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Author Topic: Answering Kathy's question  (Read 11372 times)
Acebird
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« Reply #80 on: March 08, 2011, 03:58:49 PM »

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Labor cost is a big part of most real businesses. When the cost of labor goes down, a business can be more “competitive” and gain market share by lowering prices. Price moves products.



Yes price will move product but the consumer is still deciding whether they want to buy that product.  Every time you go to the pump you decide if you will pay the price.  If you stop buying gas it will come down.  That is what every alternative energy source faces and why the alternatives will not reduce our dependency on oil.  If the price of gas goes to 10.00 a gallon and stays there it will be replaced in a hart beat.

Most of you are trying to justify costs.  Just because something cost you more to make does not mean you can charge more for it.  If you could it was underpriced.  The fact that the oil companies can raise the price of gas in an instant whether it is speculation or not means it is underpriced.

If you look at Bluebees statement “Price moves products” if you lower the price of a product you sell more so if you raise the price of gas you should sell less.  That is not happening with gas.  It is underpriced.  The oil companies are proving that they can set the price higher and it still sells.  People will just pay more for it.
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« Reply #81 on: March 08, 2011, 04:24:28 PM »

I disagree you are using oil as an example and fuel. There is no alternative for the consumer right now except other gas stations. Textiles automobiles etc have options. That is why some all clothing companies are over seas making our clothes no one wants to pay 50 bucks for a pair of fruit of the looms. cotton cost the same on the world market labor does not

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Acebird
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« Reply #82 on: March 08, 2011, 04:57:26 PM »

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That is why some all clothing companies are over seas making our clothes no one wants to pay 50 bucks for a pair of fruit of the looms.

Do you want to use clothing as an example?  A pair of designer jeans  can run you $100, where as the run of the mill jeans are closer to $50.  For non labeled jeans I pay as low as $10 from Tractor Supply.  These product are all made by the same people with the same machines and their labor and operating cost are identical.  It is basic supply and demand, can't be any simpler.
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Jerrymac
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« Reply #83 on: March 08, 2011, 07:18:05 PM »


Gas prices are about more than just oil

http://news.yahoo.com/s/ap/20110307/ap_on_bi_ge/us_pricing_gas
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« Reply #84 on: March 08, 2011, 07:29:56 PM »

not sure supply and demand has much to do with the price of designer jeans.....of course, what do i know?  i buy my jeans at goodwill.
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.....The greatest changes occur in their country without their cooperation. They are not even aware of precisely what has taken place. They suspect it; they have heard of the event by chance. More than that, they are unconcerned with the fortunes of their village, the safety of their streets, the fate of their church and its vestry. They think that such things have nothing to do with them, that they belong to a powerful stranger called “the government.” They enjoy these goods as tenants, without a sense of ownership, and never give a thought to how they might be improved.....

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« Reply #85 on: March 08, 2011, 07:37:20 PM »

http://www.accountingcoach.com/online-accounting-course/36Xpg01.html
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« Reply #86 on: March 08, 2011, 09:26:06 PM »

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please explain how minimum wage raises standard of living.

Oh come on now you can't be that oblivious.  As wages increase people on the low end spend more.  People on the high end spend less.  It is good for the country.

Swing and a miss!  This is such a fairy tale Ace, nothing but liberal drivel, which has the exact opposite effect of what is intended.  It is promoted by many well-intentioned people who are allied with the special interest groups (i.e. labor union bosses).  Minimum wage increases unemployment.  Minimum wage requires employers to discriminate against those employees whose skill set does not justify the minimum wage.  They can't hire them and remain competitive.  If employers do hire these folks they are engaging in charity (which is wonderful) but there's only so much charity available if a business owner wants to remain competitive.
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Countryboy
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« Reply #87 on: March 08, 2011, 09:42:54 PM »

Companies seek automation because they cannot meet demand or they want to increase their market share and thirdly, they cannot get enough people to do the work.

Companies go to automation because it is cheaper than paying the wages and benefits for workers.

