BCOR 1015 Chapter Notes - Chapter 3 Scarcity: Invisible Hand
27 Nov 2016
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Artificial scarcity= scarcity is required for capitalism to work. The conflict companies face is the need for profit vs. human satisfaction. Humans need a product but if they cannot afford a certain price for that product, then they cannot buy it. However, if companies make a product too cheap, then they will not make any money. The invisible hand bankrupts companies that are inefficient, or useless to society. An enterprise is judged to be efficient based on its profits and lack of profits lead to failure (the revenue must exceed its cost). Increasing prices however does not necessarily mean more profit in fact it could lead to higher costs in certain situations. Profit also depends on how much you compensate your workers. Capitalists need to compensate their workers as little as possible while also keeping them satisfied in order to maximize their profits. The reason why profit is so essential to capitalists is because it increases their company"s capital.
