Carl Young of Johnson City, TN: Profits and Losses and the Economy

Any person interested in the economy, including Carl Young of Johnson City TN, knows that the goal of any business owner is to increase the profits and avoid the losses. However, from the standpoint of the economy, both profits and losses are equally important because they sustain and improve the living standards of people.

Part of why a price-coordinated economy is so effective is because the products or services can simply follow the leaders. Producers do not have to know the reasons why the customers are buying the products, all they have to do is manufacture and supply items that people will buy. When a business in a market economy finds a way to make great profits by creating new products or lowering costs, competition always follows. 

While socialists have been viewing profits as overcharges and greed, profits play a number of important functions in a market economy. The desire to receive a profit is what drives business owners to take the risk of creating new products and selling them. To stay competitive and survive, capitalist enterprises also need to figure out how to minimize the production costs and sell at the highest possible prices. 

Companies in socialist economies do not have this pressure, which is why socialism offers fewer incentives for efficiency and productivity and this is why socialist economies can’t compete with capitalist economies. At the same time, under capitalism, the companies not only need to figure out how to remain profitable but also constantly innovate to stay ahead of the competition.

For example, even though International Business Machines (IBM) was the first company to build a computer in 1944, Intel’s creation of a small computer chip in the 1970s allowed Intel to eventually become a leader in the marketplace. The developments in computer technologies later led to the creation of various markets and exchanges including the foreign exchange market where Carl Young of Johnson City, TN trades.