Tendency of the rate of profit to fall

Imagine you have a lemonade stand and you make a delicious lemonade that everyone loves. You charge $1 for a cup of lemonade and you sell a lot. But as time goes by, other people notice how successful your lemonade stand is and they start making lemonade too. Now, instead of just you selling lemonade, there are 10 other stands all selling lemonade for $1.

Because there are so many people selling lemonade, you start to sell less and less, and you have to lower your price to 50 cents to compete with the other stands. But the cost of the lemons and sugar you need to make the lemonade stays the same. This means that you are making less profit on each cup of lemonade you sell.

This is similar to what happens in a real economy. As more companies enter a market and start selling the same thing, they have to lower their prices to compete. But the cost of making the product stays the same. This means that they are making less profit on each product they sell.

This trend is called the tendency of the rate of profit to fall. As competition increases, and costs stay the same, profits will eventually decrease. This can lead to economic problems like recession or even depression if the trend continues for a long time.