Posted on 03/28/2013 4:53:20 PM PDT by presidio9
Edited on 03/28/2013 5:05:17 PM PDT by Admin Moderator. [history]
“if the consumer has the alternative of buying his product elsewhere”
When is that not the case? Legal monopolies (which is what I meant by guns to heads), maybe, or temporarily during natural disasters. With or without substitutes you can always buy less. People act as if consumers have no choice but to buy gas, for instance, which firstly isn’t true. However, were it true, it wouldn’t mean they’d pay for the same amount of gas at higher and higher prices. There is no fixed amount of gas you must buy. Maybe there’s a floor below which you will not sink. But no one has any clear idea what this is. You might be surprised; look at how people lived under wartime rationing. Point is, when gas prices go up usually demand goes down, despite there being few alternative to the average driver. This is so because you can drive less, carpool, etc.
Monopolies can’t charge whatever price they wish, despite popular delusion. They still want to make the most profit possible, with or without competition. You can charge millions of dollars for a sandwich, assuming you control the world’s supply of sandwiches, and rich people or large enough groups of the less well off will pay it. Others will die without paying it, should that be their only means of sustenance. We’ve seen this throughout history, people dying instead of paying what’s beyond their means to pay. So there is a price too high. The same holds, less dramatically, for products having nothing to do with life or death, and potentially life or death products beyond life or death circumstances.
Ceteris paribus, if the supply clears at a higher price the price was set too low to begin with. This is true whether we’re talking about the most cutthroat industries with the thinnest profit margin, or the most heavily regulated industries with the least market-disciplined prices. Of course, when we’re talking about unfree markets we’re not talking about the best allocation of scarce resources; we’re talking about the most profit to be made, or whether the profit is going to the corporation, when it sets the price optimally (for its own pocketbook, not the consumer’s), or the gubmint.
“Assuming that all producers are taxed equally, the end result...is price inflation”
I don’t know why we’d assume that. Anyway, no, it wouldn’t, if for no other reason than different lines of production are on different time schedules. But there are other reasons.
“All correct prices are a reflection of EVERY cost of doing business plus the profit incentive”
Yes, absolutely. And customers buying less, which ceteris paribus is the result of higher prices, adds to the cost of business. Higher cost means less employees and/or less profit. Which is what I was getting at by saying corporate taxes are carried back to the origin of production.
Are you mad? Then it will be the spenders versus the savers. Given production relies vitally on saving, it’ll be nobody versus nobody because we’ll all be bums.
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