Profit System Models of the Firm, Industry, and Business Sector

Abstract

This chapter proposes an integrated profit system model of the firm consisting of dynamic relationships among fundamental business variables. The first part of the chapter derives theoretical profit system models of production, capital stock, profit rate, profit margin, total profit, and employment for firms in the business sector, in addition to related models of employee compensation and other business variables. The second part of the chapter provides empirical profit system models that capture the relationships between these variables as a system of dynamic equations. These empirical models can be applied to individual firms, industries, and the whole business sector.