Question

Why is it not enough to understand profits as the result of buying things cheap and selling them dear?

Because you cannot always succeed in doing that

All of the above

Because that kind of activity can never give us net profits across the economy

Because you can always ,make more profits by buying more cheap goods

Answer 1

Here, all the statements are found true

· Profit is defined as the financial gain, ie; the difference between the amount earned and the amount spent in buying, operating or producing something. As per the statement, it is given that it is not always true to understand the profits in terms of buying thigs at a cheaper price and selling them at higher prices. The first statement is true that we cannot always make profits. Profit making in an economy involves many factors as in an economy it involves land, labour, capital and market patterns that decides the profit making. When the input cost is less, say we bought a commodity at cheaper price. But, when the market forces are not favourable and if we are forced to sell them at those times, then it may not be able to sell them at more prices and hence instead of making profits, it would result in a loss. Hence, profit making is dependent on many factors and thus it is not always true that buying at cheaper prices would end in making profits.

· Net profit in an economy represents the excess of total revenue over the total costs which includes cost spent for land, wages, capital interest etc. Buying at cheaper prices and selling at more prices could not result in making net profit in an economy as money has to be spent on establishment costs also as given. Thus, along with the cost incurred for buying, the establishment costs should also be considered to understand the net profit in an economy.

· As the consumption of goods are increased, more profits could be achieved as and when more cheaper goods are procured. Thus, by buying more and more cheaper goods, the chances of making profit are more.