Definition: Another source of a pure profit (over and above the normal profit) is said to be a Monopoly, characterized by a single seller without any close substitute. Monopoly Theory of Profit posit that the firms enjoying the monopoly power restricts the output and charge higher prices for its products and services, than under perfect completion. So far, all the theories … [Read more...] about Monopoly Theory of Profit
Schumpeter’s Innovation Theory of Profit
Definition: The Innovation Theory of Profit was proposed by Joseph. A. Schumpeter, who believed that an entrepreneur can earn economic profits by introducing successful innovations. In other words, innovation theory of profit posits that the main function of an entrepreneur is to introduce innovations and the profit in the form of reward is given for his performance. … [Read more...] about Schumpeter’s Innovation Theory of Profit
Knight’s Theory of Profit
Definition: The Knight’s Theory of Profit was proposed by Frank. H. Knight, who believed profit as a reward for uncertainty-bearing, not to risk bearing. Simply, profit is the residual return to the entrepreneur for bearing the uncertainty in business. Knight had made a clear distinction between the risk and uncertainty. The risk can be classified as a calculable and … [Read more...] about Knight’s Theory of Profit
Hawley’s Risk Theory of Profit
Definition: Hawley’s Risk Theory of Profit was propounded by F.B. Hawley, who believed that those who have the risk taking ability in the dynamic production have a sound claim on the reward, called as profit. Simply, profit is the price that society pays to assume the business risk. The risk in business may arise due to several factors, Viz. Obsolescence of a product, … [Read more...] about Hawley’s Risk Theory of Profit
Clark’s Dynamic Theory of Profit
Definition: Clark’s Dynamic Theory of Profit was propounded by J.B. Clark, who believed that profits arise in the dynamic economy and not in the static economy. The static economy is one in which the things do not change significantly or remains unchanged. Such as, the population and capital remain stationary, goods continue to be homogeneous, production process remains … [Read more...] about Clark’s Dynamic Theory of Profit
Walker’s Theory of Profit
Definition: Walker’s Theory of Profit, also called as a Rent Theory of profit was propounded by F.A. Walker, who believed that profit is regarded as a rent of differential ability that an entrepreneur may possess over the others. Walker’s theory of profit works on the same principle as that of land rent, which is the difference between the yields of least and most effective … [Read more...] about Walker’s Theory of Profit
Theories of Profit
Definition: Profit is the financial benefit realized from the business activity when the revenues generated exceeds the costs and expenses incurred in the operation of such activities. Simply, the total cost deducted from total revenue yields profit. The profits of the organization depend on the successful management of business operations, i.e. how well an entrepreneur … [Read more...] about Theories of Profit
Types of Profit
Definition: Profit refers to the financial gain obtained when the revenue generated from the business operations exceed the expenses and costs incurred in carrying out the business activity. The term “profit” imply different meanings to different people. Such as, profit is regarded as income to the equity holder, wages to the labor, rent to the owner, interest to the money … [Read more...] about Types of Profit
Emerson Plan
Definition: Under Emerson Plan, the standard time for the completion of a task is fixed against which the actual performance of the workers is measured. The worker’s efficiency can be determined by dividing the time taken by the standard time. In Emerson Plan, the worker is paid only the time rate for the efficiency up to 67%. At 100% efficiency, the worker is paid time … [Read more...] about Emerson Plan
Gantt Task System
Definition: Under Gantt Task System, the standard time is fixed for the completion of a task based on a careful time and motion study. The worker’s actual performance is compared against the standard time to determine his efficiency and make the payments accordingly. The Gantt task system guarantees the worker’s time-rate for the level of output below the standard. Thus, if … [Read more...] about Gantt Task System