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Example: I used to sell 100 hammers a year for $5 profit per hammer. My supplier says "There is a hammer shortage I can only give you 50 this year". Okay, so I
by legitster 3y ago
Example: I used to sell 100 hammers a year for $5 profit per hammer. My supplier says "There is a hammer shortage I can only give you 50 this year". Okay, so I raise the prices to the point that I know hammers are always on the shelf. And everyone else is short on hammers too, so no risk of losing sales.
I'm paying only a fraction more per hammer. Any my revenue is down. But my profit margins are through the roof.
Supply side issues will show up as profits purely as an accounting figment.
- perlgeek 3y ago> Supply side issues will show up as profits purely as an accounting figment. Supply side issues will show up as profit margins, by your explanation, not necessarily as greater total profits.
- badpun 3y agoMargins go up, but volume comes down, so hard to tell if the overall profits will increase or decrease.
- ImPostingOnHN 3y ago> so I raise the prices to the point that I know hammers are always on the shelf you mean, you raise the prices to the point where you maximize profits by taking advantage of the shortage to extract maximal value from consumers. In other words, the exact greedflation we're talking about. "hammers are on the shelf" is an arbitrary threshold that need not be met: supplying 50 consumers with hammers can be done with no price or marginal profit increase at all if the analogy is to fit reality, you then raise the price even more (since profit isn't necessarily maximized when demand=supply), blaming the further increase on those pesky supply chain issues, while pocketing the extra money > Any my revenue is down actually, it's up, along with profits. That's how bad the greedflation is, and how little the supply chain issues actually impact either