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Thu. Nov 23rd, 2023


A lot has been mentioned about revenue and its implications within the society. Some individuals have supported the existence of revenue. Others have argued towards it. This essay intends to determine the necessity for existence of revenue.

Those that have supported the existence of revenue have their very own causes that additionally assist the morality of it. Those that have argued towards revenue have their very own causes that see the immorality in it. For revenue to be seen pretty much as good it must be carried out inside sure ranges of morality – On this case it will likely be accepted. For revenue to be seen as unhealthy it’s going to exhibit sure ranges of immorality thence rejected.

When revenue is obtained inside acceptable ranges, it might not be condoned, however when obtained at extreme ranges with out correct justifications, it might carry with it immorality (wherein case it’s irregular). That’s the reason we discuss with revenue as both being regular or irregular revenue.

Justification of Existence of Revenue

(a) What’s revenue?

When items and providers are produced and offered, there’s want to know the prices concerned so {that a} worth that features some return may be established. This promoting worth features a mark-up on the price that ultimately provides the revenue.

Promoting worth – prices = revenue

Due to this fact, revenue is the cash that’s obtained above the manufacturing prices when items and providers are offered.

For instance, when an individual sells items or providers to prospects, s/he wants to know what it prices to supply or produce such items or providers and ship them to prospects so {that a} worth may be fastened that brings a revenue. For example,

1. Mr. Kamau sells items in his store or kiosk that prices him sh.5, 000. The income obtained totals sh.6, 000. Due to this fact Kamau will get a revenue of sh.1, 000.

6,000 – 5,000 = 1,000


2. A small scale farmer (Simiyu) makes use of inputs that go into cultivation of crops on his farm totaling sh.28, 000. After promoting what’s produced on the farm, he realizes income of sh.33, 000. Due to this fact his revenue is sh.5, 000. See Desk under

Income – value worth = PROFIT

33,000 – 28,000 = 5,000


Clearing of land -500

First ploughing -2,000

2nd ploughing -2,000

Seed (50 kg) -2,500

Fertilizer -6,000

Labor -3,000

Weeding (labor) -4,000

Harvest -3,000

Preparation and storage (earlier than sale) -5,000

TOTAL -28,000

N.B: contemplating all residing elements, this farmer by no means has any cash in his pocket because the sh.5,000 needs to be utilized on bought gadgets e.g. salt, tea leaves, sugar, cooking oil, cleaning soap, lotion, basins, cups and kettles, plates, spoons, water jars, clothes-ware and bed-ware, paraffin, matches, depart alone educating kids. The farmer depends on his farm for meals stuffs.

3. A girl who sells ripen bananas at a neighborhood market experiences the next prices and revenues:


Value of banana bunch 150

Value of municipal ticket 20

Income from gross sales 220

(S.P) – C.P. = PROFIT

Sh.220 – Sh.170 = Sh.50

N.B: The examples above mirror the overall enterprise actions. The company enterprise organizations nevertheless would name for intensive embellishments that may nonetheless arrive at revenue that justify their organizations.

(b) How is revenue arrived at and the view of it

The above examples give an image of how revenue is arrived at and relying on its degree; it due to this fact may be seen as unhealthy or good

Understanding man’s wants

This essay is speaking about revenue. The query is HOW and WHY does revenue exist? Revenue comes about as a result of individuals have wants that must be glad. Another individuals promote to those individuals (prospects) the products and providers that fulfill these wants at a worth. However we now have seen that worth consists of the prices of manufacturing and a mark-up.

Due to this fact the satisfaction of man’s wants that results in buying and selling or business actions ultimately give rise to revenue that is being talked about right here. The interior query of WHY revenue exists is mentioned elsewhere on this paper.

Identification of assets to impact manufacturing

To be able to fulfill man’s wants, manufacturing needs to be effected. The assets which might be wanted must be recognized. They are going to embrace: Uncooked supplies, tools equipment, and labor. Due to this fact manufacturing is the transformation of uncooked supplies utilizing tools, equipment, and human labor to provide items and providers that can fulfill man’s wants.

