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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (76001)	12/18/2006 5:47:23 PM
From: Mike Johnston	Read Replies (1) \| Respond to 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.

To: mishedlo who wrote (76001)	12/18/2006 5:52:07 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 110194

"input prices irrelevant" Only in the very short term perhaps. If costs cannot be covered companies go bankrupt and cease or reduce production. An inflationary depression happened in Argentina. It can happen here too if the Fed were to aggressively slash rates despite huge balance of payments deficits in a hopeless attempt to repeal the business cycle .

To: mishedlo who wrote (76001)	12/18/2006 11:35:40 PM
From: GST	Read Replies (1) \| Respond to 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.> ...<Input prices are more or less irrelevant.> That is great news! I think I will fill up my car's gas tank at 2 cents a gallon tomorrow. I wonder how many people running a business would agree with you that input costs are irrelevant? Perhaps the thing that is irrelevant is an economic theory in which input costs are ignored.

To: mishedlo who wrote (76001)	12/18/2006 11:49:17 PM
From: jimmg	Read Replies (1) \| Respond to of 110194

Sales prices are determined by demand. Cost paid is simply irrelevant. Sales prices for any tradeable good can never go below marginal cost to produce that good unless the sale is coming from existing inventory (essentially a sunk cost). Once existing inventories are depleted, production won't occur unless the sales price exceeds marginal cost to produce. I learned that in econ 101.