– when an industry or market is described to be ‘worth an estimated x dollars’ what does that actually mean?

Question

– when an industry or market is described to be ‘worth an estimated x dollars’ what does that actually mean?

In: 45

Answer 1

If you could magically fulfill at the demand in the market at the market price, you would collect X in profit. Essentially, it’s the sales revenue for that market.

Of course, magic isn’t real, so it’s also important to know how much it would actually *cost* to fulfill at that demand. Your profits would then be the initial revenue number, minus these costs. The profits in a small market might be much higher than the profits in a big market.

So these absolute market size calculations are maybe not the best for investment decisions, but they can still be useful for thinking about the economy and economic policy. If the market for VR headsets is going to eventually be $1 trillion (just making up a big number), it’s possible that nobody really profits, but that’s still an enormous amount of labor, capital, marketing, and general social buy-in.