It’s also true that the govt sets the profit margin for the utils, so that conservation actually creates a smaller profit, so the util must raise its rates to make up the shortfall. I live in a community that enjoyed just that by conserving its water usage. Our bills went up. So much for govt regulation.
If demand goes down in an unregulated market, but where fixed costs are high, as with utility companies, wouldn’t you expect the cost of the goods to increase?
Carrick - 01:02pm on 02/21/2006
"If demand goes down in an unregulated market, but where fixed costs are high, as with utility companies, wouldn’t you expect the cost of the goods to increase?"
Nope. When the supply curve stays the same but the demand curve is reduced, the market clearing price is generally reduced. If fixed costs are indeed high, the effects are a general inelasticity of supply. That is, faced with paying for big ‘ol tool X, people will tend to produce even at a low price to pay it off.
Now, when suppliers say "enough is enough" and leave the market, THEN the supply curve can be redefined and prices can rise. But in general, prices can fall pretty dramatically in capital-intensive industries with a small reduction in demand. See "farming" and "disk drives" as examples.
Robert Perry - 01:02pm on 02/21/2006
Carrick: No. If demand drops with the same supply(short-run), prices go down to facilitate selling the supply. When supply adjusts downward to meet the demand, prices tend to stabilize at the previous level. Less product moves, that’s all. Fixed costs are part of doing business. If you can’t sell your product at a profit, you move out of the business. If the demand is still there, then the price will rise. If the good costs more to produce than it will sell for, there is no market. The govt subsidized monopoly is the problem in pub utils. It prevents new entry and innovation. Govt likes things to be centralized, but utils, if private, might take another form entirely. We just don’t know, since utils have not historically been in the free market.
robert108 - 01:02pm on 02/21/2006
Carrick: I can see I wasn’t clear about the "fixed cost" thing. Since the govt fixes the cost of producing and distributing energy, we don’t know what the real costs might be in a free market.
robert108 - 01:02pm on 02/21/2006
Robert108,...Is it okay if I have a flat tax and everyone else can have it this way?… Please!
Zsa Zsa - 03:02pm on 02/21/2006
ZZ: Sure! As soon as we get that "middle class tax cut" that Clinton promised us in the ‘92 campaign. "Targeted tax cuts" are a leftie political scam, btw. How about substantially lower taxes for everyone, like a 20% maximum rate?
robert108 - 05:02pm on 02/21/2006
docdave: Yeah, those govt drones would have to get real jobs in the productive sector. They would be contributing to the economy instead of being a drain on it. Very bad!(I’m joking). We could combine that program with shutting down the borders and sending all the illegals back to where they came from. There would then be plenty of jobs for the excess govt workers. Neat, huh?
robert108 - 05:02pm on 02/21/2006
Doc Dave,...Dismantling the current infastructure? Yikes! The lobbiests would be coming out of the walls! Accountants, IRS employees etc… I guess I should quit being so self centered about this and suck it up?
Zsa Zsa - 03:02am on 02/22/2006
What a crock of right wing nut propaganda! The sooner the republicans are voted out of their offices the better it will be for all. You don’t have to agree with my views,,, but I am not ready to accept the republican facisym ideology ever!!!!
R.T. - 03:04pm on 04/21/2006
RT: I vastly prefer free people making free choices to the Marxist ideology of the lefties.
Robert108:
If demand goes down in an unregulated market, but where fixed costs are high, as with utility companies, wouldn’t you expect the cost of the goods to increase?
"If demand goes down in an unregulated market, but where fixed costs are high, as with utility companies, wouldn’t you expect the cost of the goods to increase?"
Nope. When the supply curve stays the same but the demand curve is reduced, the market clearing price is generally reduced. If fixed costs are indeed high, the effects are a general inelasticity of supply. That is, faced with paying for big ‘ol tool X, people will tend to produce even at a low price to pay it off.
Now, when suppliers say "enough is enough" and leave the market, THEN the supply curve can be redefined and prices can rise. But in general, prices can fall pretty dramatically in capital-intensive industries with a small reduction in demand. See "farming" and "disk drives" as examples.
Carrick: No. If demand drops with the same supply(short-run), prices go down to facilitate selling the supply. When supply adjusts downward to meet the demand, prices tend to stabilize at the previous level. Less product moves, that’s all. Fixed costs are part of doing business. If you can’t sell your product at a profit, you move out of the business. If the demand is still there, then the price will rise. If the good costs more to produce than it will sell for, there is no market. The govt subsidized monopoly is the problem in pub utils. It prevents new entry and innovation. Govt likes things to be centralized, but utils, if private, might take another form entirely. We just don’t know, since utils have not historically been in the free market.
Carrick: I can see I wasn’t clear about the "fixed cost" thing. Since the govt fixes the cost of producing and distributing energy, we don’t know what the real costs might be in a free market.
Robert108,...Is it okay if I have a flat tax and everyone else can have it this way?… Please!
ZZ: Sure! As soon as we get that "middle class tax cut" that Clinton promised us in the ‘92 campaign. "Targeted tax cuts" are a leftie political scam, btw. How about substantially lower taxes for everyone, like a 20% maximum rate?
docdave: Yeah, those govt drones would have to get real jobs in the productive sector. They would be contributing to the economy instead of being a drain on it. Very bad!(I’m joking). We could combine that program with shutting down the borders and sending all the illegals back to where they came from. There would then be plenty of jobs for the excess govt workers. Neat, huh?
Doc Dave,...Dismantling the current infastructure? Yikes! The lobbiests would be coming out of the walls! Accountants, IRS employees etc… I guess I should quit being so self centered about this and suck it up?
What a crock of right wing nut propaganda! The sooner the republicans are voted out of their offices the better it will be for all. You don’t have to agree with my views,,, but I am not ready to accept the republican facisym ideology ever!!!!
RT: I vastly prefer free people making free choices to the Marxist ideology of the lefties.