Today children we are going to study how a corporation works and we are going to pretend you own one, it is your lemonade stand. So let's say you have a lemonade stand where you sell lemonade for $1 a glass. You then hire a few people to work the stand so you don't have to and you pay them 5 cents an hour. If you sell 100 glasses of lemonade a day, and your workers (you have two) get paid 5 cents an hour and work 10 hours each, what is your profit if it costs you 2 cents to make one glass of lemonade?
Equation
100 X 1 = 100
100 X .2 = 2
.5 X 10 = .50 X 2 = 1
100 - 3 = 97
Now does that seem fair to you?
No, it's not fair but it would be fun to get all the money and I can buy whatever I want with it including a new 3-D Dsi and as many games as I want. Let's open a lemonade stand, right now, today.
Okay, so it's great to be the corporation but what if instead of the corporation, you are one of their workers. How would you feel then?
I'd say screw that and go open my own lemonade stand. I'd work for myself and make a ton of money just like they do.
Great idea, but there's just one problem, you have to buy your lemons from the corporation. They own all the lemon trees.
So what? I'll just buy the lemons from them then.
Okay, they will sell them to you for $1 a lemon and it takes one lemon to make one glass of lemonade.
Man, that's a rip off. How about I grow my own lemon trees first so I don't get ripped off?
You could if you had a lemon tree seed but they own the seeds too. They will sell you a seed for $100,000 but there's no guarantee it will grow. If it does grow, you have to pay them 50 cents for every lemon you grew from the seed they sold you. That's the deal.
Man, I'd have to be rich to afford that.
Exactly.
Wait, why don't I buy a lemon for a dollar and use the seeds from that to grow my trees.
Another great idea, except that the seeds have been genetically engineered to commit suicide so they can't grow.
Wow, that's horrible.
Okay, so what if I save up and agree to buy the lemons from them at 1 dollar a piece and I sell my lemonade for $2 instead of $1.
You could do that but why would someone buy lemonade from you for $2 when they can get it from the corporation for $1?
This sucks, well how about I just sell it for a little more like $1.25 and I deliver the lemonade to your house.
Great idea, lets do the math. You sell 100 glasses of lemonade, it costs you $1 to make each glass, and you deliver so you have to pay for gas which costs you roughly 20 cents per delivery, not counting your time, of course.
equation
1.25 X 1 = 125
100 X 1 = 100
100 X .20 = 20
125 - 120 = 5
Now lets say you worked 12 hours to sell 100 lemonades which made you a profit of 5 dollars. How much did you make an hour?
equation
5 divided by 12 = . 44
That's less than what I would have made if I worked for the corporation and only worked 10 hours. Not good.
Not good, but at least you work for yourself and no one can tell you what to do. You are your own boss.
That's true. I don't like being bossed around.
One more thing.
What's that?
All of a sudden the people who own the gas decide to double their prices. They are a corporation too.
What?!!!
Yep, it's true, they have decided they aren't nearly rich enough so they raise the price of gas to double of what it was when you started your business. Can you still make money?
Let me see. 125 - 140
Nope, now I'm losing money. It would cost me to sell lemonade. That's not fair. I'm not doing that. That would be stupid.
Yes, it would so what would you have to do?
I guess I would have to charge more or it wouldn't be worth it.
Yes, you would but here's the deal. A lot of your customers who like lemonade also have businesses where they use gas to run them.
So they are raising their prices too?
Yes, and some of them have decided they will have to give up their lemonade drinking habits for more important things like food.
Bummer. I'd have work harder and longer to get new business, wouldn't I?
One more thing.
Now what?
The guy with the lemons has decided he's not rich enough either, even though he has more money than he could ever spend in his lifetime, and wants to raise the price of his lemons.
I give up. I'm screwed.
It gets worse.
How could it get worse?
Since the corporation has so much money it's friends are in high places such as the government and it has decided it wants a law made that says you can't sell lemonade out of your home because it isn't safe and it might not be clean. If you still want to do it you will have to pay to have your home inspected regularly.
Are their lemonade stands inspected?
Yes, but they don't have to worry about it because they just pay off the inspectors so however they are making their lemonade they always pass.
Figures.
There is so much more but that's enough bad news for one day.
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