ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos


Math Videos 43 videos

Math 5: Researching Business Needs
11 Views

Want to start your own business one day? Then this video is a must-watch. If you're just planning to keep working at Wendy's forever, then move along.

Math 5: What is Profit?
22 Views

If you know your earnings, and you know how much you've spent, how do you calculate your profit? That's right - you hire an accountant. (Or, if you...

See All

Math 5: What Should I Charge? 1 Views


Share It!


Description:

If you're looking to open up a profitable lemonade stand, this is the video for you. If you're looking to open up a lemonade stand that loses money...you probably don't need our help.

Language:
English Language

Transcript

00:04

[Dino and Coop singing]

00:13

When you walk through a store, you probably notice that different items have different

00:17

prices.

00:18

…or maybe you don't, and you just buy whatever color cereal box is the prettiest. [Row of cereal boxes in a supermarket]

00:22

Hey, whatever works.

00:23

But say you do notice the different prices…why are they different? [Jelly is scanned at a till]

00:27

Where do these prices come from?

00:28

It's not just someone in the backroom throwing darts at a dartboard.

00:31

There are lots of things that affect the prices of goods and services, even if the dart thing [Darts being thrown at a dartboard with prices on them]

00:35

would be easier and a bit more fun.

00:37

So let's say you're starting a lemonade stand.

00:39

You've got your stand set up, a fresh batch is in the pitcher, and you're ready to make [Kid walking to his lemonade stand]

00:43

some sales.

00:44

…Ooh…one issue….you haven't set a price.

00:46

How much are you going to charge for each cup of lemonade? [Price sign has a question mark on it]

00:49

Sure, you could use the pay-what-you-can model, but you might end up with a lot of clients

00:53

who mysteriously can't pay anything more than a twig and a rock.

00:57

And while a twig for a pitcher of lemonade is a pretty good bargain, it doesn't do you [Kid tries to pay with a stick in a shop]

01:01

much good.

01:02

One important thing to think about when setting a price is how much it costs to make the product.

01:06

Whatever the cost of the product happens to be, you should be charging a bit more, so

01:10

that you're actually making some money.

01:12

After all, it's a business, not a lemonade-based charity.

01:15

If we think about our lemonade stand, it might turn out that once we pay for sugar and lemons… [Ingredients for lemonade]

01:19

…an entire pitcher costs us two dollars to make.

01:22

And if we can get eight cups of lemonade from each pitcher, that means our cost per cup

01:27

is $2 divided by eight, or 25¢. [Cups of lemonade laid out]

01:30

Quarters might be nice and shiny, but if we only charge 25¢ per cup, we're going to end

01:34

up with a grand total of zero dollars profit.

01:37

So if you opened this stand for more than just the love of making lemonade, you'll want [Love hearts coming from boy at a non-profit lemonade stand]

01:41

to charge more than 25¢ per cup.

01:43

May we suggest one million dollars per cup? [People walk up to the stand]

01:46

Which leads us to our next point…

01:48

Another important thing to think about when setting a price is what a fair price would [Customers walk away]

01:51

be.

01:52

If we're selling lemonade, we don't just want our price to cover costs.

01:56

We also want it to be something that people on our block could afford.

01:58

So it might not be the best idea to set our price at $1,000,000 a cup. [Kid looks thoughtful]

02:02

Unless everyone on your block happens to be a billionaire. [Oprah and Bill Gates at the lemonade stand]

02:05

Finally, it's also worth thinking about your target goals.

02:08

Let's say you set up this lemonade stand so that you could buy a pair of roller skates

02:11

that cost $75.

02:13

If you charge $1 per cup, you'll be making 75¢ profit per cup…

02:18

…so once you sell one hundred cups, you and your precious roller skates can start

02:22

your life together.

02:23

However, if you charge 26¢ per cup, you'll only be making 1¢ profit per cup… [Workings written in a notebook]

02:29

…which means you'll have to sell 7,500 cups to get those skates.

02:33

And by the time you'd finally get those skates, you'd probably be a little more worried about [Old man rollerskating]

02:38

retirement… [Old man falls over]

Related Videos

ELA 5: How to Spot Bias
3247 Views

Check out the best bias video ever made, courtesy of the most awesome and amazing educational website in existence.

Social Studies 5: Impeachment
1011 Views

No, this isn't a terrible new mint-peach bubble gum flavor...though it does tend to leave a bad taste in people's mouths.

Social Studies 5: Jamestown
335 Views

Those settlers in Jamestown really should have settled down with all that land-stealing. Tobacco's bad for you anyway.

Social Studies 5: The Birth of Canada
199 Views

Being born out of multiple wars doesn't quite seem to fit the peaceful, polite Canadians we know and love today...oh wait, they were called The Bea...

Social Studies 5: How to Analyze a Political Cartoon
636 Views

Not every cartoon is meant to entertain small children while their mother gets some "Mommy time." There are also political cartoons, which are mean...