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The missing piece is not all costs are passed on to consumers. Company absorb costs all the time. If you think cutting your price by 10% will boost sales by 2
by refurb 2y ago
The missing piece is not all costs are passed on to consumers.
Company absorb costs all the time. If you think cutting your price by 10% will boost sales by 20%, you do it because total profit is higher even though per unit profit is lower.
And the reverse is true - companies might increase prices and accept lower volume.
Not to mention not all items are interchangeable. Is a car made in Mexico worth the same as the same model made in Germany?
- XorNot 2y agoLow cost items, of the type the vast majority of the population are quite sensitive to the price of, have almost no margin on them to start with. There isn't 10% to cut.
- refurb 2y agoTrue, but a $5 trash can with a 10% tariff is $5.50
- XorNot 2y agoThe $5 trash can is made in China, which is receiving something on the order of a 50% tarriff. And now that's 50c extra in taxes to the government for every other part of the supply chain consuming $5 trash cans as an expense.
- yibg 2y agoSo basically a lose lose from company and consumer perspectives. Either company makes less profit or consumers pay more or a mix of both.
- naijaboiler 2y agoCongratulations you have just re-discovered an Econ 101 concept called deadweight loss
- briandear 2y agoThe Q5 is made in Mexico.