The other day, I complained about how GM was “forced” to raise prices due to materials cost increases and how wrong that concept is.
Yesterday's Chicago Tribune explained it better:
“‘GM sales are doing a little better than they thought and so GM felt it was in a strong enough position to increase prices a bit to make a little money,' noted Jim Hossack, vice president of research and consulting firm AutoPacific.”
There is nothing wrong with this. If GM thinks it is reading the market (and remember, the market sets prices), then GM is right to increase prices. Why? Because they can.
THAT is how the free market works. Not increasing prices because you “have to” because you're entitled to a given profit level. You raise prices because you can.
Why is an iPod $249? Because lots of people are willing to pay that. Why is a given car worth $24,999? Because people are willing to pay that. Why is a given house worth $249,000? Because one person is willing to pay that. It's all the marketplace talking, not the sellers “setting” prices.
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