Securitization in Infrastructure Finance
Bank loans are the dominant source of financing for infrastructure projects. This is truer in the case of developing countries like India, wherein more than 70% of all infrastructure projects are completely or partially financed by banks. The problem is that infrastructure loans tend to be extremely long term in nature. Banks, on the other […]
Retail Banking : Demand Deposit Products
Deposits can be divided into two types. The first type is time deposits in which an account holder gives the bank money for a fixed period of time and therefore does not have any right to ask for money before the maturity date has been reached. On the other hand, there are certain types of […]
Different Types of Entities in a Business
Businesses may all look the same when you look at the building in which they operate, the employees they hire and the product they sell. However, they can be very different when it comes to their legal structure. The legal structure determines the type of entity they are which in turn determines the rules that […]
Sports Management Companies: Sources of Financing
There are many sports management companies across the world that can be classified as large corporations. Many of these corporations or franchises have assets worth several millions of dollars. Hence, an average person will assume that the sources of financing for sports franchises are also similar to that of other corporations. However, this is not […]
Tax the Rich Policy: A Critical Analysis
There are few issues which strike through the heart of communists in China and capitalists in America similarly. One such issue is the issue of taxes, particularly the taxes that are levied on people of the extremely high income category. The popular opinion is that the rich somehow collude with the politicians to create a […]
Many economists have argued that profit maximization has brought about many disparities among consumers and manufacturers. In case of perfect competition it may appear as a legitimate and a reward for efforts but in case of imperfect competition a firm’s prime objective should not be profit maximization.
In olden times when there was not too much of competition selling and manufacturing goods were primarily for mutual benefit. Manufacturers didn’t produce to earn profits rather produced for mutual benefit and social welfare.
The aim of the single producer was to retain his position in the market and sustain growth, thereby earning some profit which would help him in maintaining his position. On the other hand in today’s time the production system is dominant by two tier system of ownership and management.
Ownership aims at maximizing profit and management aims at managing the system of production thereby indirectly increasing the income of the business.
These services are used by customers who in turn are forced to pay a higher price due to formation of cartels and monopoly. Not only have the customers suffered but also the employees.
Employees are forced to work more than their capacity. they is made to pay in extra hours so that production can increase.
Many times manufacturers tend to produce goods which are of no use to the society and create an artificial demand for the product by rigorous marketing and advertising.
They tend to make the product so tempting by packaging and labeling that its difficult for the consumer to resist. These happen mainly with products which aim to target kids and teenagers. Ad commercials and print ads tend to provide with wrong information to artificially hike the expectation of the product.
In case of oligopoly where the nature of the product is more or less same exploit the customer to the max. Since they form cartels and manipulate prices by giving very less flexibility to the consumer to negotiate or choose from the products available.
In such a scenario it is the consumer who becomes prey of these activities. Profit maximization motive is continuously aiming at increasing the firm’s revenue and is concentrating less on the social welfare.
Government plays a very important role in curbing this practice of charging extraordinary high prices at the cost of service or product.
In fact a market which experiences a high degree of competition is likely to exploit the customer in the name of profit maximization, and on the other hand where the production of a particular product or service is limited there is a possibility to charge higher prices is greater. There are few things which need a greater clarification as far as maximization of profit is concerned
Profit maximization objective is a little vague in terms of returns achieved by a firm in different time period. The time value of money is often ignored when measuring profit.
It leads to uncertainty of returns. Two firms which use same technology and same factors of production may eventually earn different returns. It is due to the profit margin. It may not be legitimate if seen from a different stand point.
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