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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (76001)12/18/2006 5:47:23 PM
From: Mike Johnston  Read Replies (1) of 110194
 
PRICE can be anything anyone wants it to be.
Actual sales prices are different.
Sales prices are determined by demand.
Cost paid is simply irrelevant.

This is wrong.

Prices are determined by both, demand AND supply.
When costs of production increase, if prices do not go up to reflect that, supply will drop, then pushing prices higher.

Nobody can sell below the cost of production for long.

So cost of production might not matter right away if the seller decides to shrink its margin, but in the long run, cost does matter as it affects profitability and supply.
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