View Poll Results: All othe things being equal, when you raise price, what happens to demand?

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  • When you raise price, all other things being equal, demand decreases

    11 84.62%
  • When you raise price, all other things being equal, demand increases

    1 7.69%
  • I do not believe that the laws of supply and demand apply to labor

    1 7.69%
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Thread: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

  1. #21
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by Tucker Case View Post
    Because labor usually directly affects production, while goods are typically the result of production and do not directly affect production.

    But if the goods in question do affect the production, demand is usually unaffected by price. If I need corn in order to make corn chips at my factory, my demand for corn will not be affected by the price of corn. The price of my product, however, will often go up to account for the increased price in order to maintain my profits. If I run a trucking company, and diesel prices increase, I will not less demand for diesel (for my routes must continue to exist in order for me to continue to stay in business). So the end result is that the cost of my services increase.

    Labor works the same way as those examples above. Companies require employees in order to provide their services or produce their goods. They cannot profit without them. So instead of demand for labor decreasing, the more likely result is that the cost of services and goods increases.

    Decreases in demand would initially only occur if the labor involved is not essential to maintaining production levels. However, the increased prices for goods and services could affect demand for those goods and services (mostly in the short-term, though, as the economy would eventually adjust to the new baseline cost of labor as it has every other time the minimum wage was raised). If the increased cost of those goods decreases demand for those goods, then the demand for production decreases and if the demand for production decreases, the demand for labor decreases.

    That's a series of "ifs", however, thus making the answer of "depends" the most accurate one to the question of whether or not increasing the price of labor will decrease the demand for it. The supply part is unchanged and an increase in minimum wage prevents there from being any legal alternative cheaper labor. That has a major affect on the whole situation. Not to mention other cost cutting approaches which exist that can counter the increased wage prices (fast food restaurants often lower the quality of their ingredients in order to offset the increased labor costs so that production can remain constant and demand won't decrease since people who eat fast food are relatively unconcerned with quality anyway, for example)
    Very well stated.

    Is that the reason companies are offering their products...cereal or packages of cheese, for example, in reduced ounces while charging the same price as before? I don't understand how companies could be "pocketing" the difference when they have to pay a higher price for the raw materials to make their product in the first place. This seems to be a circular argument. What am I not getting here?

  2. #22
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by ReformCollege View Post
    Besides, you cannot sit here and tell me that out of all the minimum wage jobs there are right now, employers can't find say 5-10% of them that they don't need. There is always waste to cut, and raising the minimum wage simply makes getting rid of that waste have a higher payoff.
    Of course there's waste, but think for a second. What business is going to say "Well, $7.25/hr of waste is one thing, but $9/hr is too much?" If they're decent business people, they're going to cut waste, and if they're not then maybe they shouldn't be in business anyway.

    Has anybody noticed that prices go up, but wages don't? Granted there are a lot of factors involved in that, but shouldn't the minimum wage go up with inflation? If you've ever worked minimum wage, you know that they'd pay you less if they could get away with it. They'd still raise prices, though, but you as a worker wouldn't see any of that.


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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by cpwill View Post
    Currently the score is 31 to 2 in favor of labor existing on a supply / demand curve. So, if Labor follows the rules of Supply and Demand, then what happens when, all other things being equal the price of labor is raised?
    Is the question what do I "favor" happening or "what do I think" happens whether I want it to or not?
    Having opinions all over the map is a good sign of a person capable of autonomous thinking. Felix -2011

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by Fisher View Post
    With the $2 an hour raise in the minimum wage, teenagers would be able to buy 2 more dollar menu items from McDonalds per hour they work and then they could hire more people.......see how that works---just depends
    McDonalds workers probably make up a small % of McDonald's customer base. So everyone else buying less would overpower their own workers buying more, IF they even decide they want to buy more McDonald's with their hypothetical wage increase.

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by rocket88 View Post
    Of course there's waste, but think for a second. What business is going to say "Well, $7.25/hr of waste is one thing, but $9/hr is too much?" If they're decent business people, they're going to cut waste, and if they're not then maybe they shouldn't be in business anyway.

    Has anybody noticed that prices go up, but wages don't? Granted there are a lot of factors involved in that, but shouldn't the minimum wage go up with inflation? If you've ever worked minimum wage, you know that they'd pay you less if they could get away with it. They'd still raise prices, though, but you as a worker wouldn't see any of that.
    No, because inflation should reduce the amount of people that are priced out of getting paid the minimum wage. Consider back in the 40s when the minimum wage was effectively removed due to inflation, a vast majority of even low skilled workers were paid above the minimum wage because it no longer factored into hiring decisions.

