Americans say businesses will not raise their prices when the minimum wage increases.
@freepatriot @amerika As a business owner…yeah…no. ALL costs get passed along to the customers.
The only good way to reduce profits for the "greedy capitalists" is to remove regulation, licensing, and "laws" that make starting a business hard.
With a fair market (i.e. free from state involvement) and an educated (not indoctrinated) public, large profit margins are temporary as competition will fill voids.
And remove "Corporations" from "legal entity" definition, while at it. It is only gangs of people, and should personally be responsible.
I’m not sure how this is going to reduce profits. Additionally, what are “large profit margins”?
Margins are always dependent upon a number of factors, not the least of which is market demand.
I will always price products and services at whatever the market will pay (over and above my fixed and variable costs).
@Bunnyslope
Huh? Basic free market economics...
Yes, you will price to what people are willing to pay. But with large margins (due to increased demand) competitors are incentivized to enter your market, increasing supply, which drives down prices. Not all markets are "ideal", as "personal preferences", "network effects" and other things may skew it. But most small businesses are not in such.
I recommend Khan Academy;
https://www.khanacademy.org/economics-finance-domain/macroeconomics
https://www.khanacademy.org/economics-finance-domain/microeconomics
@niclas @freepatriot @amerika I believe that you are speaking theoretically. If there are high barriers to entry, there won’t necessarily be many competitors. Competition will not necessarily undercut pricing and margin. They , too, will price at the market. If you invent a product or market, you won’t have immediate competition.
@Bunnyslope
You meant "no barriers to entry", I hope.
It is indisputable that the more barriers you put on a market, the fewer the number of competitors.
The evidence for "more competitors" lead to "lower prices" are also overwhelming. Semiconductor market has been a good example, even though patents and IP right are barriers.
HOWEVER, there are exceptions to that. Fashion and Luxury goods are classical examples, as people buy the brand, not the utility.
@niclas @Bunnyslope @freepatriot
However, a market pitched to the high-end tends to gain competitors at the low end so that the customer base expands. E.g. many cars now have features that were only available on Mercedes type cars in the 1980s.
@niclas @Bunnyslope @freepatriot
"It is indisputable that the more barriers you put on a market, the fewer the number of competitors."
The big point. Taxes, unions, regulations, laws, and lawsuits can all be barriers.
@niclas @Bunnyslope @freepatriot
For example, recent lawsuits against gun manufacturers are designed to prevent new entries to the market as well as to raise costs, since all costs are passed on to the consumer.
Cost of lawsuits including legal fees / number of rifles sold = price increase on each rifle.
@niclas @Bunnyslope @freepatriot
"Competition will not necessarily undercut pricing and margin. They , too, will price at the market."
This is the interesting question. In my view, competitors price lower until they have brand goodwill/recognition. This drives prices down. Brands also compete on quality, so some markets are pitched to the high-end. Mercedes has little to fear from Hyundai until it becomes an established brand. Then watch out!