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I'm asking because of something I think I saw while trying to refresh my memory on calculus. Reading a book that was copyrighted back in the 1970s but I think it's a good one for doing what I'm trying to do. Anyway I was reading about economic applications today. And it looks to me like if you have a situation where there is a relationship between price and number of units sold such that consumers buy more units when prices are lower taxes mean profits are maximized when there is less production.

The specific example I was looking at first went through an example of establishing the number of units to be produced in order to maximize profit. Then it said, "Let's see what happens when we add a tax" so that the cost of production of each unit increased. And the result was that profit was then maximized when the price per unit was a little higher but the number of units produced was a little lower.

That's an interesting thing to think about. Like for one thing it suggests a negative effect on jobs when taxes are increased.

The authors of the textbook weren't being political either. At least I don't think so. They were just doing math.

I'm not an economist so I'm not exactly following what you're laying down. Wouldn't demand and productivity weigh more heavily? What's the industry? What's the competition like?

kalm wrote:I'm not an economist so I'm not exactly following what you're laying down. Wouldn't demand and productivity weigh more heavily? What's the industry? What's the competition like?

Taxes change the price and thus impact the demand which in turn impacts production. There are multiple factors but in general a rational producer is going to select the price and production points relative to demand that maximizes their profits. How great will the impact be and does it outweigh the perceived benefit of the increased tax?

kalm wrote:I'm not an economist so I'm not exactly following what you're laying down. Wouldn't demand and productivity weigh more heavily? What's the industry? What's the competition like?

The authors did not specify the product. It was just a math thing where they talked about what typical marginal cost, marginal profit, etc. curves looked like then went into an example problem where x was the number of units produced. The idea is that profit went up for a while as number of units produced increased but you reached a certain point where after that profit went down as you produced more units. In the particular problem the maximum profit was achieved through production of 2500 units.

Then they said let's go through the process again only add a certain additional cost per unit produced through adding a tax and do the math again. Then when they did the math again the maximum profit was achieved through production of 2000 units.

Again: This was all premised on a situation where consumers bought more units as price declined and fewer units as price increased. But I don't think that's an unrealistic premise.

The takeaway for me was that if a firm is using those kinds of models to make decisions they could actually decide to produce LESS product than they otherwise would have if cost per unit production is increased through taxation or anything else.

UNI88 wrote:

kalm wrote:I'm not an economist so I'm not exactly following what you're laying down. Wouldn't demand and productivity weigh more heavily? What's the industry? What's the competition like?

Taxes change the price and thus impact the demand which in turn impacts production. There are multiple factors but in general a rational producer is going to select the price and production points relative to demand that maximizes their profits. How great will the impact be and does it outweigh the perceived benefit of the increased tax?

Do taxes always change the price? What if competition in the market simultaneously increases or decreases along with increased taxes and demand is more greatly effected by that? What if new technology increases demand? If you're in AG, what if bad weather reduces supply and increases demand? What if a competitor with greater capitalization decides to lower prices to force competition out?

Again, I'm not an economist. Just genuinely curious.

kalm wrote:

UNI88 wrote: Taxes change the price and thus impact the demand which in turn impacts production. There are multiple factors but in general a rational producer is going to select the price and production points relative to demand that maximizes their profits. How great will the impact be and does it outweigh the perceived benefit of the increased tax?

Do taxes always change the price? What if competition in the market simultaneously increases or decreases along with increased taxes and demand is more greatly effected by that? What if new technology increases demand? If you're in AG, what if bad weather reduces supply and increases demand? What if a competitor with greater capitalization decides to lower prices to force competition out?

Again, I'm not an economist. Just genuinely curious.

It's been a long time since I studied economics but usually some portion of a new or increased tax will be passed on to the consumer. But just like your examples show "there are multiple factors" so it's not always as simple as taxes increase prices and decrease production.

JohnStOnge wrote:

kalm wrote:I'm not an economist so I'm not exactly following what you're laying down. Wouldn't demand and productivity weigh more heavily? What's the industry? What's the competition like?

The authors did not specify the product. It was just a math thing where they talked about what typical marginal cost, marginal profit, etc. curves looked like then went into an example problem where x was the number of units produced. The idea is that profit went up for a while as number of units produced increased but you reached a certain point where after that profit went down as you produced more units. In the particular problem the maximum profit was achieved through production of 2500 units.

Then they said let's go through the process again only add a certain additional cost per unit produced through adding a tax and do the math again. Then when they did the math again the maximum profit was achieved through production of 2000 units.

Again: This was all premised on a situation where consumers bought more units as price declined and fewer units as price increased. But I don't think that's an unrealistic premise.

The takeaway for me was that if a firm is using those kinds of models to make decisions they could actually decide to produce LESS product than they otherwise would have if cost per unit production is increased through taxation or anything else.