There is a really rich Chinese guy (I can't remember his company name off the top of my head...3 letters though)  who decided it was cheaper to hire a bunch of workers, rather than paying for high dollar automated machines.  IIRC, they manufacture batteries.

There is never a shortage of workers.  You can meet demand with either human or automated workers.  Automation has no effect on ability to increase market share.

Do you honestly believe the price of a car would go down if wages at GM were reduced.

Yes.  GM car prices are cheaper in other countries where GM has factories, and those workers get paid reduced wages compared to here.

I am not an economics major but supply and demand is basic.

Perhaps you should try to increase your economics knowledge then.  I'd like to recommend www.mises.org so you can learn the basics of Austrian economics.

Wages do not affect what someone will pay for a product.

Correct.  The consumer determines what they are willing to pay for a product.  Wages affect what the producer sets the price at, regardless if anyone is willing to purchase the item at that price.

Do you think everyone in the oil industry just got a big raise?


No.

Wages affect profits and profits do not affect prices.

Wages do not affect profits.  Wages affect profitability, and profitability determines prices.  There is a difference.  Do not confuse the two.

If you stop buying gas it will come down.


If you stop buying gas, the Chinese will buy the gas you were going to buy.  You do realize that more cars were sold in China than in the US last year, right?

That is what every alternative energy source faces and why the alternatives will not reduce our dependency on oil.  If the price of gas goes to 10.00 a gallon and stays there it will be replaced in a hart beat.

Why is it that the US built two refineries to produce an alternative energy automobile fuel that is cheaper to produce as long as oil is more than $40 a barrel.  (When oil is less than $40 a barrel, it is cheaper to use oil.)

Guess what - we tore those facilities down because oil was cheaper back then.  Oil went above $40 a barrel, and we have never rebuilt those facilities.

Guess who is building those plants to produce that alternative fuel?  China.

There is an Air Force base (Wyoming?) commander begging someone to build one of those plants on his base to ensure his jets have fuel too.

Just because something cost you more to make does not mean you can charge more for it.


That's correct - you also have the option to not produce that product anymore.  You can raise prices, or you can lay off the workers and close the doors.

If you could it was underpriced.  The fact that the oil companies can raise the price of gas in an instant whether it is speculation or not means it is underpriced.

Part of the pricing of an item is the cost to produce it.  If the cost to produce the item increases and you raise the purchase price, it does not mean it was underpriced before.  It means the input costs affected the selling price - inputs increased, so the selling price was raised.

so if you raise the price of gas you should sell less.  That is not happening with gas.

It happened when gas hit $4 a gallon here.  Where have you been?  People stopped driving as much.  I have a friend in Netherland who rides his bicycle 20 miles to work in Belgium so he doesn't have to buy high priced gas.  He is an engineer, and also purchased his first vehicle at 28 - a Kia.

The oil companies are proving that they can set the price higher and it still sells.  People will just pay more for it.

The oil companies are showing that there are more buyers coming to the market to offset the losses in gas consumption by individual consumers.

There is no alternative for the consumer right now except other gas stations.

Actually, there is, but people choose to be ignorant about other options.
When I was in high school, a fellow student had a pickup truck that ran on compressed natural gas.  He filled his tanks at home on the farm with an air compressor hooked to the well.
I know other individuals with CNG vehicles, and even a local CNG dealership for CNG vehicles.  I even know businesses that run their fleet vehicles on CNG.
Quite a few local people use horse drawn carriages to get around.
I am seeing a large increase in people riding bicycles for transportation - it's not just for kids anymore.

Keep in mind that Germany has no oil - so how did Hitler get fuel to run all his tanks and machines?
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Acebird
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« Reply #88 on: March 09, 2011, 08:51:53 AM »

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Correct.  The consumer determines what they are willing to pay for a product.


 shocked grin

Quote
Wages affect what the producer sets the price at, regardless if anyone is willing to purchase the item at that price.
False.  If a competitor offers a lower price the "producer" will lower his price and take less profit.  Wages affect profit.  This sceanario can continue even below the cost of manufacture in the hopes that the competitor will quit or go under first.  What usually happens is the owner gets disenchanted with his margins and seeks ways to reduce his costs.  If he can't succeed he will look for another product that will put more money in his pocket.

