Unit-v Profit 1.

Objective: After studying this unit, you should be able to: Make familiar with the theories of profit. Discuss in detail Clarks and Schumpeter theories of profit. Analyze the practical importance of this concept in business field. 2. Assignment: a) Explain the term Profit from different point of view. b) Explain the Clarks Dynamic theory of profit in detail. c) What are the five generic changes going on in a dynamic state according to Clarks? Explain in detail. d) Explain the Schumpeter theory of profit in detail. e) Explain the circular flow with diagram according to Schumpeter theory of profit.

3. FAQ: a) Define Profit from Accountant point of view. b) Define Total revenue. c) How the profit will be measured? Write its formula only. d) What are the two theories of profit? e) What do you mean by Dynamic Economy? f) Write another name of Schumpeter theory of profit. g) Which one is considered as the role of innovator in Schumpeter theory of profit?

h) According to Clarks theory of profit, in which type of economy profit occurs. 3.1 Answer Key: a) b) c) d) e) Excess of revenue over all paid-out costs. The total amount a firm receives for the sale of its output. Profits = Total Revenue Total Costs. Clarks theory of profit and Schumpeter theory of profit. Dynamic economy is that where there is increase in population, increase in capital, improvement in technology and increased in consumer demand exist. f) Theory of innovation. g) Entrepreneur. h) Dynamic Economy. 4. Downloads: NA for this section. 5. Case Study: NA for this section. 6. Glossary: NA 7. References: 1) 2) 3) 4) 5) 6) 7) 8) 9) Business Economics by Saraswat, B., Ajemra Publication, Second Edition. Economics by Samuelson Paul A, McGraw-Hill, Ninth Edition. Managerial Economics by Dwivedi D N, Seventh Edition. Managerial Economics By Metha P. L., Eight Edition. Managerial Economics by Brigham, E.F.& Pappas, J.L., Second Edition. Managerial Economics by Peterson and Lewis, Third Edition. Economic Theory and operation Analysis by Baumol, W.J., Fourth Edition. Modern Microeconomics by Kautoyiannis, A., Second Edition. Business Economics by Ahuja H L, Ninth Edition.

8. Quiz: a) Clarks theory of profit based on: i) Static Economy ii) Dynamic Economy

iii) Redundant Economy Answer: ii)

iv) None

b) All firms earn only normal profit in which economy: i) Static Economy iii) Redundant Economy Answer: i) c) Dynamic economy is one in which changes takes place in: i) Population ii) consumer demand Answer: iv) d) For making pure profit which factor is not required by managers: i) efficiency of managers iii) Trustworthyness Answer: iii) e) In dynamic state, which generic changes are going on: i) population is increasing iii) technology improvement Answer: iv) f) According to Schumpeter theory of profit, Innovation doesnt include i) reduce cost of production iii) increase market size Answer: iii) g) The factor consider most important in profit earnings: ii) increase demand for product iv) all of the above ii) Capital is increasing iv) all of the above ii) able to take advantage of the changes iv) None ii) technology iv) all of the above ii) Dynamic Economy iv) None

i) leadership iii) innovation Answer: iii)

ii) entrepreneurship iv) both i) & ii

h) The phenomenon of circular flow is given by: i) Clarks iii) both i) & ii) Answer: ii) Summary: NA ii) Schumpeter iv) None