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To: edamo who wrote (95323)	2/6/1999 2:15:00 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 176387

edamo, the name of the game is to maximize profits over the long run, not just make a profit as you state. i say long run as making more money now may mean that you make less money later and less money over the long term (you may attract competition through high, high margins). supply and demand directly impacts the price of everything that isn't regulated. direct relationship. repeat, direct relationship. lowering production costs doesn't directly affect the pricing of anything, excluding regulation and the dope factor. some dopes make bad decisions. now, lowering production costs doesn't tend to impact demand. however, lowering production costs does tend to impact supply. if supply goes up then it is the increase in supply that directly impacts the pricing and NOT the technological cost cutting advance. for example, if my cost reduction advance doesn't cause me to increase output (and i'm selling all i can make before the advance), nor does it cause competitors to increase output or new ones to enter the market and increase output, then i would be a FOOL to lower prices unless my mission was to provide some kind of welfare to the needy (noble, but we're talking business concepts here and we need a baseline of motives - profit in this case). why? i can sell all i have at current prices and lowering prices would just mean that i'd make less money. duh, that would be stupid. i don't care if you are selling potatos, fpgas, tortilla chips or piii chips. according to you, the cost reduction advance (at least for the fpga and piii chips), in and of itself, means prices go lower. please explain how this, using the above example, makes economic sense. it is supply and demand. for everything. as i said in a prior post, there are many complex variables that impact supply and demand. however, pricing is based upon supply and demand. no mumbo jumbo deflecting and ignoring tactics. btw, the practical test failed. i didn't quote the absurd. take mu. they are a technology company apparently guided by the edamo theory that cost reductions directly impact pricing. so, please tell everyone why they raised prices while lowering costs in the 95 time frame? pssst, the answer is that demand was low relative to supply and they did it for no other reason than they could. if supply and demand were in balance then they wouldn't have done it w/o suffering badly. price cuts or not. please explain that. no deflection tactics allowed ;-)