Quote:
Originally Posted by Devils'Advocate
But therein lies the rub. Remember those funky supply and demand charts we did in grade 8 economics classes? Business are ALREADY charging us the MAXIMUM that they can charge us without losing business. My aunt makes these really neat looking Christmas ornaments out of styrofoam nuts and pipe cleaners. She charges $2 per ornament because that's the point at which she can sell them. Not because she could sell them for $5 and she's a nice person. If the cost of pipecleaners went up, she still can't "pass that on to the consumer" because if she charges $3 per ornament, she won't sell nearly as many. She would have to find a way to cut down on the pipe cleaners and perhaps use half a pipe cleaner for the ornament whereas she used to use a whole pipe cleaner. Somehow, someway, she has to keep the cost down.
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No rub.
I took several economic courses and what I can tell you with zero doubt is that in this case if the cost structure changes for everyone, every ounce of that cost will go to consumers.
The flaw in your thoughts is that they are changing at the level they can make a profit AND justify their expenditure in the first place.
If they can't make the return they want to, they will invest somewhere else.
If say the industry has a $1.00 / l gasoline production cost levied on it ... they would decide a) how much can be passed on, if they can't pass on a level that allows them to justify investment, they will move the capital around and invest somewhere else.