Profit in the capitalist price system

The term profit is used to denote the income earned by the organizer or the entrepreneur. According to Taussig “Profit is a mixed and vexed vexed income”. It is a ‘mixed’ income because it is earned from many sources. It is a ‘vexed’ income because it is earned from many sources. It is a ‘vexed’ income because of disagreement among economists relating to profit. Walker and many other economists use profit in a narrow sense. While and many other economists use profit in a narrow sense. While Marshall, Robertson and other English economist are in favors of using the term in the wider sense. Role of profit in capitalist price system s the motivation for economic activities. All economic activities revolve round the profit. It is the profit which helps in making balance between demand and supply. When demand become more than supply, price increase. Therefore, profit increases as a result of the increase in price. This causes the entry of new firms into production. With this entry of new firm, production increases and as a result supplies of goods also increases. In this way balance is made between demand and supply or consumption and production. Thus business fluctuations are avoided by profit mechanism in capitalist price system. Social wealth means total capital of society. Profit makes allocation of total capital from the low demand sector to high. If demand of certain goods and services becomes low, entrepreneurs do not like to employee their capital for the production of those goods which are demanded more. So there is diversion of capital from goods which demanded more. So there is diversion of capital from low demand sector to high demand sector. In this way allocation of total capital is made by the profit mechanism. It is the profit which determine nature of production. Therefore, profit in the capitalist price system helps in solving the basic problems of economy.

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Advantages of investment

Now the thing is that why should we go for investment? There must be some advantages of investment that make people to invest . So the advantages can be discussed from different aspects of investment. So the first things that I am going to start is

CD

Bank CD is normally the safest way of investment. Normally investments carry a risk of market’s ups and downs .But in case of CD there is minimum risk for the investor. The only disadvantage of CD is the time factor as you cannot get your money back before the time specified in the documents.

Commitments

Commitments are basically the loan that you are looking for. It is may be Government or company bond which can be risky or can not be risky. That can provide quiet a good rate of return on your investment. The security measure in case of Government bond is more in comparison to company bond.

Stocks


Stocks are the investments that you make in different companies. The investment risk may be high or low. The company, having goodwill can provide you more safety than the newly built company. So if you have acquisition in the big company like Johnson & Johnson that can provide you more security about your return. So the big names of the industry can provide you more return.


Investment Funds

The biggest thing about mutual fund is that why should we invest in mutual fund and is there any assurance that I am going to get a handsome return from it. The mutual fund is basically the collection of money from a group of people and then the investment of that collection in stock market.

These are some areas where you can invest in order to generate return. There are some advantages of investments. These are:

Economic growth - Investment is one of the major factors that ensure the economic growth. If the investment level of the country is very high then you can be sure of the fact that the country is growing financially.

Trade - trade is one of the determinants of growth. The increasing rate of investments will definitely contribute to the rise in trade.

Employment - During recession we found that many people lost their jobs and you could notice that the investment level also fell. So the proper investment path will definitely lead to the demolition of unemployment and growth in skill.

Re-investments - Big companies are taking over the sick industries so that the company does not need to close down. The big companies have more money to invest in the small
Firms.

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