Profit ensures that companies make the best use of their limited resources. When companies earn economic profits, opportunity cost grows for those who own the resources. When one company grows its profits, other companies are more likely to enter the same industry to increase their own profitability.

As more companies move into the same industry, the market price and profits will likely decrease. Because of this, profits reflect how much consumers and shareholders value certain resources.

Because some people think pursuing profit is a selfish venture that does not benefit others, they believe that companies growing their profits have a negative impact on the rest of the world. However, in The Wealth of Nations, Adam Smith says, "It is not out of the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest" (1776/2000). Smith explains that being self-focused (which companies must be to grow their profit) actually allows companies to meet the world's necessities.

Smith, A. (2000). The wealth of nations. New York, NY: Modern Library. (Original work published 1776)