what is the role of profits in a market economy


What is the role of profits in a market economy?

Profits act as an incentive to producers and potential entrepreneurs, and also as a signal to both that resources may be re-allocated advantageously. Profits also enable (re-)investment, innovation, R&D, incomes and give a taxable base.

 

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Microeconomics: what is the role of profits in a market economy
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