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price = f(cost) is incorrect cost = f(price) is correct This is basic economics. (Seriously, this is in the easy stuff like Hazlitt.) For an example, see joe'
by mdpopescu 9y ago
price = f(cost) is incorrect
cost = f(price) is correct
This is basic economics. (Seriously, this is in the easy stuff like Hazlitt.)
For an example, see joe's response.
- taneq 9y agoJust to check that I'm understanding you correctly, you're saying that the cost of producing a product is a function of its sell price?
- mdpopescu 9y agoYes. Costs are determined by the sale price, not the other way around. For example, if the sale price of a product increases, the demand for its components raises, which raises their cost. If a would-be producer cannot source materials that would cost him less than the sale price, he just won't build the product. [1] has more details on the subject. [1] https://mises.org/library/whats-cost-got-do-it-0 https://mises.org/library/whats-cost-got-do-it-0