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Introduction

What is the major objective of an organisation? The concept of profit maximisation has survived for many as the major objective for an organisation for a long period. Is this still true in modern business today? Most large firms are being run and operated by management instead of the owners, how they manage the firm? Still maximising the profit, maximising sales turnover or something else?

In this essay, I will briefly outline the key points underpinning the economics of a profit maximising firm and evaluate the management model of Baumol (1959) on sales revenue maximisation to examine the modern management’s behaviour.

Profit maximisation

The neoclassical model of profit maximisation was first aroused from classical economist, Adam Smith (1776), who believed that the markets would settle on a position of natural equilibrium. He claimed based on this, the organisations will do all in their power to gain maximum benefit for themselves.

In economics,......

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Approximate Word Count: 1628
Approximate Pages: 7 (250 words per double-spaced page)

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