Profit (economics)

Profit (economics)

In neoclassical microeconomic theory, the term profit has two related but distinct meanings. Economic profit is similar to accounting profit but smaller because it reflects the total opportunity costs (both explicit and implicit) of a venture to an investor. Normal profit refers to a situation in which the economic profit is zero. A related concept, sometimes considered synonymous to profit in certain contexts, is that of economic rent.

In Classical economics and Marxian economics, profit is the return to an owner of capital goods or natural resources in any productive pursuit involving labor, or a return on bonds and money invested in capital markets. By extension, in Marxian economic theory, the maximization of profit corresponds to the accumulation of capital, which is the driving force behind economic activity within capitalist economic systems.

Other types of profit have been referenced, including social profit (related to externalities). It is not to be confused with profit in finance and accounting, which is equal to revenue minus only explicit costs, and superprofit, a concept in Marxian economic theory.

Related concepts include profitability and the profit motive.

Read more about Profit (economics):  Normal Profit, Other Applications of The Term, Maximization, See Also

Other articles related to "profit":

Profit (economics) - See Also
... surplus Economic rent Economic value added Externality Inverse demand function Profit(accounting) Profitefficiency Profitmotive Profitability index Rate of profitSuperprofit ...

Famous quotes containing the word profit:

    When we can drain the Ocean into mill-ponds, and bottle up the Force of Gravity, to be sold by retail, in gas jars; then may we hope to comprehend the infinitudes of man’s soul under formulas of Profit and Loss; and rule over this too, as over a patent engine, by checks, and valves, and balances.
    Thomas Carlyle (1795–1881)