Arguments against sales maximisation model in defence of this model, the following arguments are given increase in sales and expansion in its market share is a sign of healthy growth of a normal company. Baumol’s model of sales maximisation points out that the profit maximisation output oq will be smaller than the sales maximisation output od, and price higher than under sales maximisation the reason for a lower price under sales maximisation is that both total revenue and total output are equally higher while under profit maximisation total.
Baumol's theory of sales revenue maximisation prof baumol, in his book 'business behaviour, value and growth' has propounded a theory of sales maximisation main aim of a firm is to maximise sales. Baumol’s model of sales maximisation points out that the profit maximisation output will be smaller than the sales-maximisation output od, and price higher than under sales maximisation the reason for a lower price under sales maximisation is that both total revenue and total output are equally higher while under profit maximisation, total output is much less as compared to total revenue.
Baumol model of sales revenue maximization managerial economics august 15, 2007 the key points underpinning the economics of a profit maximizing firm neoclassical model of the firm states that organization will have the main objective of maximizing its profit within a given period of time. Baumol's work helped economists as well as managers make sense of business decisions that often seemed to conflict with a profit maximization model and is an important body of work in microeconomics revenue vs profit. However, in baumol’s model the firm is a sales maximiser, but it must also earn a minimum level of profit acceptable to shareholders and to those who finance its operations if the minimum acceptable level of profit is π 1 , the firm will produce the level of output x sm which maximises its sales revenue.
Baumol’s sales revenue maximization model highlights that the primary objective of a firm is to maximize its sales rather than profit maximization it states that the goal of the firm is maximization of sales revenue subject to a minimum profit constraint the minimum profit constraint is determined by the expectations of the share holders this is because no company can displease the share holders. There are two models of sales revenue-maximization which both work under above assumption: the static model and the dynamic model static model is a single period model for organization assuming that no competition with other companies exist.
Sales maximization is a business approach that focuses on making the most sales revenue possible without the business taking a loss baumol's theory of sales revenue maximization outlines a model for utilizing sales maximization. Sales maximisation model of oligopoly is another important alternative to profit maximization model this has been propounded by wj baumol, an american economistsales maximisation was quite consistent with rationality assumption about business behaviour it may also be noted that sales.