Business

PRICE AND PROFIT: INVESTIGATING THE CONUNDRUM

It appears reasonable to define profit as what is left-over after all tangible, specifiable and quantifiable costs have been paid. Hence, it is considered to be the reward for tangible factors that are crucial to business. These would include risk, entrepreneurial creativity, initiative and the deferment of the use of one’s resources. Reasons for the justification of profit is that many of the solutions to problem in business effect affect profits, these include pollution, adequate workers’ wages, conducive work environment, genuine products and honest adverts. For many people, the intangible element that may justify profit do not have as much important as other immediate, basic, tangible and seeming pressing needs of other claimant in society which includes benefits for workers, clean air for all, and workers and consumers’ safety. Therefore, when profit is placed against other social considerations such as the wages of workers, profit is always at a disadvantage.

Profit may be justify on the ground that the desire for profit is a manifestation of a universal desire of all humans ( investors, workers, suppliers, consumers) to acquire more than what one already has. This argument assumes that the drive for profit is a universal and innate attribute, it is beyond criticism. However, this line of thought ignores the fact that decisions in ordinary life and also in business requires that innate drives are either suppressed or transcendence for people to act in acceptable ways. Consequently, the attempt to justify profit on the basic of the fact that the desire for it is innate and universal to all humans fails to provide any cogent justification for profit.

Another conception of profit that is reasonable and legitimate for business is to tie it with what the market can bear. The argument is that profit is reasonable, legitimate, and therefore justified to the extent that the market can bear it and customers pay for it. If it were not reasonable and legitimate, customers would not pay for it. Hence, it is maintained that profit is determine by the interplay of forces of demand and supply in the market place. A problem with this position, however, is that there are occasions when customers do not have choice but to pay for certain products at excessively high price. Situation of scarcity provides a good example of this.

There is also a standpoint that businesses and their owners have a conscience by virtue of which they would always respect the rule of proportionality. But there is no guarantee that business owners would always respect the demand of the rules of proportionality as many businesses are known to exploit customers as often as they can get away with it. Moreover, there is the challenge of how to determine what profit is proportional to the contribution of business.

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