Profits won't increase from raising prices because it decreases demand. There is a sweet spot where profits are maximized. Consider this, if a barber charges $5000 for a haircut he won't make any money because he'll have no customers. If he charges 5 cents for a haircut he may have a ton of customers but he still will make very little money. There is a price point where he maximizes his profit, probably around $20 per haircut.
Now of course there are things that have what is called inelastic demand, and people will pay higher prices if it is something they need. Medicine, insulin, is a good example. Food staples. But if there is competition then people will go elsewhere to buy what they need. Moderna raising its price will likely mean more people will go with Pfizer.
So you're going to say Moderna, Pfizer and the rest will collude to set prices. They might, but cartels have economic pressures that force them to break down over time. OPEC has existed forever, but it can't arbitrarily and permanently fix the price of oil because when demand drops some of its members will drop their price and force the others to do the same. There is always an incentive for cartel members to "cheat" the cartel by offering a slightly lower price and gain more market share and profit.
Current Events » in reply to Interesting, considering public demand for it is dropping...
Price equilibrium.
The whole thread (33 posts)
- Whatever the market will bear
- Interesting, considering public demand for it is dropping...
- Price equilibrium.
- You're ignoring elasticity of demand. n/t
- De Beers
- You start off your post with a contradiction. The first two sentences.
- Price equilibrium.
- Interesting, considering public demand for it is dropping...