Profit PER unit declines as MR and MC converge.

Pursuing the point where MR=MC in a market with more than one firms means that if you lose out on the marginal sales, you risk losing money trying for the last sale.

Assume you sell 10 units in a market at $1/unit. You think you can supply 13 at .$90/unit. What happens if you stick your neck out, make a move on price, and a different firm captures the extra sales? What happens if an extraneous event redefines demand? You don't know if another firm can increase production cheaper than you. At 10 units at $1/unit your costs are stable and profit is cosy. In monopoly, duopoly, etc profit ranges. Competition is anathema to capitalists.

I am saying this is where firms operate in the real world. Away from MR=MC. Therefore, a lot of economic maxims and theorems just don't apply when pursuing policy. Firms pursue low-hanging, safe demand. I realize I don't make the argument the economist's way, but government guaranteeing demand is the only way to stimulate more production, investment and hiring in SOME markets.

http://www.geekwire.com/2011/experim...es-gabe-newell

Companies experiment with pricing all the time.

Steam is making a move to corner the online video game sales market. Why?

Gamespot, Walmart, Best Buy, etc are doing a poor job of it. What do they want to do? They want to be the pricesetter, and reap the monopoly profits. I have Steam games, and like some of what they do, but I don't see them changing video game sales. Look at the top 10 console games. How many do you think are new ventures? How many have budged off their list prices. Even Steam sales are usually short window offers. I hope it succeeds, but an industry with so few players will see profits slipping as the expected price of a new game , $60 for the titles I like, falls. I didn't say a new entrant will never shake things up.....that established firms in established markets prefer cosy pricing and profits.

My other counter to that, is that consumers are driving this by using piracy.

Take me, I have Civ5, and Civ5 shot its fans the bird by requiring multiple purchases for new maps and Civs to be added. Some weekends Steam offers discounts on packages, but the price is still odious. I didn't pirate the downloadable content, but I did check it out, and its amazing how fast each patch is adjusted for on new content. And, I paid $5 more to patronize my local games store than Steam when the game came out.

Steam/Valve is more of an answer to piracy than competing on price.

wat

Despression or Democracy by Paul Krugman December 11, 2011

*** Executive Summary ***

People who pay the bills are the evil ones.

*** Footnotes ***

Paragraph 4, "First of all, the crisis of the euro is killing the European dream". The reality is the Euro is just a unit of exchange. People go to work in corporations and are paid wage. The euro is not killing the European dream, politicians and government are.

Paragraph 5, "German Power", I thought it was Greece and other countries that are trying to skip out of their loans.

Paragraph 7, "Right-wing populists are on the Rise". When the government plans to steal and take money from those that earned it and give it to those that don't, right-wing populists should rise. The only way to stop the rise of nuts is to let them be sane.

Last Paragraph, "And they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy — and the breakup of the euro may be the least of their worries. "

Greek printed a bunch of non-securitized loans aka Greek debt. They have the choice to repay it or not. If they don't, the banks lose their money. Some banks will hopefully go broke and their owners sued for all they got. It is the honest decision, and all the right wing fanatics will go away if people are treated fairly.

Oligarchy, American Style by Paul Krugman 11/3/2011

*** Executive Summary ***

The poor are poor because the rich took it from the poor.

*** Footnotes ***

The reality is the poor are poor because they are living in a society that rewards the public sector union worker and teachers. People were raised with a reality to support government. "I create everything, I own" is what should be taught in schools, along with how to pick stocks, how to create a business, saving techniques, and how to eliminate fraud in the finance industry. Instead they teach you higher the taxes, better teachers, better jobs, and better economy.

The top 1% would come tumbling down if people were taught to seek owning businesses. Instead of government being 42% of GDP, it would be 5%. As capital rises, wages would rise too. To run a business, they should think about getting rid of all business permits, and allow everyone to have free land to run a business.

And poor old Mr. Krugman, might actually have to go back to work, or better yet run a for profit school people could buy stock in.

It only remains to reveal that teachers are in fact lizards. From outer space.

December 15, 2011, 4:40 pm
Inflation Predictions
Peter Schiff on Glenn Beck, Dec. 28, 2009:

PAYNE: So, where are you then, Peter, with respect to inflation? Do you think this is going to be the big story of 2010?

SCHIFF: You know, look, I know inflation is going to get worse in 2010. Whether it’s going to run out of control or it’s going to take until 2011 or 2012, but I know we’re going to have a major currency crisis coming soon. It’s going to dwarf the financial crisis and it’s going to send consumer prices absolutely ballistic, as well as interest rates and unemployment.

PAYNE: And what does that mean? For people watching this show, what does that mean for the average American?

SCHIFF: It means their life is going to get a lot more difficult. It means things that they need to buy, things like food and energy, are going to be much more expensive. Ultimately, interest rates are going to rise and their entire standard of living is going to plunge.

And I’m hoping the government doesn’t respond to this inflation with price controls because that’s going to make it even worse. Now, you’re going to be waiting in long lines to get basic food items or to get energy because there’s going to be shortages. People might be going to the black market.

PAYNE: You’re talking you’re talking Zimbabwe, Weimar, Germany — I mean, you’re really talking about something like that actually happening in this country.

SCHIFF: It will happen if we don’t change policies. There is still time to change.

