Describe about the theory of profit, Managerial Economics

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Describe about the Theory of profit

Every industrial and business enterprise aims at maximising profit. Profit is the difference between total economic cost and totalrevenue. Profitability of an organisation is greatly influenced by the below factors:

  • Demand of the product
  • Prices of the factors of production
  • Nature and degree of competition in the market
  • Price behaviour under changing conditions

Therefore profit management and profit planning are very significant requisites for improving profit earning efficiency of the firm. Profit management includes the use of most efficient technique for predicting the future. Probability of risks must be minimised as far as possible.

 


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