Definition
- Profit maximisation
- Profit maximisation is producing the quantity of output at which total revenue exceeds total cost by the largest amount.
- Not to be confused with: Satisficing
- Satisficing is aiming for a result that is good enough to keep the firm's owners and other groups content, rather than the largest profit possible.
Example
Can you think of one organisation that is not trying to make the most profit, and say what it aims for instead?
An NHS hospital is in the public sector: it treats patients free at the point of use and is judged on waiting times and outcomes, not profit. A food bank run by a charity aims to feed as many families as its donations allow. A new streaming service may run at a loss for years to grow its subscriber base. A local bakery may simply satisfice.
Test yourself
What is the difference between profit maximisation and satisficing?
Profit maximisation seeks the most profit available; satisficing settles for enough profit and trades the rest for other aims.