sorry I had to post again. Anyone have any positive reasons or negatives about this?? I have one positive, businesses would earn way more and people would get their jobs back and we could forget about a second depression and losing homes. What do you think about it??
The dollar has a value. When prices rise, so do wages and salaries. If I make $100,000 a year, and spend $10,000 on food, I'm spending 10% on food. If every price is dropped by half, I'd be spending $5,000 on food, but my salary would also drop to $50,000 because businesses are only making half as much money now. So I'm still spending 10% on food. In the end, there is no benefit to me or to businesses.
Now lets say that wages and salaries stayed the same, how would businesses make a profit? If they halved the price, and everyone's salaries remained the same, you would have to produce more products as people would buy more. This means people would have to work extra hours and overtime. You would have to hire more workers. In most businesses, wage and salary make up well over 50% of spending. So the extra workers would cost a ton of money, and wouldn't make up for the extra profit.
The only thing that could happen would be that corporations would take advantage of the situation, and cut pay, benefits, and work conditions.
But the best way to boost profit is to increase the minimum wage. When the money is spread more evenly, people spend more money.
Right now, I'm working for Target an making $9.50 an hour. I make about $900 a month. I live at home and don't pay for food. Let's say Target paid me a living wage. If I could live on my own, I would be spending hundreds a month at Target. Most people are loyal to their company, so they would go back to their employer to shop. The money they paid me to live decently would go directly back to them, and to other businesses (the landlord, gas stations, the pharmacy, restaurants, and other places I'd go if I had money).
Not to sound offensive, but its obvious with so many employees target cannot pay you that much. Then again, Target (Along with everyone else) can and should be forced to increase wage by regulations. Its one of the only proven ways that has actually ever worked to keep the economy rolling, it did good things to Virginia in 07 when min. wage went to 7.25, though Imo it should be higher. Or it should be set by amount of cash made by corporation, etc. A wage/salary economy is good, consumers boom the industry. If the industry expects us to buy things without us doing anything it doesn't work.
Now, when you ask 50% your just being stupid. 2-10 (10 being the extreme) % could be beneficial to an economy, causing more people to buy so overall boosting the profit made by things bought compensating for the 2-10% price decrease.
You also need to realize that the power of the dollar would be screwed, too. [Technically speaking] The Dollar would be worth twice as much, meaning we would be paid half. (Considering the higher the prices the less each dollar is worth, because you need more to buy with it) So who decides how many dollars is needed to equal a certain value? I'm guessing business/world trade or something, though I'm not particularly sure. I wish I knew.
if you would cut all the prices in half, then most of the businesses would spent more money on producing their product, then they gain on selling it. since they are no longer able to cover the costs they are bancrupt and close down. and products are not that expensive. the average protif margin for the last 25 years has been around 8 per cent. if you take that profit away, you can increase sales a million times and there would still be no profit
Indiana's way of increasing the minimum wage is through taxes of the working class which is a BS idea in my opinion. The ones working for minimum wage gets extra income per hour, while those with a profession pay for the minimum wage in taxes. Then there are companies that charge higher prices to make up for the increased pay in employees. There is no good side to this change.
To answer the question using economic principles/words/ideas:
There are different buyer reactions for price change in different cost levels. If you lower the price and the same amount of people come, you'll lose revenue. You need a large enough amount of people to come to do that.
When lowering the price in certain higher prices, it is worth the amount of business; and in some lower prices it is not. There is a part in the middle where within a decently large for price, it is always worth it to raise or lower price. The more people that want the item, and the more they need it, that area will be larger.
From the price drop, the percent of people wanting the item more must be higher than the percent price is cut. ---------------- So, it's not usually good to just cut your prices in half, because you are lowering (for example) price of a haircut drastically, but people aren't going to start needing haircuts more than twice as much simply because they cost a lot less. For food, people will need or think they need some more food than normal, but not twice as much.
well this principle only applies as long as the marginal revenue is higher then the marginal costs. if you need 5 dollars to produce something and you sell it for 4 dollars. no matter how many objects you will sell, you will still make a loss.
Imagine If prices dropped down to 50% or even more. People would buy like 7000000 times more. Businesses
This isn't always the case. For example I sell designs on all sorts of stuff online. Many people including myself who do this have noticed an increase in sales with higher markups. So lower price doesn't always mean more sales.
Not really. In times of inflation and economic misery, real wages actually tend to go down. Perhaps you'll earn more, but with inflation counted, your buying power is much lower.