Example:
EKG electrodes.  When I started with the company it was getting 12 cents an electrode.  It now gets if it is lucky, one cent per electrode.  There are not enough people in the US to produce all the EKG electrodes by hand the way there were back then.  The demand could only be filled by machinery and automation.  You can say the same for the auto industry except autos cost more now than they did then.
Think about it, computers, cell phones, entertainment centers, all the toys we like would not be possible if it were hand labor regardless of what the cost of labor is.  Small businesses are always crying for cheap help because they know the price ceiling is fixed so it affects their bottom line.  They know they can’t just raise prices or they wouldn’t care how much labor costs.

If this is nothing but “liberal drivel” why is it written in text books?


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Keith13
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« Reply #89 on: March 09, 2011, 09:08:56 AM »

your last sentence you quoted blew your argument out the water.

I will build widgits in America with union labor/ minimum wages you build widgits in southeast asia who do you think will dominate the market place?

Its why every cheap item we use in America is stamped made in China it is why our trade deficit is growing everyday.

Keith
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kathyp
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« Reply #90 on: March 09, 2011, 09:32:28 AM »

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your last sentence you quoted blew your argument out the water.

it also explains almost a lot!!!!!!!!!
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.....The greatest changes occur in their country without their cooperation. They are not even aware of precisely what has taken place. They suspect it; they have heard of the event by chance. More than that, they are unconcerned with the fortunes of their village, the safety of their streets, the fate of their church and its vestry. They think that such things have nothing to do with them, that they belong to a powerful stranger called “the government.” They enjoy these goods as tenants, without a sense of ownership, and never give a thought to how they might be improved.....

 Alexis de Tocqueville
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« Reply #91 on: March 09, 2011, 09:57:25 AM »

Hey Ace...I happen to have a brand new shovel that you can use-I'm sure yours is getting pretty thin from the hole you've dug yourself in to  grin
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Jerrymac
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« Reply #92 on: March 09, 2011, 10:17:35 AM »

If a competitor offers a lower price the "producer" will lower his price and take less profit.  Wages affect profit. 

Yes wages affect profit the same way the raw materials and the processing of the raw materials affect the profit. Along with the cost of the work place. The packaging of the product. It all affects the profit. All of it has to be included into the cost of the product. If you sold your product for just the cost of manufacturing it and left out all the wages of all employees then you will not last long. You will go broke the first day.

Wages need to be covered by what you charge for your product.  rolleyes
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Acebird
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« Reply #93 on: March 09, 2011, 11:31:20 AM »

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Yes wages affect profit the same way the raw materials and the processing of the raw materials affect the profit. Along with the cost of the work place. The packaging of the product. It all affects the profit. All of it has to be included into the cost of the product. If you sold your product for just the cost of manufacturing it and left out all the wages of all employees then you will not last long. You will go broke the first day.

Wages need to be covered by what you charge for your product.


I have been a manufacturing engineer for over 23 years.  You are going to teach me this lesson?  huh
I agree with everything you said.  So what!  It doesn't change the fact that the consumer dictates the price not the manufacturer.  The manufacturer decides to produce the product based on what profit he can make.

Hole??  You may not like the way the world turns but that isn't going to change it.
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Jerrymac
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« Reply #94 on: March 09, 2011, 12:09:36 PM »


I agree with everything you said. 

So now you are changing your story and saying wages are included in the price of the product?  huh

It doesn't change the fact that the consumer dictates the price not the manufacturer.  The manufacturer decides to produce the product based on what profit he can make.

I am sure the consumer would love to have prices set a lot cheaper than they are now. If the manufacturer can not make a little money on a product then he can not make the product. If he can not make the product then the consumer certainly can not buy it. If the consumer wants it then they will pay what ever the manufacturer has to sell it for to stay in business.

It ain't rocket science.  rolleyes
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Acebird
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« Reply #95 on: March 09, 2011, 01:30:25 PM »

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So now you are changing your story and saying wages are included in the price of the product? 


