Economics Year 13 revision Day 4 - Revenue and profit
On day 4 of the Year 13 recap we switch our attention to the distinction between revenue and profit.
When multiplying the price of a product and the quantity sold we get the total sales revenue raised from selling a product.
When this figure is offset against the costs of making those products, this determines the profitability of the product range. Firms need to raise profits to reinvest into their business and make innovative changes to the production process and product range. We define this level of profit as the supernormal profit earned by the firm. The point at which the firm profit maximises is when the difference between the firm’s total revenue and total costs are at its greatest level. Being comfortable with some of the terminology regarding revenue and profit provides you with the analytical framework to evaluate and contrast different market structures in an exam context.
Here Jack guides you through the revision slide on revenue and profit:
