In a simpler equation â. Gross Income (Sales) ... imposed on employees. Tax imposed on Net Profit as follows: ... Sole Traders financial year must be July â June therefore you must lodge an income tax return within 4 months after the end of the f
Mar 13, 2012 - disseminated and provided further that each copy bears the following credit .... sales taxes). When determining the transaction price, an entity would consider the effects of all of the following: 1. Variable considerationâIf the pro
Idea Transcript
Eco 101
Microeconomics Lecture Notes Revenue, Costs, and Profit
Marginal Analysis of Revenue and Costs Economic Profit Profit = Total Revenue - Total Costs = TR - TC Total Revenue = Price x Quantity Sold TR = P x Q Total Costs = Opportunity costs of all factors of production: land, capital, labor and other inputs supplied by the firms owner(s) Economic Profit versus Business Profit Economic Costs =Explicit costs + Implicit Costs Economic Profit = T. Revenue -T. Economic Costs =TR- Explicit Costs-Implicit Costs Business Profit = T. Revenue -Explicit Costs =>We expect: Bus. Profit > Economic Profit Total Revenue and Demand Curve Consider the following two cases:
Note that in the diagram on the left with a horizontal demand curve the revenue increases at a constant rate (price) as the output increases. In the case of a downward-sloping demand curve, however, as the quantity increases, total revenue increases first reaches a maximum and then starts falling.
Profit Recall that we defined a firms short-run total costs as: Total Cost = TFC + TVC Now we can define economic profit: Profit = Total Revenue - Total Cost Profit = TR - TC Total Revenue and Total Costs
The Case of a Horizontal Demand Curve The Case of a Downward-Sloping Demand Curve The vertical (linear) spread between the TC curve and the TR curve measures the profit. Profit Determination: A Marginal Approach As a firm increases its output, both its revenue and costs increase. That will result in changes in its profit. Change in Profit = Change in Revenue + Change in Costs If the firm changes its output one unit at a time, Change in Profit = Marginal Revenue - Marginal Cost Marginal Revenue(MR): Change in total revenue resulting from producing one additional unit of output. Marginal Cost(MC): Change in total cost resulting from producing one additional unit of output Profit: A Marginal Approach If change in total revenue > change in total cost, MR > MC ==> Change in profit will be positive ==> Profit will increase ==> The firm will stop increasing output when MR = MC Marginal Revenue and Marginal cost
Note that on the left side of the crossing between marginal revenue and marginal cost MR>MC. That means increases in the output will increase the profit. On the right side of the crossing between MR and MC, MR