Question

Why do you think is an inequality in the profits earned in the chain of markets?

Answer 1

There are numerous reasons for inequality in the profits earned in the chain of markets. These are discussed below:

1. Lack of resources: The main cause of inherent inequality of profits is the lack of resources with the real producers and artisans. They solely rely on the traders and merchants for their raw material requirements. Thus, the merchants have an upper hand in negotiating terms with the weavers and, thereby claim undue profits.
2. Financial constraints: The distribution of profits is along the lines of financial resources owned by the individuals in the production chain. The weavers who are already hand to mouth find it difficult to manage a handsome gain as they have certain personal and social obligations to meet unlike the merchants and the foreign importers who are financially well equipped. Weavers and artisans also do not have access to credit from banks and therefore have to depend on their suppliers or local moneylenders .
3. Role of intermediaries: The presence of a large number of intermediaries in the market system makes the condition of the actual producers worse by taking away their share of gain every time.
4. Market contacts: The weavers have no market access, so they get paid a meagre amount suggested by the merchants. The merchants, on the other hand, have good contacts, making them take away a decent cut from the profits. The manufacturing units also have a wide range of contacts in the overseas markets, making them eligible to take a large share in the profits. Finally, the importers are the largest gainers since they have excellent penetration in the international market.