Revenue and sales maximisation
Maximising sales revenue is an alternative to
profit maximisation and
occurs when the marginal revenue, MR, from selling an extra unit is zero.
The condition for revenue maximisation is, therefore, to produce .
The condition for revenue maximisation is, therefore, to produceup to the point where MR = 0
.This is also at the same level of output where PED = 1, namely at the mid-point of the average revenue/demand curve.
Sales maximisation is another possible goal and occurs when the firm sells as much as possible without making a loss.
Not-for-profit organisations may choose to operate at this level of output, as may profit making firms faced with certain situations, or employing certain strategies. An example of this would be predatory pricing where, so long as costs are covered, a firm may reduce price to drive rivals out of the market.
Sales maximisation graph
Sales maximisation means achieving the highest possible sales volume, without making a loss. To the right of Q, the firm will make a loss, and to the left of Q sales are not maximised.