Free Market vs Socialism

[Arta]

I'm not a socialist either.

[Adron]

But that fails to take into account the fact that for an elastic good, the total number of buyers will go up with a lower price. So the two could very well be making more money selling lower anyway, but company a is going to make off like a bandit for the time when they cut below b. If you are increasing the consumer surplus the demand is on the rise.

It all depends on the goods involved, I suppose. However, you're then not looking at a competition effect at all any more. Reducing prices to get more customers to buy your wares applies equally to a monopoly. Which means that under these circumstances having a monopoly isn't negative for prices or economy - the one company will be just as motivated to drop prices as if there were other competing companies.

some other things to talk about: we still have the fact that government intervention is bad because of taxation which causes a dead weight loss in the market's efficiency, and the fact that the government (US) has historically screwed things up with price ceilings and price floors and I would also like to talk about those since they do have to do with this subject.

Price ceilings and price floors I have limited experience with. Subsidies I know, used to ensure there is sufficient overproduction in for example farming to handle a bad year. About taxation being a dead weight loss in the market's efficiency - yes, anything you do has a price. It just has to be worth it. You can't speak about taxes as being an unacceptable loss of efficiency without considering what you get for them.

[quasi-modo]

But that fails to take into account the fact that for an elastic good, the total number of buyers will go up with a lower price. So the two could very well be making more money selling lower anyway, but company a is going to make off like a bandit for the time when they cut below b. If you are increasing the consumer surplus the demand is on the rise.

It all depends on the goods involved, I suppose. However, you're then not looking at a competition effect at all any more. Reducing prices to get more customers to buy your wares applies equally to a monopoly. Which means that under these circumstances having a monopoly isn't negative for prices or economy - the one company will be just as motivated to drop prices as if there were other competing companies.

I never really said a monopoly was particularly bad. In some cases in the real world a monopoly is good. Take your local phone, and cable companies, without the municipality saying that there can only be one lines would be strung up all over the place. They still must strive to have good service otherwise they will loose their bid. That is an everyday legal monopoly.

some other things to talk about: we still have the fact that government intervention is bad because of taxation which causes a dead weight loss in the market's efficiency, and the fact that the government (US) has historically screwed things up with price ceilings and price floors and I would also like to talk about those since they do have to do with this subject.

Price ceilings and price floors I have limited experience with. Subsidies I know, used to ensure there is sufficient overproduction in for example farming to handle a bad year. About taxation being a dead weight loss in the market's efficiency - yes, anything you do has a price. It just has to be worth it. You can't speak about taxes as being an unacceptable loss of efficiency without considering what you get for them.

I know that some ammount of tax is neccessary, but the fact is they do cut a chunk out of the efficiency, I might forege for some graphs or make some later. So therefore that form of government intervention is inherently bad for a markets well being, so taxes should  be kept as low as possible.

An example of a price floor would be minimum wage. An example of a price ceiling would be rent control or the gas cap they had here in the states during the energy crunch. Those all keep the market from functioning out of it's equilibrium.

[MyndFyre]

But that fails to take into account the fact that for an elastic good, the total number of buyers will go up with a lower price. So the two could very well be making more money selling lower anyway, but company a is going to make off like a bandit for the time when they cut below b. If you are increasing the consumer surplus the demand is on the rise.

It all depends on the goods involved, I suppose. However, you're then not looking at a competition effect at all any more. Reducing prices to get more customers to buy your wares applies equally to a monopoly. Which means that under these circumstances having a monopoly isn't negative for prices or economy - the one company will be just as motivated to drop prices as if there were other competing companies.

I never really said a monopoly was particularly bad. In some cases in the real world a monopoly is good. Take your local phone, and cable companies, without the municipality saying that there can only be one lines would be strung up all over the place. They still must strive to have good service otherwise they will loose their bid. That is an everyday legal monopoly.

But look -- that monopoly is enforced by the government!

[quasi-modo]

But that fails to take into account the fact that for an elastic good, the total number of buyers will go up with a lower price. So the two could very well be making more money
selling lower anyway, but company a is going to make off like a bandit for the time when they cut below b. If you are increasing the consumer surplus the demand is on the rise.

It all depends on the goods involved, I suppose. However, you're then not looking at a competition effect at all any more. Reducing prices to get more customers to buy your wares applies equally to a monopoly. Which means that under these circumstances having a monopoly isn't negative for prices or economy - the one company will be just as motivated to drop prices as if there were other competing companies.

I never really said a monopoly was particularly bad. In some cases in the real world a monopoly is good. Take your local phone, and cable companies, without the municipality saying that there can only be one lines would be strung up all over the place. They still must strive to have good service otherwise they will loose their bid. That is an everyday legal monopoly.

