Economic high school paper

In the process of production, there some costs which are incurred. In order to maximize the total benefits from any activity, the production costs should be kept at a minimal level. With low production costs, the industry is less likely to over price its goods and services. This is a factor that has enabled fresh and easy to ensure that that the prices for its goods and services are considerably low.

Elasticity

Elasticity is defined as the ratio of change in one variable as a result of change in another. This can also be defined as the responsiveness of price of a certain commodity with respect to changes in market demand. A good can be described as either elastic or inelastic depending on its responsiveness to a unit change in another quantity. Elasticity is a very crucial factor in determining either consumer or producer surpluses.

Profitability

An industry realizes profit in the event that total revenue is greater than the total cost. Profit thus is the difference between total revenue and total cost. Profit is the key driving tool for expansion of many businesses. For instance, since Fresh and easy was started in the United States, it has been experiences increase in profit margins from one year to another. This has boosted the drive to open more outlets in the country. The profit realized has also helped in availing cash to serve as capital for starting up the other outlets

Despite the painting of the picture of fresh and easy as a very successful industry, it is faced with a number of problems. To start with, Tesco`s fresh and easy has been experiences a very stiff competition from discounters such as Lidl, Netto, Aldi as well as frozen food specialist (Iceland). The impact of this stiff competition has been that Tesco has not been able to increase it sales at the rate at which it would wish to. For instance, if an executive of Tim mason can increase Fresh and easy`s sales by around 10%, this is the same as rounding the error on financials of Tesco. (Curran, 1999, p. 44).