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Pastimes : Austrian Economics, a lens on everyday reality
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To: Wildstar who wrote (333)12/9/2003 4:02:39 AM
From: Don Lloyd   of 445
 
Wildstar,

Perhaps it might be useful to go to the heart of the matter, and come back later to these minor discrepancies.

As I understand your point -

1) Consumer goods are generally cheap as the decisions for buying them are directly in the hands of consumers.

I don't remember claiming this.

To the extent that consumer goods MAY be cheap, it is likely to be the result of suppliers optimizing their results by pricing low enough to address the high density of consumers that fall below the median family income level.

2) NFOPs are also generally cheap because they usually also serve as consumer goods, with the marginal buyer likely a consumer rather than a supplier.

No. Non-specific factors of production are, by definition, those factors that are used in the production of multiple consumer products. They are cheap because their market price is set by their least valued use in one specific consumer product but which is still just high enough to attract supply. All of the other non-marginal consumer products benefit from the price set by the factor's marginal use.

3) SFOPs are not generally cheap because a suppliers have no incentive to bring down prices (during purchase of the SFOP).

Maybe.

For a non-specific factor of production in a non-marginal use, changes in consumer demand do not greatly affect the factor market price. This is not true for a specific factor of production whose supplier may well be able to collect most of any price increases that result from higher consumer demand.

Regards, Don
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