Imagine that a generic drug becomes available for the treatment of a condition, no substitute good is available (inslulin might be a good example), and the elasticity of demand is low .Say that there are multiple companies producing this drug and competing with each other for customers. Assuming no…

I think the main problem is linear causation. Stimuly do not cause responses in people. People are not pieces of iron. If you heat iron (stimulus) you get lengthening (response) EVERY TIME. If you apply heat to a human beeing you don’t know what specificaly to expect, but the end result will be the…

One of the best examples I have read came from a Daily post during Christmas. The example was one of those inflatable santa’s that are oh-so-popular during that time of the year. A couple sees one and the wife decides she wants it. They are sold out of all the ones in the box, but they still have t…

If noody had diabities(or if there were some other way to perminantly cure diabities), then insilin would be worthless, no matter how many people/firms were producing it…

These last couple of posts just completely misunderstand the point that I am making. As to the posts that came before that, I am reading through Bohm Bawerks essay and will respond soon. Cheers for directing me to it, its very interesting so far.

Forgive me if I claim to much, but it seems as though you’re also assuming that production cost can’t/won’t change either. The likely in such a scenario winner isn’t one who can successfully sell their product above production costs, but the competitor that can produce their product at lower cost th…

“So, while production cost is a lower limit, it is by no means static or unchangable” This is it. This is exactly what I am claiming. Production cost is a lower limit, but it is a lower limit towards which prices gravitate. It is this gravitation that incentivises firms to innovate and produce at l…

Did you even read either of my posts responding to you? Or at least the article in which Prof. Salerno directly addresses your question exactly?

Production costs only contribute to price once competition has created an incentive to modify it though. Prices originate with preference. Consider: No elixer of immortality exists, yet the demand for immortality exists. Regardless of the production cost, a preference of willingness to pay for it …

Yes, this is just another way of saying Marginal Revenues tend towards Marginal Costs. But just to reiterate, even those Production Costs are dependant on consumer preferences (see all of the previous posts/articles everyone has been pointing you towards).

Why do Austrians say price is set by preference rather than production cost?

Economics Economics Questions

Autolykos March 31, 2011, 8:16am 79

The OP might want to check out this post I wrote in another, similar thread.

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Why do Austrians say price is set by preference rather than production cost?

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