Hello. This is Ten Watanabe of the R86plusA blog. There is a formula that says income - cost = profit.
The idea of income is generally based on production (quantity) x price (price) in economics.
However, in the real economy, it is absolutely not possible to sell all the quantity produced as it is, so it seems that the general income formula is to use sales quantity x price.
If all the products can be sold, you will mass-produce Mercedes-Benz.
So, in this case, if the sales quantity is Acheieve x (Ax) and the price is price(p), it becomes pAx. As for the cost, the production volume is multiplied by the cost per unit, so it is production volume (x) x marginal cost (MC).
So, if you become an enlightened monk who says that you don't need profit, your profit will be zero.
You can't think of zero profit. If you are asked to shop without any trouble, you will not accept it obediently. At least let me buy one of the sweets.
After all, income - expense = profit is pAx-xMC=π. And if the profit is zero, pAx = xMC, and the sales pAx and expense xMC match.
If the production volume is 15 units, the sales quantity is 10 units, and the marginal cost is $5, then p=xMC/Ax, so p=(15×5)/10=$7.5. In other words, if you set the price per piece to $7.5, you will not be in the black or in the red, but the sales and expenses will be the same, that is, zero profit.
Here, the story jumps skyward, but there is a concept called the quantity theory of money in macroeconomics. The formula MV = PT is M: money supply, P: prices, V: speed of money circulation, and T: real GDP.
Here, the person who hits the nail on the head is sharp. If PT = MV, it can be reduced to the formula of income = expense. If p=P, T=Ax, M=x, V=MC, then the two formulas will match.
Furthermore, if we say M: money stock M3, T: real GDP, P: CPI (consumer price index), and V: multiplier effect, the story will expand more and more. The equations pAx=xMC and MV=PT are also related to the IS-LM model of macroeconomics.
From here, through macroeconomics and microeconomics, new ways of thinking will be born more and more.
If you push it further, the formula p = MC is famous in microeconomics, but if P (price) = V (multiplier effect), M (money supply) = T (real GDP).
At this point, we can see that the current money stock M3, which amounts to 1,500 trillion yen, can achieve an efficient economic environment suitable for market principles by matching the real GDP of 550 trillion yen.
As an aside, money stock = credit multiplier x monetary base.
Monetary base = "Bank of Japan bill issuance" + "money circulation" + "Bank of Japan current account".
And that's it. See you then.