Essay on Relationship Between Cost And Revenue

Essay on Relationship Between Cost And Revenue

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In this essay, I will be explaining the concept of supply & demand and the factors that will show the relationship between costs and revenues in International business and I will also show how a manager might use these factors in order to maximize profit and use examples and diagrams to explain.

In this paragraph, I will be explaining the Supply and demand concept by using examples and diagrams when explaining and I will be explaining the relationship between cost and revenue and supply and demand. Demand is how much of a product or service a consumer wants to buy and an example of demand is if a consumer goes into a phone shop and ask to buy 5 IPhone 's this means they have demanded this product and, therefore, they want to buy it. Whereas Supply is about how much a market can supply a customer. Another definition of Demand is ‘Demand refers to how much (quantity) of a product or service is desired by buyers. ' (Investopedia, 2015) and a definition for Supply is ‘Supply represents how much the market can offer. ' (Investopedia, 2015). The main reason that Supply and Demand is a key role in international business is, because when Supply and Demand meet each other equilibrium happens which is shown in the graph below and nothing can change this unless an external factor affects the supply or demand.

(Economics online, 2015)
Many factors can cause the demand curve to shift one of them is if Volkswagen competitors was to raise their prices of their cars this could lead to consumers buying cars of Volkswagen, as they would see it as a substitute because it is a cheaper option which would shift the demand curve to the right and it would increase the price and output and a new equilibrium point would be shown as it is in the image...

... middle of paper ...

...n. A table below highlights marginal revenue and marginal cost when they are equal which can help managers see the opportunity for them to maximize profit in the long run.

(Cliffs Notes, 2015)
In conclusion, the diagrams and examples that I have used to help highlight the supply and demand concept and how important it is in international business, and as I have highlighted above that many different factors can affect both supply and demand. Therefore, managers have to use factors, so they can help benefit their supply and demand, and decrease their costs, as well as increase the revenue. Also, this essay has highlighted that for managers to maximize profits in the long run they have to keep cost lower than revenue and that marginal revenue has to be equal to marginal cost for them to maximize profit in the long run as well.

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