The whole concept of offer and demand is but a highly superstitious model. I know no store that alters their price when two customers both want the last can
That's not how it works. Take a look at when there's a big storm that wipes out some fruit crop, the store prices shoot up in response. But prices
do fall again when bananas are more plentiful. The idea that shops will always just charge high prices no matter what the wholesale cost is, isn't true.
You can do the math to prove it. Say you have an equation for how many units you'll sell at a certain price, something like 100/sqrt(x) where x = the dollar price (assume the minimum price is $1). So your revenue will be x * 100/sqrt(x), and you can find which price maximizes the profit. But now, add in a cost "y" per unit. You can now work out what price you should be charging for any given y. And as y goes up and down, the optimal value of x also goes up and down.
So no, shops
could refuse to pass on reductions in the wholesale price, but it would be stupid to do so, because if you don't pass on cost reductions from your supplier, you
make less money. This is why businesses that
stay in business do in fact alter their prices based on supply and demand - they out-compete the ones that refuse to do so. Passing on changes in the wholesale price is provably more profitable and therefore the common sense thing to do.
However, the point was something like insulin doesn't have demand that changes in response to market price, so they can get away with gouging in that situation.
That's why allowing the "market" to charge high prices for insulin is bad, whereas trying to have government price-fixing for bananas is bad.
Author
Topic: Things that made you go "WTF?" today o_O (Read 14956490 times)