Most firms determine the selling point by determining where those two lines intersect anyways....what volume at what price point maximizes profits. Adding a tax just shifts one of those two lines.

kalm wrote:

UNI88 wrote: Taxes change the price and thus impact the demand which in turn impacts production. There are multiple factors but in general a rational producer is going to select the price and production points relative to demand that maximizes their profits. How great will the impact be and does it outweigh the perceived benefit of the increased tax?

Do taxes always change the price? What if competition in the market simultaneously increases or decreases along with increased taxes and demand is more greatly effected by that? What if new technology increases demand? If you're in AG, what if bad weather reduces supply and increases demand? What if a competitor with greater capitalization decides to lower prices to force competition out?

Again, I'm not an economist. Just genuinely curious.

All good questions and not easy to answer. We face your last question every day. I'd LOVE to raise the rates on our auto loans (to increase profit, but also to better cover loan losses) but we cannot because competitors prices are already slightly lower...any higher and we'd kill volume altogether. so, we accept very marginal returns on most of our auto products...

JohnStOnge wrote:I'm asking because of something I think I saw while trying to refresh my memory on calculus. Reading a book that was copyrighted back in the 1970s but I think it's a good one for doing what I'm trying to do. Anyway I was reading about economic applications today. And it looks to me like if you have a situation where there is a relationship between price and number of units sold such that consumers buy more units when prices are lower taxes mean profits are maximized when there is less production.

The specific example I was looking at first went through an example of establishing the number of units to be produced in order to maximize profit. Then it said, "Let's see what happens when we add a tax" so that the cost of production of each unit increased. And the result was that profit was then maximized when the price per unit was a little higher but the number of units produced was a little lower.

That's an interesting thing to think about. Like for one thing it suggests a negative effect on jobs when taxes are increased.

The authors of the textbook weren't being political either. At least I don't think so. They were just doing math.

Pro tip: Can't find an economist? You can usually get the game service from an astrologer for a lower price.

I'm no economist but what you are describing I am pretty sure is taught on day 1 in microeconomics 101


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No, but I have occasionally played one for certain dramas on message boards.

No.

Meh. There are so many variables to factor in. Sure, taxes play a role, but I don't think it is that significant.
One of the many factors that would help maximize profits with less production is customer acquisition cost.
For example, if you are selling a golf related widget, the hard core golfers will be the first to find out about it. The customer acquisition cost is relatively low for that group as compared to the "casual" golfer. That group would require a more intense marketing scheme. In the case of golf, it may require paying a PGA Professional to endorse the product.

Some sales perform better based on certain price points. If you sell a product for $9.99, and then there is a new 15 cent tax, the seller will not find it easy to raise the cost above $9.99 in order to cover the tax. The tax in this case would just eat into the margin. Companies get around these increased costs sometimes by making the product smaller and keeping the price the same. You can see this with products like Doritos. The "Party Size" is much smaller now than when it originally hit the shelf. McDonalds hamburgers got smaller over time. Tide laundry detergent went from a 100 oz. container to a 92 oz. container but the price is the same. Same shape container.

http://www.mouseprint.org/2013/04/08/wh ... downsized/

CAA Flagship wrote:Meh. There are so many variables to factor in. Sure, taxes play a role, but I don't think it is that significant.
One of the many factors that would help maximize profits with less production is customer acquisition cost.
For example, if you are selling a golf related widget, the hard core golfers will be the first to find out about it. The customer acquisition cost is relatively low for that group as compared to the "casual" golfer. That group would require a more intense marketing scheme. In the case of golf, it may require paying a PGA Professional to endorse the product.

Some sales perform better based on certain price points. If you sell a product for $9.99, and then there is a new 15 cent tax, the seller will not find it easy to raise the cost above $9.99 in order to cover the tax. The tax in this case would just eat into the margin. Companies get around these increased costs sometimes by making the product smaller and keeping the price the same. You can see this with products like Doritos. The "Party Size" is much smaller now than when it originally hit the shelf. McDonalds hamburgers got smaller over time. Tide laundry detergent went from a 100 oz. container to a 92 oz. container but the price is the same. Same shape container.

http://www.mouseprint.org/2013/04/08/wh ... downsized/

Same with ice cream. Remember years ago when the containers for the major brands were a 2 quarts,1/2 gallon. Then all of a sudden then went to 1.75 quarts. But the prices stayed the same. Then all of a sudden about 8-10 years ago the sizes went down to 1.5 quarts. Again the prices stayed the same. And like consumers aren't going to notice that shit . That was about the time I said about the major brands like Breyers fuck them, and never bought their ice cream anymore, but rather a gallon container of a knockoff brocery chain brand a few times a year (and I haven't even done that in 3 years). Much healthier..