Theories of profit

Theories of profit explain why businesses make money. One idea is the "Residual Theory," which sees profit as the leftover after paying all costs, including wages and expenses. Another is the "Innovation Theory," where profits come from new ideas or inventions that give a business a competitive edge. The "Market Power Theory" suggests profits are earned when a company has control over prices, like a monopoly. Lastly, some believe profit is a reward for taking risks and investing resources. In essence, profits are seen as incentives, rewards, or residuals resulting from various business activities.