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> they'll just raise their own prices to compensate. That's how it works in econ 101, but not necessarily in practice. Prices on many goods are less flexible t
by jbay808 5y ago
> they'll just raise their own prices to compensate.
That's how it works in econ 101, but not necessarily in practice. Prices on many goods are less flexible than commodities like oil and lumber, for many reasons. Manufacturers may be locked into fixed-price contracts or distribution agreements, for example. Or a scarce component might be shared across "budget" and "premium" product lines, but the budget line is too price sensitive to change so the premium product goes up 10x instead. Or the company just borrows money and eats the loss...
- mindslight 5y agoSure, but the alternative is for a company to shut down its production line rather than pay extra for parts it needs. None of your examples would seem to include that happening.
- jbay808 5y agoI agree they'd probably pay extra for the parts, but that might not just get passed on in their system price. It can manifest in all sorts of other ways (debt, discontinuing a different product line, cutting back on research, etc). In today's environment debt is cheap, so companies that might otherwise shut off a production line can afford to borrow and bid up the price of parts.