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>>Companies set prices to maximize their profits. When Uber's costs decrease, do they cut prices or take more profit? Profit margins can only absorb cost incre

>>Companies set prices to maximize their profits. When Uber's costs decrease, do they cut prices or take more profit? Profit margins can only absorb cost increases until they go to zero, after which point prices have to be raised. Additionally, it is NOT good if companies are forced to reduce profit margins below what free market forces would place them at. Profit is compensation for investors. Too low profits leads to under-investment and stagnation of productivity/wage growth.

wolverine876 6y ago
> Profit margins can only absorb cost increases until they go to zero, after which point prices have to be raised. That's not true. Businesses sell things at a loss all the time because that price still generates the most revenue. What good is raising the price if it reduces overall revenue? Consider when you buy something on sale. > Additionally, it is NOT good if companies are forced to reduce profit margins below what free market forces would place them at. It's not always free market forces. For example, businesses abuse their market and political power all the time, including to pay workers less. Also, free market forces are useful tools, not scripture. They are not 'good' in themselves; like you and me, they are good when they do good. Like all tools, they are useful for some things and not for others; they have limitations.
- CryptoPunk 6y ago
  >>That's not true. Businesses sell things at a loss all the time because that price still generates the most revenue This is completely ignorant of basic business operations. Revenue that is less than expenses means the company runs out of money. Companies need profit. Revenue only helps insofar as it contributes to profit. >>Also, free market forces are useful tools, not scripture. They are not 'good' in themselves; like you and me, they are good when they do good. Free market forces maximize investment, with it, productivity/wage growth, so they are in fact good. I recommend you study some Economics because there is very good evidence for all of this.

wolverine876 6y ago

> Profit margins can only absorb cost increases until they go to zero, after which point prices have to be raised. That's not true. Businesses sell things at a loss all the time because that price still generates the most revenue. What good is raising the price if it reduces overall revenue? Consider when you buy something on sale. > Additionally, it is NOT good if companies are forced to reduce profit margins below what free market forces would place them at. It's not always free market forces. For example, businesses abuse their market and political power all the time, including to pay workers less. Also, free market forces are useful tools, not scripture. They are not 'good' in themselves; like you and me, they are good when they do good. Like all tools, they are useful for some things and not for others; they have limitations.

CryptoPunk 6y ago
>>That's not true. Businesses sell things at a loss all the time because that price still generates the most revenue This is completely ignorant of basic business operations. Revenue that is less than expenses means the company runs out of money. Companies need profit. Revenue only helps insofar as it contributes to profit. >>Also, free market forces are useful tools, not scripture. They are not 'good' in themselves; like you and me, they are good when they do good. Free market forces maximize investment, with it, productivity/wage growth, so they are in fact good. I recommend you study some Economics because there is very good evidence for all of this.