Let’s take a phone merchand for example. Let’s say that he sells the phones for 500$, but his income from a phone is 50$ because they are sold 450$ from the factory. So, if just ONE phone isn’t sold, he’d lose 450$, and he’d need to sell 9 phones (450÷5) just to come back to the starting point.
This question also works for any kind of merchandizing, including food (which becomes unsellable after a few days unlike phones).
So how do they make profit of it ? I’m confused
This post is the same as a post I made 1 hour ago that corrects some words, sorry for my bad english.
In: Economics
Volume, you are correct if he doesn’t have sales but assuming the merchant thinks he can sell many of these items then he probably took out a loan to buy the initial phones. Taking you example, lets say he takes out a loan for $4500, buys 10 phones and then sells them all, he now has $5000, he makes a small payment on the loan of say $100, buys 10 more phones for $4500 and pockets the remaining $400 as profit. He then does this over and over again. This is a very simple example and their is a lot more costs and things that go into it but this explains you question.
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