Size of Market and Inducement to Invest

Investment means the expenditure on the making  and installation of capital goods construction of factories and the making of machines and

their installation. execution of irrigation and power  projects. the construction of roads. railway. u Obviously an entrepreneur will be induced to invest III factories. machinery etc  if he expects sufficient return  on his investment. Businessmen   ill ave incentive to invest only from a motive of earning a profit It is  the expectation  f profit which is a fundamental factor  influencing the amount of investment in a   country at a given time. In a poor country the low level of  investment is due to low   expectation of profit because of less demand for goods or a small size of the market.  Let us understand clearly why there  less  inducement to invest in a poor country.  t is easily  understandable that. in under developed countries

said Division of labor is limited shy the size of the  market can say in the  same manlier that inducement  to invest depends on the size of the market. Inducement to invest. in the last analysis depends  on the size of the   amend or market. The small size of The market or the low level of Ill maid for the products concerned discourages the entrepreneurs from investing. This will be clear Rom an illustration. In a modem  dairy. milking. filling up bottles and their loading  all these operations are done with the aid of automatic machinery. Will the instillation of such a machinery in every Indian town be profitable for individual entrepreneurs  Obviously it will not be profitable. Per