Our town, Wolfeboro, is a tourist attraction and the many small businesses depend on the tourist to make money. Our team wanted to figure out how store owners price their items. We do understand that prices are affected by labor costs, storefront costs and other expenses involved in running a store.
The theory that we wanted to test was how the demand for a product affected the cost, so we tested the theory by planning what item we wanted to sell. We decided on delicious chocolate chip cookies.
We planned the process we would use to determine how a business might figure the market value of the product they were selling. The market value is the price you can charge for a product that most people will be willing to pay. We had to: 1) design charts to summarize how many students would purchase a cookie for different prices; 2) establish a list of projected prices we, the producers, would charge per cookie; 3) determine how many cookies we would be willing to sell at each price; 4)survey the fourth and fifth grade students at Crescent Lake School to identify the range of prices they would be willing to pay; and 5) summarize our survey graphically to determine the market price.
Our market price had to consider the cost of making our product, delicious chocolate chip cookies. First we made the chocolate chip cookies. When we finally finished making them we had to calculate the cost. We used the cost of the ingredients to determine the cost of each cookie. We totaled the cost of the ingredients, and divided the total expense by the number of cookies we made. We made 75 cookies. The cost ended up being about 12 cents per cookie. We did not include the cost of our labor, the cost of electricity to cook the cookies, the use of equipment or other business expenses a real bakery might have producing the same product.
The survey was completed with 150 fourth and fifth grade students. The results indicated that all the students would take a free cookie. This would be producing a product at 100% loss.
We got very excited about the project and forgot to control the number of cookies we put on display . We showed the students that we had a lot of cookies to sell. When we started selling the cookies, the best price we could get was $ .25.
The economic experience taught us several things. It was a real learning experience, because a business person needs to keep track of all data to decide whether or not a product is a good money maker. We also learned that if you have too much of a product and consumers (buyers) know this, they will not pay the true market value for the product. They wait for rock bottom sales.
From our experience, we recommend that when a person is trying to sell a product, she or he must limit the supply and sell only to the customers who are willing to pay the most for cookies, or a pay fair market price. Otherwise, the seller or producer will not earn enough money to cover the cost of the production of a product. In our simulation we earned enough money to cover only the cost of the ingredients. A bakery would go bankrupt using our process.
It was a fun experience, but our experience taught us that we need to think more about our process and follow our design more carefully. As a young "entrepreneur", this experience provided the basis for designing a more detailed plan to set up a business experience.
 | ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
|
|