CH07 Profit Loss.pptVIP

“The Economic Way of Thinking”12th Edition Chapter 7: Profit and Loss （利润和损失） Chapter Outline Wage, Rent and Interest: Incomes Established in Advance by Contract Profit: Income That can be Positive or Negative Calculating Profit: What Should be Included in Costs? Comparing Economic Profit and Accounting Profit Uncertainty: A Necessary Condition for Profit Chapter Outline The Entrepreneur The Entrepreneur as Residual Claimant Where Does the Buck（责任） Stop? Not-For-Profit Institutions Entrepreneurship and the Market Process Mere Luck? Profit and Loss as Coordinating Signals; The Role of Monetary Calculation Beware of Experts Chapter Outline Appendix: Varieties of Speculation Consequences of Entrepreneurial Speculation Commodity Speculators and Futures Markets Prophets（预言家） and Losses Introduction “Perhaps no term or concept in economic discussion is used with a more bewildering variety of well-established meanings than profit.” -Frank Knight Introduction Profit (net revenue，净收益) Total revenue minus total cost To understand the concept of profit, it would be worthwhile to briefly consider the meaning of wage, rent, and interest. Wage, Rent and Interest（工资、租金和利息） Wage is the payment to people for their labor service. It is typically established by a contractual agreement between a firm owner and a labor supplier. The contractual agreement reduces uncertainty. Wage, Rent and Interest Rent represents the payment to landlords and others who lease their property, such as tools and machinery. Like wage, rent is also contractually established and reduces uncertainty. No one would consider wage and rent payments as profit. Wage, Rent and Interest Interest is NOT: The price of money Payment for the use of money Interest IS: Paid when we borrow The price people pay to obtain resources now rather than to wait until they have earned the purchasing power with which to buy the resources Ratio between what is paid back and what is obtained now Wage, Rent and Interest