N.B: We’re bearing on wants and assets as a result of there might be prices concerned in buying and selling transactions that contain sellers and consumers – that can result in revenue for the sellers. The method to provide will name for some group to impact manufacturing. This group can both be a single individual or a enterprise entity that’s promoting items and providers to prospects.

Want for manufacturing group and provision of providers

What’s a enterprise group?

That is the authorized coming collectively of individuals and different assets to supply items and providers to would-be prospects at a revenue. The belief on this definition is that such a company is appropriate below the legislation for the society, and is registered. The products and providers ought to supply satisfaction to the consumers (prospects). The value at which the products and providers are offered is predicted to incorporate a revenue.

The approaching collectively of such a company is not going to solely establish the assets but additionally the prices or rewards that go to such assets (elements of manufacturing)

Components of manufacturing Rewards

Labor – Wages and salaries

Land – Lease

Capital -Curiosity

Entrepreneurship -Revenue

N.B: the rewards right here may be interpreted as prices that go to the elements of manufacturing and therefore they must be understood as they relate to the revenue mannequin

Instance of individuals with wants:

An individual who’s thirsty buys a smooth drink

An individual with torn gown takes it to a tailor for restore

An individual with lengthy hair could go to the barber for hair minimize

A pupil who needs to put in writing could purchase a pen

A household might have a home or place to remain in

An individual with uncared-for footwear might have a brush and shoe polish

Wants due to this fact come both within the type of primary or secondary and have totally different precedence for every particular person

Enterprise organizations additionally exist at totally different ranges e.g. proprietary companies -individually owned; partnership companies which will contain two or extra individuals who’ve determined to come back collectively to pool their assets, and firms or corporations that contain traders who purchase shares within the group which might be registered with the registrar of corporations.

Understanding prices and mannequin resulting in revenue

Enterprise because it exists at any degree includes varied prices. These embrace:

(a) Mounted prices – that are incurred whether or not or not the enterprise is producing items and providers e.g. the price of tools and equipment, buildings, land

(b) Variable prices – these are prices which range in accordance with degree of manufacturing or exercise e.g. uncooked supplies, labor (direct labor)

(c) Overhead prices – these are prices which can’t be straight attributed to particular models. The best way they’re handled is that they’re normally lumped collectively and utilized to the products offered e.g. water, electrical energy, administrative prices.

(d) Marginal prices – it is a value that’s utilized to each extra unit produced. It’s arrived at by dividing change in amount produced (at any explicit degree) by change in complete prices (at that individual degree). N.B:

(e) Complete prices = fastened prices + variable value + overhead

In our revenue mannequin, it may due to this fact be established that:

Income – [fixed costs + variable costs + overhead] = revenue

It’s also very vital to know the idea of common prices. These are merely the assorted varieties of prices relevant to particular person models produced and offered, allowing for that we now have companies which might be concerned in manufacturing and others are concerned in shopping for already manufactured items which they in flip promote to prospects or customers.

Examples of common prices: common fastened prices, common variable prices, common complete prices

Why ought to a enterprise or enterprise individual perceive prices?

That is required as a result of the appropriate worth that can result in acceptable revenue can solely be arrived at after contemplating these points. And in addition it have to be understood that companies contribute to the event of economies. A very good instance here’s a have a look at the notorious “Triangle Commerce”. Low cost or free feedstock reminiscent of cotton, cocoa, tea, latex and timber (in addition to human useful resource – slaves), had been exported from Africa – on the west coast of the continent, and from Latin America to Europe through London. In trade, completed merchandise had been offered at exorbitant costs to the identical supply nations. This heralded the eventual mismatch of economies throughout the Atlantic therefore terminologies such because the “first world” and “third world” international locations. The style wherein companies conduct themselves can contribute to the discount of poverty within the society. They’ll additionally promote entrepreneurship within the society, extra so in poor international locations. As a enterprise goes about its actions has an affect on the development or degradation of the atmosphere.

Why ought to enterprise pursue the revenue motive?

As companies go about pursuing a revenue, how ought to they conduct themselves in relation to the atmosphere and utilization of assets, how they make the most of the revenue earned contemplating the truth that the world on which we stay on has change into a village? That is to say that points and issues have change into globalized.

