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.Underlying supply considerations is the fundamental economic reality of scarcity. Agricultural products such as those mentioned above are subject to weather and other factors.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.