The difference between normal and abnormal (supernormal) profit
Normal profit is the minimum a firm needs to stay in a market. Supernormal profit is any extra earned above that minimum.
Formula
Supernormal Profit = TR − TC (where TC includes normal profit)
Real World
In 2022, Shell reported record profits far exceeding what was needed to retain shareholders and cover costs — this excess above normal profit is supernormal profit, which attracted political debate about a windfall tax.
Exam Focus
Define normal profit as the opportunity cost of capital before distinguishing it from supernormal profit — examiners reward precise definitions.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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