PJ Media

Tom I don’t want to insult your intelligence because I know you do understand but in making my illustration I have to keep it kindergarten simple because there are so many ways to get off track. There is a reason right to work means more prosperity. Work rules being one of the major reasons. That the labor unions are helping the employee is on the same order as “We’re from the government and we’re here to help.” That is propaganda, pure and simple.

Something I came up with recently from trigonometry is the right triangle as it applies to selling price. The hypotenuse of this triangle in the market price of your product. It is the market that that sets the price price perimeter of that circle rather than the business. The auction sale illustrates this quite well. At a cattle auction the auctioneer is paid by commission so the higher the sale the more he makes. The highest bidder is also the buyer of a single item offered for sale. So each cow is sold one at a time or a batch at a time.

A tool auction, on the other hand, is different. The auctioneer needs to sell the most items at the highest price that will move them. When the last bid is in he may ask who else and get one or two responses at the most so he drops the price back a notch and a dozen hands go up but he thinks there are more buyers out there so he makes another cut and gets several more hands. A third cut would not improve his profit so that is the market price for that tool at that auction. How many economists miss this simple truth of the market setting the selling price?

Now lets break this down into the triangle which has three elements, base, height and hypotenuse. We can let the base represent gross expense which includes any and all taxes, subsidies, grants, etc. as well as labor and material cost that goes into the salable product. The height would then be profit which I am taking as net profit. The hypotenuse becomes the diameter of the market price of footprint on the product. It consists of two elements, one that is set and over which the business has very little control which is the expense and the profit is what he has left. A healthy profit requires a certain portion, of that diameter, otherwise it becomes weak and anemic. The market won’t let the selling price get out of hand because it can appraise value. When the product gets priced out of the market sales stop.

However the more wealthy can and will buy at the top of the market but they leave the crumbs for those of us that pasture further down on the hog.

I think you are on solid ground and have seen some very interesting posts as well as some you wonder what the writer really thinks since he can hardly believe what he has written
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