Couldn't {they} make more and take a lower margin and try to drive the demand with lower pricing?
I don't see how the math works out on that.
Assuming the widget costs $1 to make and they sell 100 at $2, then they've made $100.
With the same cost of $1, if they could increase sales to 250 by pricing it at $1.50, then they've made $125.
Making the same amount of TV dinners simply nets a lot less profit.
But less is still better than none. They shouldn't stop making them.
Well, there's capital costs. {snip} Eventually they're selling so few TV dinners that they're not getting enough in net to pay for the factory and the labor.
Well then they're no longer making a profit. Assuming they're making a profit, making something would be better than not:
quote:
Since it means less profit to be in the TV dinner business we should expect some businesses to get out of the business altogether, which presumably means less TV dinner production.
Well that's no good at all!
I think we'd want the producers to continue producing stuff, even if they're making less profit (so long as they're not losing money).
And actually, in a sense, wouldn't that just be one of the ways that the dollar has become worth less? Or is that just the value of the food increasing?
Well, there's more people, and they have to eat. That's an increase in demand for food. Doesn't that indicate the rising value of food?
Yes. But too, if the cost of food production has gone up, but the demand is the same, then that same $1 would be worth less food. No?
If you measure the distance between New York and London, you find that it increases at a rate of about a half-inch per year.
Does that indicate that our rulers are all shrinking, or that the plates are moving?
Are you saying that the value of the dollar is as static as the length of an inch? The value of the dollar can't change?
Don't be so quick to assume that measurements are changing because the things we use to measure them are changing. More often we measure change because the things we're measuring really are changing.
But if the cost to make the food goes up and then they start putting in less for the same price, how can you tell if the value of the food increased or if the value of the dollar decreased if the demand stays the same?
Edited by Catholic Scientist, : 150 --> 250
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