4 ms·

That is only true if competition between the sellers of those goods is broken or there truly is a global shortage of all types of goods that can fulfill a basic

That is only true if competition between the sellers of those goods is broken or there truly is a global shortage of all types of goods that can fulfill a basic need.

jackcosgrove 11y ago
If competition is not broken, sellers will raise prices to be whatever the buyer can bear, not whatever it costs to produce the product.
- clavalle 11y ago
  That's not how competition works. If I can produce my good for $10 and sell for $20 and my competition sells for $15, what will a consumer do? What will I do in response?
- norea-armozel 11y ago
  If and only if the competing sellers also raise their prices in step with yours. But that's generally not how the price rises for food, even for restaurants. It's more they're in line with imperfect competition where MR >= MC and in most cases MR is only but a fraction higher than MC (say 1-5% if we take grocery store business accounting profits as a measure which is around 1%). Basically, food markets aren't very profitable businesses compared to technology or entertainment where you have various legal restrictions on supply. There's nothing stopping a firm from starting up their own farms, bakeries, and the like. So, unless you can show me that MC for all firms is going to rise in step with each other versus demand for supply of food I can't say your argument holds water. I'm not saying there won't be a rise in the price, but rather than the rise in the price will be negligible for food. Now, for services or any other product I'd say you're right. And we'll see many goods come out of reach for the proof despite the injection of money. But that would likely be goods like housing and services of any kind like Internet or phone utilities. But for the rest of the economy, there's not much incentive to raise the price unless your costs of covering the extra demand is killing your bottom line. If it doesn't then you don't care either way.

That is only true if competition between the sellers of those goods is broken or there truly is a global shortage of all types of goods that can fulfill a basic need.

jackcosgrove 11y ago

If competition is not broken, sellers will raise prices to be whatever the buyer can bear, not whatever it costs to produce the product.

clavalle 11y ago
That's not how competition works. If I can produce my good for $10 and sell for $20 and my competition sells for $15, what will a consumer do? What will I do in response?
norea-armozel 11y ago
If and only if the competing sellers also raise their prices in step with yours. But that's generally not how the price rises for food, even for restaurants. It's more they're in line with imperfect competition where MR >= MC and in most cases MR is only but a fraction higher than MC (say 1-5% if we take grocery store business accounting profits as a measure which is around 1%). Basically, food markets aren't very profitable businesses compared to technology or entertainment where you have various legal restrictions on supply. There's nothing stopping a firm from starting up their own farms, bakeries, and the like. So, unless you can show me that MC for all firms is going to rise in step with each other versus demand for supply of food I can't say your argument holds water. I'm not saying there won't be a rise in the price, but rather than the rise in the price will be negligible for food. Now, for services or any other product I'd say you're right. And we'll see many goods come out of reach for the proof despite the injection of money. But that would likely be goods like housing and services of any kind like Internet or phone utilities. But for the rest of the economy, there's not much incentive to raise the price unless your costs of covering the extra demand is killing your bottom line. If it doesn't then you don't care either way.