Summer Fun: The Economics of the Lemonade Stand

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• Part 2: Strategies

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• Want vs. Need: Basic Economics
Supply and Demand: Basic Economics
Basic Economics: Goods and Services
Basic Economics: Scarcity and Choices
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Basic Economics: Inflation
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Part 1: Wanting Things

When it's really hot outside, you often want to stay cool. What are your options? Sit under a tree? Sounds cool. Go swimming or play under a hose? Equally cool. Sit in front of a fan or an air conditioner? Now that's a COOL idea. But unless you're swimming or playing in the water, you're probably sitting still, trying to minimize your heat production. You don't want to move too fast or too much for fear of getting even hotter.

So how do you spend your time? Reading a book? There's a way to learn. Watching TV? Yes, you're sitting still there. How about playing a video game? You're probably sitting still there, too.

Summer is also a time when we want things. Big, exciting summer movies come out, and we want the latest books or action figures that go with those movies. Or, we want to go see those movies. Sony or other video-game makers release the latest games for their consoles. We want those latest games.

All these things require money. Where do we get it? Chances are, someone at your age doesn't have a lot of it. (If you do, then you can still appreciate the possibilities that follow.) You could earn money in the summertime by babysitting or mowing lawns or helping with cleanup. You could also operate a lemonade stand.

You set up shop on a sidewalk or in front of a house or business. You have at least one pitcher of ice-cold lemonade, and you're offering it to anyone who walks by--for a very low price. You most likely got the lemonade from someone in your family, so you don't really have any costs. So, everything you make is pure profit. If you sell your lemonade for 10 cents a glass, then you need to sell only 10 glasses to make a dollar. Sell about 50 glasses and you'll have enough to see that cool new summer movie or buy that great new book or video game.

But what about that 10 cents you're charging? Could it be more? You might charge 50 cents a glass. You might also end up like the boy in the graphic at right: He's very sad because no one is buying his lemonade. Why? He's charging too much.

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