is it the numbers or the percentages that matter?
this is a subject that often does spark some good debate. There are many theories on how much someone "should" make when offering a product or service. Pure capatalist types, contend that "whatever the market will bear" is the only way to go. They contend that all other factors are irrelevant. They are more comfortable in a realm where laws such as "supply and demand" which are constant, rule the day. Objections of fairness, sacrifice and decency play no role whatsoever.
Others contend that goverment should regulate prices on many fronts. Capping earnings and forcing companies and individuals to "do their share" and the like are paramount to their platform.
I subscribe to neither position inherently. And most of the time, I side with the more capatalistic side of things. But sometimes, I do see a need to stop out of control and greedy corporations by legally raping our society in the name of "market economies." Granted, those on the left get out of control as well, looking to regulate everybody and everything they can, revealing just a general contempt for any business larger than the corner store.
How and when we balance these two factions is really not what I wanted to discuss however. That is just a little too broad in my opinion, to dive into headfirst.
But in general, what is a fair profit to you? Not what should be regulated, and the politics and rhetoric behind it, but when you shop...how much is "too much" when you hand over your hard earned cash to a clerk or salesperson?
Sometimes we focus on percentages. Like when the oil industry defends it's record profit numbers. Other industries, have to look more at the actual amount of dollars produced per unit vs. a percentage.
For example, the resturaunt business typically sell food or booze at a 3 to 1 up to a 5 to 1 gross profit ratio. Meaning that whatever the food costs (if it costs a dollar to make a hamburger) you sell it for 3 to 5 times (3 to 5 dollars for the burger) what it costs you. The new car dealer, by contrast, generally makes between 1000 and 3000 dollars gross profit on a car selling for 20 to 30K (despite their appearance of "losing money on every deal, and making it up in volume"). Retail on a piece of fine jewelery might be 10 times what the wholesale cost of it is.
From what I can tell, 3 factors seem to dictate the profit. The amount of dollars generated typically means a smaller percentage. The exception, and 2nd factor seems to be the overhead involved. And of course, competition always plays it's part in our economy.
For example, the jewelery man has more overhead in paying for his storefront / insurance / inventory / salaries / etc... that greatly brings down his final net profit. Also, a jewler is going to often sell at a "discount" as a rule, thus never actually seeing a true "retail profit." And people generally feel good with the belief that they saved 50% or whatever off of a pie in the sky, inflated retail price.
But on the other hand, people seem to resent when a car dealer makes ANYTHING on a sale. Of course, unless you are buying a Saturn or a rare car, nobody pays sticker price on a car. But when I used to be in that industry, it used to amaze me when people showed an obvious contempt and a desire for the dealership to actually lose money on a sale. They felt entitled to it, almost.
But in the end, in the type of society we live in, businesses need to be profitable, on the whole. But what is fair? It seems that most businesses, especially larger ones, like the oil industry, like to focus entirely on the percentages, which almost makes them look benevolent. that is, until you look at the sheer numbers.
The guy in the corner diner may turn a dollar burger into a 4 dollar lunch special, and he will quadruple his money. But then again, he only made 3 bucks.
Any thoughts? What is a fair profit to you?