Market supply decisions are based on the objectives businesses set when they are producing in different markets.

Classical economic theory assumes that firms aim to maximise profits and this is the business objective that underlies supply decisions in markets.   

This is business decision-making guided primarily by an entrepreneur’s desire to achieve the highest possible profit their firm can make from producing its goods and services.

Profit is important to entrepreneurs because it is the reward they earn from the risk of setting up and starting their business.

We know that profit maximisation as a business objective is crucial in guiding the allocation of resources in free markets through the incentive function of price.

Producers in a market will set prices and outputs that achieve revenue and costs, which give them the highest level of profit.

Nature of CSR

Corporate social responsibility (CSR) is a set of business objectives based on environmental, ethical and social factors.

An ethical objective is where a business makes decisions to achieve positive moral outcomes.

Reasons for ethical and environmental objectives

• To follow government regulations.
• It is important to their stakeholders, such as employees, customers and shareholders. 
• It creates a positive image in the mind of the consumer. 
• Some firms have an ethical outlook because of the philanthropic outlook of their owners.

Market share is the percentage of total market revenue an individual firm's revenue accounts for.

Calculated as:

• Individual firm’s total revenue/market’s total revenue x 100 = individual firm’s market share
• Example: total revenue $25 million, total market revenue is $200 million
• $25m / $200m x 100 = 12.5% 

Market share is an objective businesses can use to judge their relative performance compared to other firms in the same industry.

Increasing market share can also be useful to a firm looking to achieve greater market influence when setting prices.

Satisficing is where a business sets an aim that is satisfactory rather than optimal.

A firm might set an acceptable profit objective rather than trying to maximise profit.

Firms try to meet the needs of their shareholders as well as its other stakeholders such as its employees and the local community.

The growth of their profit, revenue and market share is a key objective because it represents progress for a business.

A business that is reaching more customers, operating in more countries and has a higher asset value is often seen as successful in terms of growth. 

a. Outline an environmental objective a business might aim to achieve. [2]

b. Explain two advantages to a business of setting environmental objectives. [4]

c. Explain two disadvantages to Ryanair of setting environmental objectives. [4]