Syllabus: AQA - AS and A Level Economics
Module: 3.1.4 Competitive and Concentrated Markets
Lesson: 3.1.4.2 The Objectives of Firms
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Introduction
The AQA A Level Economics specification (section 3.1.4.2) explores the objectives of firms within competitive and concentrated markets. This topic encourages students to challenge the assumption that firms only aim to maximise profits and instead consider a broader range of motives including sales maximisation, growth, ethical goals, and survival.
Understanding firm objectives helps students apply economic theory to real business decisions, critically assess different market structures, and explain behaviour that deviates from the textbook norm of pure profit-maximising models. This unit also links clearly with contemporary issues, such as corporate social responsibility, pricing strategy, and competition law, all while embedding key microeconomic principles.
Key Concepts
AQA students are expected to understand and evaluate the following:
Profit maximisation: The traditional neoclassical assumption where firms aim to make the highest possible difference between total revenue and total cost.
Revenue maximisation: Firms may choose to maximise sales revenue rather than profit—often linked to managerial motives.
Sales maximisation: A strategy to increase market share or meet a growth target, possibly at the expense of profit margins.
Satisficing: A compromise between competing objectives, where firms ‘do enough’ rather than optimise one goal.
Other objectives: Including long-term survival, ethical practices, environmental sustainability, or customer service excellence.
Students should be able to link these objectives to different market structures—perfect competition, monopoly, oligopoly—and understand how the level of competition influences decision-making.
Real-World Relevance
This topic invites students to look beyond the blackboard and into the boardroom. For example:
Amazon has often operated on razor-thin profit margins, choosing long-term growth and market dominance over short-term profit maximisation.
Patagonia, the outdoor clothing brand, is known for environmental and ethical goals—prioritising purpose over profit.
In contrast, private equity firms often exemplify short-term profit maximisation, driving operational efficiencies for investor returns.
Encourage students to debate which objectives are sustainable or desirable, particularly in sectors like healthcare, education, or tech monopolies. News articles about firms shifting toward ESG (Environmental, Social and Governance) priorities are perfect discussion starters.
How It’s Assessed
AQA examiners will assess this topic across multiple question formats. Typical command words include:
Explain: Describe and define objectives using examples.
Analyse: Use chains of reasoning to show how objectives affect behaviour or outcomes.
Evaluate: Make judgements about the relative importance or outcomes of different objectives.
Question types might include:
Data response: Interpreting information about firm behaviour (e.g. cost and revenue data).
Essay questions: E.g. “To what extent do firms always aim to maximise profits?”
Diagram-based analysis: Students might be asked to use cost and revenue curves to illustrate objectives like revenue or sales maximisation.
Assessment will also test the student’s ability to apply theory to unfamiliar firms or industries.
Enterprise Skills Integration
This topic is a natural fit for active learning. It calls on students to think like business leaders:
Decision-making: Weighing trade-offs between growth, ethics, and shareholder returns.
Problem-solving: Exploring how firms adapt their objectives in response to economic pressures.
Critical thinking: Evaluating assumptions in economic theory versus real-world complexity.
Enterprise Skills’ Business Simulations directly align here—students take on roles in fictional firms, making pricing and investment decisions under constraints. These sessions make abstract objectives tangible and assessable, helping students learn by doing.
Careers Links
Understanding firm objectives supports Gatsby Benchmarks 4, 5 and 6:
Benchmark 4 (Curriculum Links): This unit connects directly with real business behaviour and economic decision-making.
Benchmark 5 (Encounters with Employers): Invite guest speakers or use simulation tools to bring firm strategies to life.
Benchmark 6 (Experience of Workplaces): Enterprise Skills simulations replicate boardroom decision-making, giving students a realistic taste of commercial strategy.
Relevant careers include:
Business consultancy
Strategy analyst
Marketing and sales management
Corporate sustainability advisor
Entrepreneur / start-up founder
This topic fosters a broader understanding of motivations in business, ideal for those considering careers beyond finance or accounting.
Teaching Notes
Tips for classroom delivery:
Use case studies: real brands or fictional caselets (like Enterprise Skills simulations) work well.
Include class debates: “Should firms be allowed to prioritise profits over ethics?”
Encourage students to critique media reports using theory (e.g. from The Economist, BBC Business).
Common misconceptions:
Students often default to assuming all firms aim solely to maximise profit—spend time unpacking this.
Confusion between revenue maximisation and sales maximisation—a diagram helps here.
Extension ideas:
Explore behavioural economics: How do internal stakeholders (like managers) shape firm objectives?
Ask students to model firm behaviour using cost and revenue curves under different objectives.
Recommended tool:
Use Skills Hub for short plug-and-play activities that ask students to rank and justify firm objectives based on business scenarios—saving planning time and building analytical depth.