But look -- that monopoly is enforced by the government!

yes, it is.

The whole thing about not needing anti trust laws was me trying to point out how the market has a tendancy to regulate it's self. Government intervention is rarely neccessary (except of course for makret failiors). When the government dabbles with the market it is generally not a good thing, so I am of the opinion that the market should be left to do its own thing as much as possible. But I never did say that a monopoly is a bad thing. Most monopolies in the real world are not price setters because their good is elastic. They do not have the ability to jack the price up and usually cannot price descriminate either to maximize their revenue.

[Adron]

Government intervention needed for phone lines?? Do you have monopolies on those? What a weird country!

Minimum wage is a good price floor. It's protection of the ignorant, those who do not know how much money they should ask for. Hardly anyone get minimum wages anyway, so it's not a problem. Well, unless you mean the minimum wages negotiated by the unions, but those are more like contracted standard wages.

[quasi-modo]

minimum wage drives up inflation.

[Adron]

minimum wage drives up inflation.

Only if it changes. Minimum wage in itself is not the driving force behind inflation; increasing wages in general is. A strong union making huge demands in negotiations drives inflation. As well as companies charging too high prices.

The main problem is that everyone wants more and noone wants less. If you would like to redistribute/revaluate work so that some groups get more and others less, you will have to have a large enough inflation and give low raises to some and big raises to some. Cutting salaries looks so bad.

[Arta]

Lack of a minimum wage drives up numbres of people who can't afford to feed and clothe their children.

[quasi-modo]

Lack of a minimum wage drives up numbres of people who can't afford to feed and clothe their children.

No. I thought we talked about this already... but maybe that was another forum. If we were to take away the price floor right now, the market would drop down to its equilibrium levels assuming they are lower and there would be a certain ammount of deflation and then we would end up where we started but with more valuble currency. All miniumum wage does is takes value away from our currency. Plus I doubt the family would be just living happily and not be on welfare if the parents of the 10 kids in the family are only making minimum wage.

[dxoigmn]

Lack of a minimum wage drives up numbres of people who can't afford to feed and clothe their children.

No. I thought we talked about this already... but maybe that was another forum. If we were to take away the price floor right now, the market would drop down to its equilibrium levels assuming they are lower and there would be a certain ammount of deflation and then we would end up where we started but with more valuble currency.

I doubt it.  Today, a single person couldn't live solely on minimum wage.

[quasi-modo]

Lack of a minimum wage drives up numbres of people who can't afford to feed and clothe their children.

No. I thought we talked about this already... but maybe that was another forum. If we were to take away the price floor right now, the market would drop down to its equilibrium levels assuming they are lower and there would be a certain ammount of deflation and then we would end up where we started but with more valuble currency.

I doubt it.  Today, a single person couldn't live solely on minimum wage.

There would be an adjustment period. I am not saying it would happen over night. But if we dropped out min wage we would end up about where we started. It would be like back in the day when you could buy coke for $0.10 though. There would be some deflation to say the least.

[muert0]

Lack of a minimum wage drives up numbres of people who can't afford to feed and clothe their children.

No. I thought we talked about this already... but maybe that was another forum. If we were to take away the price floor right now, the market would drop down to its equilibrium levels assuming they are lower and there would be a certain ammount of deflation and then we would end up where we started but with more valuble currency.

I doubt it. Today, a single person couldn't live solely on minimum wage.

I'm living solely on minimum wage but I'm probably going to lose my power in a week or two. :/

[Forged]

Lack of a minimum wage drives up numbres of people who can't afford to feed and clothe their children.

No. I thought we talked about this already... but maybe that was another forum. If we were to take away the price floor right now, the market would drop down to its equilibrium levels assuming they are lower and there would be a certain ammount of deflation and then we would end up where we started but with more valuble currency.

I doubt it.  Today, a single person couldn't live solely on minimum wage.

Depends on where you live really.  In San Antonio if you can  get a roommate and work 40hours a week you cuold probablly just about squeeze by on min wage.

[Adron]

No. I thought we talked about this already... but maybe that was another forum. If we were to take away the price floor right now, the market would drop down to its equilibrium levels assuming they are lower and there would be a certain ammount of deflation and then we would end up where we started but with more valuble currency. All miniumum wage does is takes value away from our currency. Plus I doubt the family would be just living happily and not be on welfare if the parents of the 10 kids in the family are only making minimum wage.

This is one part to it. The other solution would be to add maximum wages in addition to minimum wages. By doing that you would put a lid on it and ensure that levels do not run away freely. The problem with the free market is that it's never free. People always collude, and the wrecks it. Look at the highest income and lowest income and tell me if the difference is motivated?