What is the role of economic profit in allocating resources?
Business owners want to get the most profit possible from their resources. This means not only making profits from their current business, but also constantly looking around for other opportunities to increase profits. If you own a fried chicken restaurant, you pay attention to how much profit other types of restaurants are making. Suppose consumers decide they like hamburgers more than fried chicken. Hamburger sellers will then be making more profits than fried chicken sellers. You may decide to close your fried chicken restaurant, and reopen as a hamburger restaurant, to get more profit. Your decision to change from selling fried chicken to selling hamburgers has an impact on how resources are used in the economy. There are now more people working in the hamburger industry, and fewer in the fried chicken industry. The demand for hamburger meat will increase, increasing the quantity of hamburger meat produced; there will also be an increase in the amount of other products that go into
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