(August 12, 2018 at 2:12 pm)BrianSoddingBoru4 Wrote:(August 12, 2018 at 2:06 pm)Chad32 Wrote: I have family that believes that if you increase wages, the price of everything will go up the exact same amount.
Yeah, that's kind of silly. When wages increase, people have more disposable income, buy more stuff, creating a greater demand for services and manufactured goods, which increases production which lowers prices. Economies of scale work best when wages grow moderately faster than inflation.
Boru
I'm no economist, therefore I don't know squat about these sorts of things. But at the same time, I've never been one to accept 'because I know and you don't' as an answer. I can certainly think of lots of examples where increased production results in lower costs and therefore lower prices. But most of those examples are in the areas of production of hard goods. But when it comes to things like services, finding a builder to build your new deck for example, increase demand generally leads to higher prices. Why should I take you shitty deck job for $5k when I charge Mr Gotbucks $8k for the same work? Also in production areas like farming, seems like increased demand only leads to higher prices. Farmer Jed plants 200 acres of corn. When suppliers can get all the corn they want and more, prices are going to drop. When there just ain't enough corn to go around, prices go up.
We as a country don't produce nearly as many hard goods as we used to and we farm less than we used to as more and more farmers realize there's better money in using the land to plant million dollar McMansions than there is in planting $0.50 melons.
So again, as someone who doesn't like to take 'because I said so' as an answer, can you explain why increased demand will lead to lower prices overall? Not really doubting you. It just seems to defy logic and I genuinely want to understand it.
