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No it doesn't... You don't think Arizona Iced tea would produce more cans if everyone started wanting them for $2? Marginal costs increase as the company expand
by colinmhayes 5y ago
No it doesn't... You don't think Arizona Iced tea would produce more cans if everyone started wanting them for $2? Marginal costs increase as the company expands due to bureaucracy.
- kube-system 5y agoArizona will sell you as many cans as you want, and as many as they can supply, at their asking price. Their overhead costs per unit decrease as a company grows. The increase as you travel right on a supply curve represents the entry of more participants offering supply. You can think of a supply demand curve like a bunch of dots, representing different suppliers asking prices. Imagine you’re graphing a bid/offer spread chart for a stock. Arizona’s product offering is a single “offer”.
- colinmhayes 5y ago> Overhead costs per unit decrease as a company grows. This is correct to an extent, at Arizona's size it is wrong. It would cost them a lot to increase production.
- kube-system 5y agoSure, technically speaking, it’s not an infinitely vertical line, it has an lower and upper terminus, and might begin again at another y value. But we’re already misusing the model to begin with. The line is intended to represent multiple suppliers participating in a market for a good with a fungible source. It is not and never has been a model for pricing decisions at a single company.