Producer decisions
Factors influencing decisions    What is a market? Demand Supply Equilibrium Excess demand   Excess supply   Shifts of demand  Shifts of supply Convergence to equilibrium  Economicstutor..com.au

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In economics, it is generally assumed that all businesses seek to maximise profit.  This necessarily involves maximizing revenue and minimising expenses.  As we saw earlier, businesses will seek to achieve the lowest possible price elasticity of demand for their product.  This then enables them to increase prices, raise total sales revenue and maximise profits.  Accordingly, a major factor influencing the decision making of businesses is the market structure in which they operate.

Generally speaking, the fewer the number of firms operating in a market, the lower is the degree of competition, and the greater is the likelihood that a firm will inflate prices and/or be less attentive to quality.  


Other factors influencing the behaviour of businesses include the following:






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