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Each of us deals on a daily basis with many small stores and other retail businesses. These firms may be small but they reflect most of the major concepts of economics.
For my project I have selected a retail food store or supermarket…

Introduction

Each of us deals on a daily basis with many small stores and other retail businesses.

These firms may be small but they reflect most of the major concepts of economics.

For my project I have selected a retail food store or supermarket. These stores operate

on a very tight margin, so that the difference between profit and loss, and indeed between

security and survival, is a very narrow one. They must therefore apply sound economics.

The margin for such stores depends on the spread between all of their costs and

expenses and the selling prices of their products. Those selling prices, in turn, depend on

the supply and demand for those products. If there is a shortage of, say, coffee or grain,

the costs of those products will rise to the retailer, but those increased costs may not be

passed along to customers. The role of competition is crucial here, as if there is heavy

competition, each store may have to absorb much of the cost increases to avoid losing

business. That would erode their profit margins and perhaps even cause losses to them.

In addition to supply factors such as shortages versus surpluses, there are many

demand considerations. For example, if a particular food product is determined to be

harmful for health reasons, its demand will drop drastically. On the other hand, foods

which are considered particularly healthy can experience a sudden sharp rise in demand. ...
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