The Profit Maximisation Problem : Graphically Video Lecture | Economics CUET Preparation - Commerce

here in this recording will be talking
about the graphical analysis of the
profit maximization approach so
supposedly this is your total revenue
curve this is your total revenue curve
TR and this is your total cost okay this
is a rollercoaster so so for low levels
of output for the levels of output such
as before this Q naught for low levels
of output you will see this that cost
they exceed revenues these are your
total cost or cost exceeds revenues TC
exceeds revenue in the middle ranges of
output you'll find is that that revenues
they exceed cost this is the revenue
function this is the cost function so
revenues they are their exceeding cost
and for high levels of output again
because they are rising sharply and
costs are again greater than the
revenues so there will be a loss so and
the vertical distance between this TC
MTR curve is basically the profits
so for these level of outputs profits
are less than zero or low levels of
output for middle ranges of output
profit is greater than 0 and then again
of it might be less than zero now add
let's say
well at exit points such as this such as
this point they are slope of the TC
curve slope of TC curve and the slope of
PR curve are equal slope of TR cover
equal your profits of eczema what is the
slope of TC curve MC what is the slope
of T Arthur M R so at this level of our
correct say Q star profits are maximum
so till Q profits are negative hmm then
at Q star profits are positive and they
are maximum till point such as say Q 1
this is Q naught this is Q star this is
Q 1 okay so this is what you have learnt
that is for low levels of output costs
are greater than the revenue the
vertical distance between TC and TR that
is your cost are above than revenues and
you profits are negative
Tim Q naught this point in the middle
ranges of output profits are positive
your revenue is more than the cost and
after Q 1 cost rises sharply and and
your profits become negative okay so and
they do you think that the profits are
maximum where the slope of the TC curve
and slope of MC curve are equal even at
this point you know even at this point
the slopes are equal let me just draw
that properly even at this point the
slopes are equal for the sake of it but
at this point PC is more than TR okay so
and this is also the point where losses
makes your profits are most negative
so so the sufficient condition for a
maximum profit is that profits are
increasing to the left of Q star and
decreasing to the right of Q star so
they are increasing up until Q star okay
from Q naught they have started they are
increasing the up until Q star once they
reach Q star they started falling and
this is also the sufficient condition
that yes Q star is maximum Q star is the
maximum point of the profit maximization
well ad I'd say some level of output are
an award your Q - at this Q - of course
your slope of TC and slope of TL are
equal okay but still that is not the
point of profit maximization in fact
profits are minimum out there you could
see that TC is more than tier so this is
the way graphically to say that ad
profit maximization MC is equal to M