Revenue, profit and what firms aim for Edexcel International GCSE Business revision
Not started
Learn it
In plain words
Revenue is the money that comes in from sales. It is not profit. Profit is what is left after the costs have been paid.
Most firms want as much profit as they can make, but not all of them, and not all of the time.
4 things to know
- Total revenue (TR) = price × quantity sold.
- Average revenue (AR) = total revenue ÷ quantity sold. It is the same as the price.
- Profit = total revenue − total cost. If total cost is the larger, the firm makes a loss.
- Objectives of firms: profit maximisation, growth (more sales or a bigger market share), survival (for a new firm, or in a recession) and social welfare (for state-owned firms and charities).
Worked example
A firm sells 300 units at $15 each. Its total cost is $3600. Calculate its profit.
- Total revenue = price × quantity = 15 × 300 = $4500.
- Profit = total revenue − total cost = 4500 − 3600.
- Profit = $900.
Tips and tricks
- Selling more does not always raise revenue. If the price had to be cut to sell more, and demand is inelastic, revenue falls.
- A firm's objective can change: survival in its first year, growth later, profit once it is established.
It lands in your notebook with its questions as flashcards.
Revenue, profit and what firms aim for: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Total revenue is
Revenue is the money received from sales.
A firm's total revenue is $7000 and its total cost is $7600. What is its profit or loss?
7000 − 7600 = −$600. Costs are greater than revenue.
A firm sells 400 units and its total revenue is $2000. What is the average revenue?
2000 ÷ 400 = $5, which is the price.
Which objective is a state-owned bus company most likely to have?
It may run unprofitable routes because people need them.
During a recession, a small firm's main objective is most likely to be
When sales fall, staying in business comes first.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Revenue, profit and what firms aim for
Edexcel International GCSE Business 4BS1 · 8 marks · papermunch.org
Name ______________________________ Date ______________
A shop sells 250 books at $8 each. Calculate its total revenue.[2]
Show answerHide answer
$2000. 8 × 250.
A firm's total revenue is $18 000. Its fixed costs are $5000 and its variable costs are $9500. Calculate its profit.[3]
Show answerHide answer
Total cost = 5000 + 9500 = $14 500. Profit = 18 000 − 14 500 = $3500.
Explain why a new firm may aim for survival and not for maximum profit.[3]
Show answerHide answer
A new firm has few customers and high start-up costs. It may charge low prices to attract customers and accept little or no profit at first, as long as it stays in business.
Answers: Revenue, profit and what firms aim for
- 1. $2000. 8 × 250.
- 2. Total cost = 5000 + 9500 = $14 500. Profit = 18 000 − 14 500 = $3500.
- 3. A new firm has few customers and high start-up costs. It may charge low prices to attract customers and accept little or no profit at first, as long as it stays in business.