Video Title: Fresher Than Fresh: Economics: How Business Builds and Distributes Wealth

Video Title: Fresher than Fresh: Economics: How Business Builds and Distributes Wealth Run Time: 6:27

Classroom Application: Instructors will find this video useful in the study of capitalism, consumer sovereignty, and monopolistic competition, as well as, business models for small, entrepreneurial businesses. Fresher than Fresh serves as a great case study for this type of business model because an entrepreneur started the business with support from local funding and has built the entire design, concept, and personality of the business around a unique product concept. Providing students with such knowledge can help them to appreciate and better understand the way small businesses are built and the way their wealth is distributed in a free-market economy.

Synopsis Fresher than Fresh was founded by entrepreneur, Lindsay Laricks. The company sells 100% natural snow cones from a mobile trailer in Kansas City, Missouri. Because of free-market capitalism, Lindsay is free to charge what she wants and to keep most of the profits she earns. Due to consumer sovereignty, customers also have the right to choose to buy or to stop buying her product. Fresher than Fresh has a monopoly on gourmet snow cones in Kansas City for now, until new vendors begin to compete against Lindsay, creating a system of monopolistic competition. In addition to the threat of future competitors, Fresher than Fresh is challenged by economic cycles, as well.

Discussion Questions 1. How did Lindsay Laricks obtain funding to start her business Fresher than Fresh?

Lindsay obtained funding by applying for support from an online kick-start program. 80% of the funding she received from this program came from local supporters who shared a belief in her business idea.

2. Describe the differences between capitalism, communism, and socialism.

With capitalism, business owners are free to charge what they want and retain most of the profits the business earns. With communism, those who run a business must give all profits back to the government. Rather than being considered an entrepreneur, those running a small business are considered employees of the state. With socialism, business owners are given more choices than in a communist society but they are then highly taxed on their earnings to pay for government services, leaving little profit for the business owner.

3. What was Adam Smith referring to when he talked about “the invisible hand” of economics?

Adam Smith’s “invisible hand” reference was about the natural force that finds an equilibrium price based on how much consumer demand there is for the supply of products and services available. Quiz 1. What gave Lindsay Laricks the idea for Fresher than Fresh? a. a cupcake trailer in Austin, Texas b. a snow cone business at the local mall c. a gourmet ice cream trailer in Kansas City, Missouri d. a snow cone advertisement on television Answer: a Explanation: Lindsay Laricks first got the idea for Fresher than Fresh when she traveled to Austin, Texas and saw a Hey Cupcake! trailer. This was the first time she had seen the start of the gourmet food truck trend, and Lindsay loved the idea.

2. In which of the following types of society are business owners free to charge what they want and keep most of the profits they earn? a. capitalism b. socialism c. communism d. command economy Answer: a Explanation: Under capitalism, business owners are free to charge what they want and to keep most of the profits they earn. This is considered a free-market economy.

3. Adam Smith gave which of the following names to the natural force that finds an equilibrium price based on how much demand there is for the supply of products and services available? a. “consumer sovereignty” b. “monopolistic competition” c. “the invisible hand” d. “perfect competition” Answer: c Explanation: Adam Smith often referred to “the invisible hand” of economics. By this he was referring to the force that finds an equilibrium price based on consumer demand and the supply of products and services available.

4. Which of the following definitions most accurately defines the idea of “consumer sovereignty”? a. Those who run a business must give all profit back to the government. b. Consumer demand for unique organic treats meets a business willing to supply that desire. c. Customers have the right to decide whether to buy or not to buy a product or service. d. A few people can sell a product and differentiate that product but the barriers to enter that market are very high. Answer: c Explanation: If a company charges too much for their product or makes poor product choices, customers have the right to stop buying the company’s product or to buy something else entirely. This is the idea of consumer sovereignty.

5. Which of the following industries is (are) an example of an oligopoly? a. milk from dairy farmers b. commercial airlines c. ice cream d. all of the above Answer: b Explanation: An oligopoly occurs when a few people sell a product and can differentiate that product but the barriers to enter that market are very high.