In theory, it would allow them to reduce costs to compete better with rivals and sell more.
But usually it’s the thing you said. Capitalism fundamentals are pretty broken in most markets.
In theory, it would allow them to reduce costs to compete better with rivals and sell more.
But usually it’s the thing you said. Capitalism fundamentals are pretty broken in most markets.
partial_accumen@lemmy.world 5 days ago
Selling more could mean lower profits over all. If you have to build out extra production capacity (new fixed costs) to create more product that you’re receiving a lower price on, then it could have been more profitable to sell fewer units but at a higher cost creating more profit.
Example: If you’re at 90% capacity on your $1 billion factory selling your product for high price/high profit, and you lower your price which increase sales by 20%, you now have to another $1 billion factory to product the 8% of product not producible at your first factory. You’ve now lost nearly $1 billon from your larger sales.