Say I buy a 2 dollar bottle of Coke from a grocery store. I go up to the cashier, I give them the money, they put it in the till, and I walk away. I have given money to the store, who presumably will then use that 2 dollars to fill out their employees paychecks, pay for things in the store like water, electricity, heating, janitorial staff for cleaning, etc, etc.
After all of that, how will Coke ever see my 2 dollars? It would seem to be that the money would have diluted beyond all recognition by that point.
In: Economics
Different than how you describe, at least in most cases. Usually, the grocery store actually already bought that bottle of coke at a reduced price, say $1.50. That $1.50 is already in Coke’s pocket. The store then sells it to you for $2, so they make back their money and then their profit. All the costs in the store come out of the store’s revenue of $0.50.
You are looking at the chain of money backward. Coke mass produced the product at a cost of 50 cents a bottle. Then sold it to your grocery store for $1 a bottle. The grocery store sold it to you for $2. In all of the steps the difference between cost and sale is gross profit . Out of each step profit margin is where the cost of labor is paid. So net profit occurs in the difference. If coke makes a profit after labor and production. Of a dime. The grocery store sees roughly the same margin. These numbers are not exact but for example sake
Where do you think the store got the bottle of Coke from in the first place? The store already bought the bottle of Coke. The store sells it to you for more than they paid for it, which pays them back and earns them a profit. They they use that money to buy more bottle of Coke to sell to make more money.
Many retail establishments actually operate on a credit basis. They bring in various products from a distributor and are generally given credit terms, some times net 14 days or net 30 days before they begin to accrue interest. Could be longer depending on the industry. You buying the coke puts the money into the pocket of the business who can then pay their distributor who probably then pays the company that manufactured that item
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