Economics·The firm: profit maximisation & demand for factors · NSSCO 5.1
The firm: profit maximisation & the demand for factors
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Now we step inside a business — a firm — and ask the simple question: what is it really trying to do? Firms have many aims, but the main one is to make the biggest possible profit, and we learn to write profit as Total Revenue minus Total Costs. Then we define production, and discover a clever idea: a firm's demand for workers, machines and land is a 'derived' demand — wanted only for the output they help make. Finally we analyse what happens when one factor gets expensive and a firm swaps it for another, using real Namibian examples like a farm buying a tractor.
What you'll learn in this lesson
By the end you should be able to (NSSCO Economics 5.1):
- Describe and analyse the principle of profit maximisation as a goal
- Define production
- Describe what determines the demand for factors of production
- Analyse particular situations to show the effects of substituting one factor for another
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