Though it’s recognized that companies function in two environments viz. inner and exterior environments, their affect is properly assessed or evaluated towards varied features that may collectively be described as “the social accountability of enterprise”. The enterprise hereby assumes the place as caretaker of assets i.e. it carries out its actions for the nice of the individuals.

Enterprise entity as a citizen of the land has varied obligations to the individuals and group which it serves. These duties come below the next issues which hitherto are the core duties of enterprise:

(a) creation and provision of protected items and providers to the individuals

(b) creation of employment that gives an earnings to the employees

(c) attending to worker welfare, making certain acceptable well timed pay (wages and salaries)

(d) settlement of money owed with suppliers

(e) assembly with traders’ needs

(f) complying with the legislation of the land and authorities e.g. paying taxes

(g) defending the atmosphere i.e. finishing up enterprise actions and endeavor corrective measures with out harming the atmosphere e.g. within the space of water, air air pollution, noise, stable waste air pollution, chemical residue air pollution as is within the case of agriculture

(h) Philanthropic contributions. That is the place the enterprise contributes to worthy causes within the society.

Due to this fact it may be seen that if enterprise doesn’t behave responsibly there are a number of social issues that may comply with e.g. lack of earnings, break up in marriages, suicides, psychological illness, and so on.

N.B: as enterprise carries out its aims and makes a revenue inside agreed justifiable limits and undertakes to satisfy these obligations socially (the place the deprived individuals within the society entry providers) then it may be considered as having fun with an ethical revenue.

However the place a enterprise carries out its actions and in a technique or one other denies society entry to items and providers, or topics the society to some struggling and but it enjoys good income, it’s then having greed revenue i.e. the income are loved by only some even with disregard to the atmosphere.

How greed income and regular income come about

(Understanding the market construction wherein the enterprise operates)

Usually, most companies function within the following market constructions:

(a) Pure competitors – that is the place companies enters and exits the trade with ease i.e. at their very own will or energy. Pure competitors operates below sure assumptions:

– Simple entry and simple exit.

– the enterprise takes the value set by the trade

– it assumes no transportation prices

(b) Monopoly – right here a single enterprise dominates the trade and even varieties the trade e.g. the Kenya energy and lighting firm, KPLC. Right here, the enterprise units the value. The power to stay monopoly relies on robust monetary muscle tissue, management over key know-how or useful resource

(c) oligopoly – right here the market consists of some companies that serve the market e.g for the petroleum corporations such because the BP,Shell,Complete…

(d) Monopolistic competitors – right here the market construction displays some pure competitors circumstances and monopoly circumstances.


From the foregoing argument, it’s established that revenue is a vital evil i.e. it’s wanted for the enterprise to function in a wholesome means wherein case it’s ethical

It’s only when companies embrace ultra-vires aims in its actions and makes use of the income earned with disregard to the society and the atmosphere that it turns into immoral


The best way companies make revenue and the way they conduct themselves dictates how they’re regarding morality of revenue. E.g. within the case of monopoly companies, companies appear to go for greed revenue which is considered as immoral. Regardless of whether or not they’re contributing to social accountability or not the pursuit of revenue shouldn’t be checked out as in itself, however as an avenue of reaching good within the society therefore a vital evil.

It should even be understood that you will need to perceive the existence of the range of the individuals of the world and their communities e.g. the individuals in South America; Asia; Australia and New Zealand; the individuals in Europe; in North America and the individuals in Africa cherish their very own respective views. We now have nevertheless established right here on this paper a consideration of the place of the worldwide village towards the present universally shared pursuits, markets, currencies, schooling methods and data know-how and so on.

For African societies, it’s higher in the event that they body the event of their economies primarily based on attachment to the soil. This assertion is framed so as a result of wanting on the actions that may result in creating extra employment and sustenance have attachment to the soil and the environmental administration e.g. searching; pastoralism; agriculture; tourism; mining; and the at present astronomical technology of electrical energy through hydro, or photo voltaic. Enhancement of such actions shall in the end metal the present dwindling of crops rising; manufacturing of meals that shall therefore stimulate the event of agriculturally associated industries to fulfill man’s wants. There may be an avenue for individuals to make use of their potential by shopping for the wanted merchandise. This shall additionally strengthen the industries that produce them.

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