Free Enterprise - Principle 3

Principle 3: People are motivated by profit and will work to get profit so they can buy the essential and non-essential goods and services they need or want.

People may grow a garden and sell the vegetables. The money left over after the costs of growing the garden is called profit. Profits are desirable because they give people the freedom to buy essentials and non essentials so they can enjoy life. With their profits, they can buy whatever they want from the shopkeeper! The shopkeeper likes making a profit too. People think very hard to come up with ways they can earn a profit. Some say, “Profits equal power!”

If a man is a painter he may offer to paint his neighbor’s house for a certain amount. He figures cost of the paint. He figures the cost of brushes, maybe a new ladder if the house is tall and the cost of some work clothes. He adds up the costs of all the equipment he needs. Then he adds on more money that he can keep for himself—money over and above the equipment costs. This will be his profit. If he adds on too much profit the paint job will be too high and the neighbor will give the painting job to someone else. If he adds to little, he won’t make enough profit to make it worth his time and effort. He tries to get it just right—not too high and not too low. He is motivated to get the job so he can earn the profit.

Whether it is starting a business or taking a job on a farm or in a factory, people do it to earn a profit. People are very motivated to earn profits. Why? So they can buy the essential and the nonessential things of life that they want!

Story

Allen approached Andre cautiously. “If we work together as a team we could catch enough fish and gather enough firewood and do whatever else the others need, that we would have plenty left over—if you get my drift!”

“Why would we do that?” Andre asked. “Let them get their own fish, wood and whatever!” This made Allen grin.

“What?!” snapped Andre, seeing Allen grinning like a Wall Street profiteer.

“You don’t get it, do you? Let me explain”, said Allen, feeling a little superior now. “Some of them are not as good at this stuff as we are. We can SELL them our extra fish and whatever. We all had money when we crashed. There is lots of money here! It might as well be ours! They can buy from us. We all win! They don’t have to work so hard and we get the profit, you know, the money left over after we have paid ourselves for our labor and so on.”

Andre was grinning now too. “Yeah, we’ll have our own little business. We can figure our costs, like you said—labor and other costs—then charge more than that. We will be rolling in the profits!” Andre was as excited now as Allen. He could see that there clearly was a need, and he and Allen could fill that need, and make money doing it!

“We don’t have to stop with fish and wood!” Allen exclaimed. “Like with the new project you thought up … you know, building huts. We can sell them too. We’ll figure how much it costs us—all the wooden pegs to whittle, ropes to be made of braided vines, laborers to help, etc.—and we won’t try for too big of a profit, and not too little of course; just enough so they will pay it and we still can earn a nice little profit.”

While Andre was thinking of how much money to charge the other kids for a bundle of six fish, David and Kovrich walked up slowly, heads held high—like they were important people.

Everyone in their almost-to-be “village” wanted things, essentials for sure and the nonessentials too. The idea of how to gain a profit so they could get the things they wanted was on the mind of others too—not just Allen and Andre.

Kovrich, usually a little shy, spoke up first. “Hey guys. We are here to make your lives easier.”

“Oh yeah?” Shot back Allen. ”Does this have anything to do with the story going around that you guys took all the heavy duty clear plastic that was still good and hid it?” Everyone was silent for a moment.

“Ok, but it’s ours now. I know you guys will build a cabin,” David said. “You are going to need windows—we’ll sell you the heavy duty clear plastic you need for your windows. We know you’ve got money.”

“And I suspect you are planning to earn a nice little profit”, murmured Andre.

“Of course,” shot back Kovrich. “If we don’t make a profit we can’t buy stuff to eat or rent Sabetha’s DVD player for an evening.”

Activity: Teacher can ask: “How many of you want some extra money?” Most will say they want some money. Teacher can say: “You are not different than the rest of the world—everyone wants money. That is why they work to make a profit!”

Ask someone to define “profit”. They can refer to the chapter or story to make sure they know what profit is.

Divide the class into groups of 4 to 8 students per group. “Let’s see who can make a business plan that will allow for the most profit for the owners.” Tell them they 9 must have a realistic 1) Product, 2) material expenses, 3) labor expenses, and 4) permits fees, etc. Give them two or three minutes to choose a product. Go to each group quietly and learn what their product is. If it is realistic, tell them to go ahead with their business plan. Urge them to be realistic. Tell them, “see how much profit you can realistically make!”

Give them ten minutes to have written out their costs and anticipated profit for the span of one year. They may need a few more minutes.

Have each group report. As teacher, you can praise and criticize their plans for being realistic or not. Give applause to the group that realistically made the biggest profit.

Help them see that it is not easy to make big profits, but it is possible. Explain how competition from others will not allow them to make unrealistic profits for very long—someone else will produce the product/service at a cheaper price. Conclude by saying: “People work hard to make a profit so they can buy what they need and want. Some are better at it than others—but everyone wants to make a profit!”