Set-up, hah!

Everyone, excluding of course the minority of crazy, wants money. They work for it. The world revolves around all kinds of currency. Some even like money, they want it, seek it, plaster their walls with the smallest denomination banknotes- would not it be much more fun to make money? That's what entrepreneurs are up to. They not only seek money, they seek profits. Otherwise they'd lose money! Not in the sense of displacement, nor the money knowing its exact location, but ignoring where the location is. It would disappear completely, whilst existing on a computer screen with a big minus next to the figures. A profit is the return gained on an undertaken risk.

A risk of not making any sales, is the highest disincentive faced by enterprise. It's not the fact that consumers will look down upon businesses, whisper cruel explicitness of disrespect and walk-off leaving the set-up with a mini mental breakdown. People who operate at social norms and have mobility of status do not cross boundaries that would take them deeper into description, they just won't buy products that are of no use or interest to them. The business will suffer bankrupt, whither and die, although economics is a religion with strong evidence of reincarnation. The more unconventional a good or service is, the higher the risk of not making any sales. This is more like Business Studies- businesses- but economics is a pinch of everything.

So, how are profits made? Pressed firmly onto a blank banknote to be? In a way. Total revenue needs to be higher than total costs, simple. Here is a diagram from an exam question that I have conveniently found in a pile of papers not labelled 'GCSE Economics':

draw a break-even diagram for suicide

Costs are costly, they also have different types and apply to everyone, not just entrepreneurs who sweat their backs off, somehow. Fixed costs are the ones that do not change with output- the same as suicide produces death, where the fixed cost is life, non-variable mortgages slowly itch away when you see your so called 'smart' friends, who are just indeed lucky boast about their low variable interest payments and stay quiet of the soaring ones, where the fixed cost is the interest paid each month. Variable costs vary with output. For example, slow death may be the output of a low variable cost of jumping off the roof of your house and unintentionally breaking your spine, surviving and taking years to die as a vegetable, whereas a higher one would include buying strong drugs or domestic cleaning products. Total costs are all costs added up. Total revenue is all the money made by the subject of the diagram- in the example above, the pizza business. Loss is made up to the break-even- at which TC=TR -and profit  is everything after the break-even point.

Now, I said I will tell you how to make a profit, I lied. It will be in some other post. Not everything is as it seems, exactly the same as an actor depicting a KKK member walking down Barking and Dagenham from a performance after which he has forgotten his clothes in the dressing room.

macro after next micro, Paulius