Fair Trade Investing

And finance Allah shmoop What is the firm Shmoop economic

theory of the firm says that firms are firm about

one thing Profit maximization The big PM means getting revenues

as high as possible and costs as low as possible

And that whole rationale is the reason firms will keep

producing until their last unit of production is where marginal

costs equal marginal revenue if they produce less than this

amount while they're missing out on some profit if they

produce Mohr than this amount while they be losing money

In theory firms are incentivized to produce produce produce until

profit is maximized The yin and the yang of the

firm is consumers Consumers want to maximize their utility I'ii

get the most bang for their buck Firms and consumers

do the cha cha cha ching dance creating the economy

as we know it Yeah but what about philanthropic firms

firms that will care about more than maximizing profits with

the globe getting warmer and animal rights movements picking up

steam and environmental problems costing Well uh you know problems

and with the Internet and the media making everyone intensely

aware of these issues while suddenly people want firms to

do something about it Well In response some firms have

integrated these consumer demands into their marketing in products to

keep those profits rolling in buying just coffee No How

about Fair Trade Coffee Fair trade Coffee is an example

of the way in which firms differentiate themselves by differentiating

their products Some consumers would rather pay for this differentiated

do gooder product Mohr Expensive Fair trade Coffee over less

expensive normal coffee firms can capture their own market share

through product differentiation if consumers are willing to pay for

it And in this case they basically are using remote

union labor inside of emerging market countries and kind of

donating a dollar a pound or so so those workers

can what it called Oh yeah eat So with regulatory

policy or marketing or using quote philanthropy unquote to market

products Regardless normal firm's capital market capitalist firms are in

the game of maximizing profits The better consumers feel about

buying something well the more they will consume usually and

the more profits and given company will make But consumers

aren't the only ones making the decisions behind the scenes

The true kings and queens of firms are these shareholders

that common shareholders the people who own the stock and

elect the board of directors who then hires the CEO

who hires everyone else right The directors of firms are

the ones doing the managing but the shareholders are the

ones pulling the purse strings right They vote with their

dollars The shareholders at different firms have different privileges but

in general shareholders are considered Company owners leased the common

shareholders and they usually elect people to run the show

in the way they want it run which is almost

always to maximize dollars while firms were shaped by both

shareholders and consumer demand there also the interface between micro

economics and macro economics on the micro scale While we

look at how firms make decisions and why they make

the decisions they make what about hiring decisions and pricing

decisions Well on the macro scale economists are looking at

aggregate trends in firms such as unemployment rates turnover rates

investment you know things that all add up to impact

overall economic growth in or GDP yeah in the US

Those numbers affect monetary policy like think the Federal Reserve

and changing interest rates and fiscal policy think changes in

government spending in taxes via Congress and the press Will

firms are really just in the middle of it all

Profits consumer of shareholders governments and competing firms Regardless of

what Luda and Feral say the firms are the true 00:03:41.28 --> [endTime] moneymakers