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What is the Meaning of Profit Function?
A function may be defined as an arithmetical condition relating an input value to a corresponding output value.
In Economics, Profit Function can be defined as a function concerned with business applications. The difference between the revenue that a company earns in return for sale of a commodity or service and the Cost of Production of that specific commodity or service is known as Profit. Every business firm operates with the primary motif to earn this profit.
Therefore, a Profit Function states the functional relationship between the cost of Production and Revenue earned. The equation comprises of these two functions: cost function and revenue function. If ‘n’ be the number of units sold, then Profit Function can be represented as:
P(n) = R(n) – C(n).
Where, R(n) is the Revenue Function And C(n) is the Cost Function.
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