That is what you are saying it is not what I am saying.
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The Bix
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« Reply #96 on: March 09, 2011, 04:33:09 PM »

Ace,

Guess which character you are in this video.

Monty Python-The Black Knight


Regards,

John
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Countryboy
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« Reply #97 on: March 09, 2011, 11:50:37 PM »

False.  If a competitor offers a lower price the "producer" will lower his price and take less profit. 

You are making an invalid assumption that there is always profit.  You are neglecting the reality of loss.

Wages affect profit.

Wages do not affect profit.  Wages affect profitability.  You can have Company A paying workers a $20 an hour wage, and still be profitable and make a profit.  You can have Company B paying workers an $8 an hour wage, and not be profitable because the wages are too high and increase the cost of production above the retail value of the item.  Wages do not affect profit - they affect the profitability.  Wages are just one piece of the puzzle.

What usually happens is the owner gets disenchanted with his margins and seeks ways to reduce his costs.  If he can't succeed he will look for another product that will put more money in his pocket.


I'm not sure what fairy tale this is from.  When the sale price drops below the cost of production, owners are not looking for products that will put more money in their pocket - they look for products that don't make them lose money.

EKG electrodes.  When I started with the company it was getting 12 cents an electrode.  It now gets if it is lucky, one cent per electrode.

A cent is not a unit of value.  Please price it in a monetary unit with real value.  (Do you realize that a 1980 penny is worth 2.78 cents, but a 2011 penny is worth 6/10ths of one cent?)  Please price it in gold for me - the price in gold when you started, versus the price in gold now.  Compare those prices.  http://pricedingold.com/

Think about it, computers, cell phones, entertainment centers, all the toys we like would not be possible if it were hand labor regardless of what the cost of labor is.

That's why those things are hand assembled in China using cheap hand labor.

Small businesses are always crying for cheap help because they know the price ceiling is fixed so it affects their bottom line.

We do not currently have price controls, so there are no price ceilings.  At present, our central bank's goal is to increase prices.

They know they can’t just raise prices or they wouldn’t care how much labor costs.

Where do you get the idea they can't raise prices?  If they can't raise prices, you wouldn't see price increases.

If this is nothing but “liberal drivel” why is it written in text books?


Just because something is written doesn't make it fact or true.  Look at all the garbage written on the internet....or do you think everything you read on the net is true also? 

I have been a manufacturing engineer for over 23 years.  You are going to teach me this lesson?


It appears you haven't learned it after 23 years - so now would be a great time to start.

It has been my experience that manufacturing engineers are required to be complete idiots before they can get a degree - they are your stereotypical 'college educated idiot'.

It doesn't change the fact that the consumer dictates the price not the manufacturer.

That's wrong.  The consumer decides the price they are willing to pay, but they do NOT dictate the price.  There is a big difference in the two.  The manufacturer decides the price they will charge to sell it.  If the consumer is not willing to buy it - the consumer is forced to go without.  The consumer can't dictate the price the producer has to sell at.

Hole??  You may not like the way the world turns but that isn't going to change it.

And the rules of economics have pretty much been the same for the past 4500 years.  If you want to make up your own rules, you/your company/your nation goes belly up.  If you learn the way economic processes work, you/your company/your nation grow your wealth.

Yes, you are digging yourself a hole.  You can choose to learn the economic forces that have been well recorded for the past 4500 years, or you can continue to keep digging a hole with the shovel of ignorance.

How many business ventures have you personally started and ran successfully?  Doing this helps gives someone the proper perspective of how market forces work.  Folks without personal experience building and running a business venture are only guessing at what really happens.
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Keith13
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« Reply #98 on: March 10, 2011, 06:39:51 AM »

Its just a flesh wound we will call it a draw rolleyes

Keith
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Acebird
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« Reply #99 on: March 10, 2011, 09:12:19 AM »

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You are making an invalid assumption that there is always profit.  You are neglecting the reality of loss.

Profits can be negative.  It is called a loss.
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