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There's been this phrase 'passing costs off to the consumer' that I've heard since I was a kid, used as some kind of indictment against companies raising prices

by jcims 9mo ago

There's been this phrase 'passing costs off to the consumer' that I've heard since I was a kid, used as some kind of indictment against companies raising prices when their costs go up. Even as a kid I was confused. Where else is the money going to come from?

deleted 9mo ago
[deleted]
layer8 9mo ago
In theory, from reduced profits, or from increased efficiency incentivized by fear of reduced profits.
SpaceNugget 9mo ago
I'm confused how you could be confused. Obviously the company that's passing off their costs to the consumer?
dghlsakjg 9mo ago
This is why Econ 101 is important. There are circumstances where much of the burden of increased production costs is borne by the producer. When demand is very elastic (consumers are price sensitive, or there are many good substitutes), and supply is inelastic (its hard to change the level of output), the suppliers will eat the cost.
TheOtherHobbes 9mo ago
Profits, bonuses, and dividends. Which would be a nice balance to the way productivity has rocketed since the late 70s, and has mostly flowed to the top 1%. Ultimately - and predictably - wealth hoarding becomes economic self-harm. You need distributed prosperity if you want diverse growth and economic and social stability.
- tt24 9mo ago
  Productivity has tracked wages pretty well. The graphs you’re referring to compare median wages to mean productivity, which is of course nonsense.
carlosjobim 9mo ago
You as a consumer buy my cookies for $10. Out of that price: $3 goes to production cost, $3 goes to tariffs, and $4 goes to profits. Now the taxes/tariffs are doubled. The producer can up their price to $13, meaning $3 to production, $6 to tariffs and $4 to profit. But customers might not accept any price higher than $10. They won't buy. So instead you continue selling for $10 and your costs are: $3 for production, $6 for tariffs and $1 in profit. That's what people mean when they say that companies are paying the tariffs. They're not profiting as much as before. In practice it's usually a mix of higher consumer prices, lower company profits, or even some products not being imported anymore.

by jcims 9mo ago

deleted 9mo ago

[deleted]

layer8 9mo ago

In theory, from reduced profits, or from increased efficiency incentivized by fear of reduced profits.

SpaceNugget 9mo ago

I'm confused how you could be confused. Obviously the company that's passing off their costs to the consumer?

dghlsakjg 9mo ago

This is why Econ 101 is important. There are circumstances where much of the burden of increased production costs is borne by the producer. When demand is very elastic (consumers are price sensitive, or there are many good substitutes), and supply is inelastic (its hard to change the level of output), the suppliers will eat the cost.

TheOtherHobbes 9mo ago

Profits, bonuses, and dividends. Which would be a nice balance to the way productivity has rocketed since the late 70s, and has mostly flowed to the top 1%. Ultimately - and predictably - wealth hoarding becomes economic self-harm. You need distributed prosperity if you want diverse growth and economic and social stability.

tt24 9mo ago
Productivity has tracked wages pretty well. The graphs you’re referring to compare median wages to mean productivity, which is of course nonsense.

carlosjobim 9mo ago

You as a consumer buy my cookies for $10. Out of that price: $3 goes to production cost, $3 goes to tariffs, and $4 goes to profits. Now the taxes/tariffs are doubled. The producer can up their price to $13, meaning $3 to production, $6 to tariffs and $4 to profit. But customers might not accept any price higher than $10. They won't buy. So instead you continue selling for $10 and your costs are: $3 for production, $6 for tariffs and $1 in profit. That's what people mean when they say that companies are paying the tariffs. They're not profiting as much as before. In practice it's usually a mix of higher consumer prices, lower company profits, or even some products not being imported anymore.