Tuesday, December 21, 2010

At the Intersection of Supply and Demand...


Price is what we charge for goods and services...

Cost is what we pay.

Cost is a point on the demand curve. Price is a point on the supply curve. Where the two curves cross, cost and price are equal and a transaction may occur.

cf.

4 comments:

Greg said...

When it comes to labor though, the cost to a business (salary) is also the source for another businesses prices.

If I fire you, another business is losing a paying customer. Not a problem in normal times. When everyone is firing, I just accelerate the race to the bottom...... not enough customers.

Greg said...

Hey come by this spot and give your thoughts on this post

http://crankyprofj.blogspot.com/2010/12/thought-experiment.html

This guy is a regular commenter at David Andolfattos blog. I hooked up with him earlier and prompted him to engage in this thought experiment.

The Arthurian said...

When it comes to labor though, the cost to a business (salary) is also the source for another businesses prices.

The cost to a business (salary) is the price of labor. Two sides of one transaction.

Same money used in another transaction is the price another business charges, and the price I pay. Two sides of another transaction.

I just break it up different than you.

Hey, I took a quick look at the Cranky Professor's post. Your challenge reminds me of something.... :)

I'll get in on it over the holiday weekend.

Have a good Christmas, Greg. (Hope you're not working!)

Art

Greg said...

Thanks

Merry Christmas to you too.

I will be on call Saturday but its my first Christmas in a while and for a while.