PAYNE: Right.

SCHIFF: I mean, I’m running for the United States Senate, so I can try to change that myself. But if we don’t reverse course, if we continue to stimulate, then we will end up with hyperinflation and it will be like Zimbabwe.

OK, strictly speaking the time hasn’t run out — we could, I guess, see an explosion of inflation next year. But with commodity prices down, wages going nowhere, and the dollar actually strengthening against other currencies, it’s kind of hard to see where that’s supposed to come from.

Look, the Austrian/Ron Paul types made some very strong predictions about inflation — and rightly, given their model of how the world works. In their version of reality, it really isn’t possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that’s not only possible but what the model predicts in a liquidity trap.

So since we did indeed triple the monetary base with nothing much happening to inflation, the right lesson to draw is that their model is all wrong. Unfortunately, I see no hint that anyone in that camp is prepared to consider that possibility.

.

Policies have not changed. Hyperinflation is not coming in 2012. The US is not going to turn into Zimbabwe within 12 months.

Schiff has predicted that the currency is going to collapse in two more years since time immemorial, no?

There are austrians who believe that Schiff is wrong and that we are headed for deflation/deleveraging.

I don't care about them. Where are all the Borodog's, Nielsio's, J.R's, etc, that went on and on about "zomg money printing massive inflation?" I want them to admit they were wrong. But it will never happen because they're all really smart.

I don't think you understand how economics and politics work.

You don't get points for being right, you get points for sounding right and thinking you're right.

Hyperinflation is basically impossible when you can keep charging stuff to your credit card. But once other nations lose confidence in our dollar and stop lending us money, we're ****ed. The only way we'll be able to pay for stuff is to pay in cash, which we have none of, so we'll have to print massive amounts of it. These payments will impact the market almost immediately and will cause the value of the dollar to plummet, meaning that the longer you save, the less your money will be worth. This will cause people to run to the banks and try to get all of their savings in order to consume. There won't be enough cash in the banks to pay everyone, so the Fed will have to print even more money to fund everyone, causing the dollar to crash even more. Eventually they will just keep printing money off until the dollar reaches 0.

What's happened the last few years is that the Fed has printed an insane amount of money out, but most of it hasn't impacted the markets yet.

I congratulate you for stringing together stuff that sounds coherent but is nonsense and non sequiturs.

Except it's not.

This made more sense than your previous post. Just as wrong, however.

You gonna point anything out or just claim it's nonsense?

Pretty much everything, but I'll stick with two main things--you're getting currency confused with money. At most if people take their money out of their demand accounts in a bank the money supply will remain unchanged (even if new currency has to be printed).

Second is you assuming interest rates wouldn't adjust.

Third (hey, one free for you) is the whole sentence (and the one after that) about countries losing confidence in us and having to use cash. Unfortunately I can't really say where you're wrong, because that whole part is disjoint nonsense.

So basically--*waves hand at that entire post*--that.

Interesting. When's the last time you checked history?

It's ironic how you're doing the exact same annoying thing to him that he did to you.

Quit pussyfooting around and just say what you mean ffs.

They were not wrong, inflation was about 5% this year. The year over year change in M1 is about 25% right now. Inflation is coming. The prediction is just a little bit delayed. The reason for the delay are the problems in Europe and Japan. The world is looking to the United States as the safe haven for currency right now.

When the black Friday shoppers went beserk, I heard retail sales were up 10% plus. Now that is either going to translate into inflation, or the retailers and manufacturers are going to work for less money. I am not sure if the CPI numbers are not doctored anymore.

One thing you can do is compare sales of a company, grocery store, or industry and see if the sales amounts change. I tried to look at Kroger, which is somewhat stable 7.1% growth. I see Whole Foods at 12.1% growth.

The sad part is the next president is going to be blamed for the inflation. If you are running 10% plus budget deficits, that is pure inflation.

A rough estimate, $ value = number $ / number of people using $

http://research.stlouisfed.org/fred2/series/M1?cid=25

Also M1:

November 2009 1679.1
November 2010 1817.2
November 2011 2149.1

delta 2009-2010 1817.2/1679.1 = 1.08 or 8%.
delta 2010-2011 2149.1/1817.2 = 1.18 or 18%.

There is about a 20 month lag in m1 and inflation (Friedman,1971).

I never thought that it was an increase in demand when you lower prices and people buy more. That's why I said I could lower prices, and people buy LESS. Could.

I simply said that when demand for a product or service increases, and a business doesn't have enough people to help fill that demand, they would then hire more people.

Then someone said something about being keynsian (sp?), and I thought, "Whatever, I'm not trying to perpetuate an economic school of thought that I know nothing about, I'm simply making a statement."

Otherwise, increase in demand of products/services = potentially creation of jobs.

Some people might think:
lower taxes on rich = more jobs (I disagree)
lower taxes on everyone = more jobs (not really)
lower prices on products = more jobs (wut?)

But, that's not what I'm saying.

Headline CPI inflation was about 2% this year.

Bernanke raised the monetary base during QE1 in 2009. 18 months later there was no jump in inflation. I think a crude way of looking at it is that in the MV=PQ equation, increasing the monetary base M does not significantly increase price level P in the current climate (up to a point) because there is such a large shortfall in Q, the "output gap".