Describe briefly the Innovation Theory of Profit.

1.	Describe briefly the Innovation Theory of Profit.
Answer» Innovation theory was propounded by Joseph. A. Schumpeter. Profit is the reward for “Innovation”. Innovation means invention put into commercial practice. An innovation may consists of: 1. Introduction of a new product. 2. Introduction of a new method of production. 3. Opening up of a new market. 4. Discovery of new raw materials. 5. Reorganization of an industry/firm. 6. Anyone of these innovations leads to a reduction in the cost of production and thereby brings profit to an entrepreneur.

Answer»

Innovation theory was propounded by Joseph. A. Schumpeter.

Profit is the reward for “Innovation”. Innovation means invention put into commercial practice.

An innovation may consists of:

1. Introduction of a new product.

2. Introduction of a new method of production.

3. Opening up of a new market.

4. Discovery of new raw materials.

5. Reorganization of an industry/firm.

6. Anyone of these innovations leads to a reduction in the cost of production and thereby brings profit to an entrepreneur.

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