ADMS 2200 Lecture Notes - Lecture 9: Profit Maximization, Profit Margin, Marginal Revenue

• School: York University
• Department: Administrative Studies
• Course: ADMS 2200
• Professor: Alexander Rusetski

Document Summary

Pricing objectives vary from firm to firm, and they can be classified into four major groups: (1) profitability objectives, (2) volume objectives, (3) meeting competition objectives, and (4) prestige objectives. Not-for-profit organizations, as well, must consider objectives of one kind or another when developing pricing strategies. Consumers must be convinced they are receiving good value for their money. Intense competition results from competition for leadership position. Marketers at for-profit firms must set prices with profits in mind. Even not-for-profit organizations realize the importance of setting prices high enough to cover expenses and provide a financial cushion to cover unforeseen needs and expenses. Economic theory is based on two major assumptions. It assumes, first, that firms will behave rationally and, second, that this rational behaviour will result in an effort to maximize gains and minimize losses. Some marketers estimate profits by looking at historical sales data; others use elaborate calculations based on predicted future sales.