Many theories of profit exist. Some see profits as synonymous with production. Some claim that profits are a deduction from wages and come from the exploitation of workers. One theory of profits says they are determined by the consumption of capitalists. Which theory of profits is correct?

This course shows that answering this question requires one to make a distinction between real and nominal profits. Further, it shows that one must distinguish between the profits of individual businesses and the aggregate level of profits in an economy. The former are earned by the productive and competitive pursuits of entrepreneurs and capitalists. The latter are determined by spending in the economy that constitutes the sales revenue and costs of businesses. The course shows that to have a proper understanding of profits, one must be able to identify the origins of those revenues and costs.