protecting Market Position Business survival Managerial Objectives Breaking into a new Market
- 8. What is Satisficing?Why do many businesses satisfice? Price and Cost MC AC AR Profit Max: MC=MR MR Output
- 9. What is Satisficing?Why do many businesses satisfice? Price and Cost MC P1 AC AR Profit Max: MC=MR Q1 MR Output
- 10. What is Satisficing?Why do many businesses satisfice? Price and Cost Possible satisficing price MC P1 AC P2 AR Q1 Q2 MR Output
- 11. What is Satisficing?Why do many businesses satisfice? Price and Cost Possible satisficing price MC P1 AC P2 C2 AR Q1 Q2 MR Output
- 12. What is Satisficing?Why do many businesses satisfice? Price and Cost Possible satisficing price MC P1 AC P2 C2 AR Q1 Q2 MR Output
- 13. Evaluating the Importanceof Profit – Stagecoach Group Plc Largest UK bus operator by revenue and fleet The Group has around 20% of the UK Bus market excluding London, it has 14% of the London bus transport market One of the UK’s biggest train operators, including 49% stake in Virgin Trains Annual revenues of £2.8bn, carrying around 2.5 million passengers daily in the UK Main rivals are Go-Ahead Group, First Group and National Express
- 14. Evaluating the Importanceof Profit – Stagecoach Plc Why are profits important for a business such as Stagecoach plc? 1 It generates finance for investment in new capital 2 Creates finance for advertising and expansion 3 It attracts new investors into the business 4 It creates rewards for employees and shareholders
- 15. Factors Affecting Profitabilityof Stagecoach plc Internal Cost / Revenue factors Cost of Fuel Cost of labour Internal to the business Productivity Cost of capital
- 16. Factors Affecting Profitabilityof Stagecoach plc Internal Cost / Revenue factors External Cost / Revenue factors Cost of Fuel Demand for coach/bus travel Cost of labour Internal to the business Productivity Cost of capital Substitutes available External factors Legal Costs Competitor Actions
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