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by polgara View Post
    Very well stated.

    Is that the reason companies are offering their products...cereal or packages of cheese, for example, in reduced ounces while charging the same price as before? I don't understand how companies could be "pocketing" the difference when they have to pay a higher price for the raw materials to make their product in the first place. This seems to be a circular argument. What am I not getting here?

    You're pretty close to getting it Polgara. Production costs are relatively stable in general. The big variable is in the cost of the commodities/raw materials used to produce the finished goods.

    In the case of cereal or cheese, the raw materials have been going up considerably. The market determines what price point a consumer is willing to pay for the finished product. If costs go up, but the market selling price has been established by the consumer, the only avenue left to the manufacturer is to provide less product in order to maintain the required profit at the price consumers are willing to pay for one item.

    For example, when Apple and IBM were first establishing the personal computer market, they learned there was demand for personal computers at a price of @ $2,000. Apples first quality computer, the "Lisa" sold for @ $8,000. Jobs quickly learned the market was limited at that price point. Until recently, that price point has held fairly stable.

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by Tucker Case View Post
    Because labor usually directly affects production, while goods are typically the result of production and do not directly affect production.

    But if the goods in question do affect the production, demand is usually unaffected by price. If I need corn in order to make corn chips at my factory, my demand for corn will not be affected by the price of corn. The price of my product, however, will often go up to account for the increased price in order to maintain my profits. If I run a trucking company, and diesel prices increase, I will not less demand for diesel (for my routes must continue to exist in order for me to continue to stay in business). So the end result is that the cost of my services increase.

    Labor works the same way as those examples above. Companies require employees in order to provide their services or produce their goods. They cannot profit without them. So instead of demand for labor decreasing, the more likely result is that the cost of services and goods increases.

    Decreases in demand would initially only occur if the labor involved is not essential to maintaining production levels. However, the increased prices for goods and services could affect demand for those goods and services (mostly in the short-term, though, as the economy would eventually adjust to the new baseline cost of labor as it has every other time the minimum wage was raised). If the increased cost of those goods decreases demand for those goods, then the demand for production decreases and if the demand for production decreases, the demand for labor decreases.

    That's a series of "ifs", however, thus making the answer of "depends" the most accurate one to the question of whether or not increasing the price of labor will decrease the demand for it. The supply part is unchanged and an increase in minimum wage prevents there from being any legal alternative cheaper labor. That has a major affect on the whole situation. Not to mention other cost cutting approaches which exist that can counter the increased wage prices (fast food restaurants often lower the quality of their ingredients in order to offset the increased labor costs so that production can remain constant and demand won't decrease since people who eat fast food are relatively unconcerned with quality anyway, for example)
    I would say though, that in the long term, this will cause people to be able to consume less of those services, which would indirectly require less corn or labor or diseal to be needed for the lower production level.

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by rocket88 View Post
    Of course there's waste, but think for a second. What business is going to say "Well, $7.25/hr of waste is one thing, but $9/hr is too much?" If they're decent business people, they're going to cut waste, and if they're not then maybe they shouldn't be in business anyway.

    Has anybody noticed that prices go up, but wages don't? Granted there are a lot of factors involved in that, but shouldn't the minimum wage go up with inflation? If you've ever worked minimum wage, you know that they'd pay you less if they could get away with it. They'd still raise prices, though, but you as a worker wouldn't see any of that.
    We're competing in a global economy now. In the old days, it was relatively easy to peg wages to inflation, even though that in and of itself is inflationary. Now, we can't do that with impunity and still complete globally. Our moves toward isolationism seem to indicate we would prefer to continue such practices, even though we know it's a dead end.

  9. #29
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by ReformCollege View Post
    McDonalds workers probably make up a small % of McDonald's customer base. So everyone else buying less would overpower their own workers buying more, IF they even decide they want to buy more McDonald's with their hypothetical wage increase.
    It's not only their own workers. It's the whole bottom rungs of the income ladder that generally frequent fast food chains...including McDonalds and they would all have higher wages.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by humbolt View Post
    We're competing in a global economy now. In the old days, it was relatively easy to peg wages to inflation, even though that in and of itself is inflationary. Now, we can't do that with impunity and still complete globally. Our moves toward isolationism seem to indicate we would prefer to continue such practices, even though we know it's a dead end.
    The majority of minimum wage jobs are service industry jobs that are not competing with international labor.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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