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asked ago by (2.6k points)
edited ago by
A decrease on production follows a decrease on prices in the supply and demand functions but there would be a higher reduction of production maintaining the high prices with less demand. What is depicted in a shift on the supply function. So my question regards the probability of that shift.

There can be a higher profit reducing production than decreasing prices, thus a higher firing costs when a firm is in the black can decrease prices easily.


My point of view wasn't very clear. My main job is arduous and I'm absent-minded sometimes. I hope it's more clear now. What I tried to say before the edit was that, it's not very sensible to reduce the production when prices are low because profit is even littler, so the rational behavior would be a reduction of production when inflation is high because demand is lower maintaining the same profit.
commented ago by (100 points)
The thought would seem to make sense... in practice, it doesn't... while avoiding partisanship of perspectives, today's cultural context allows for the distraction from constructive  reasoning and a stronger focus on what's good for ME in lieu of traditional economic thought that one would affect the other in either inverse or complimentary responses... Our economic thought simply doesn't include an element of shared responsibility or predictability in supply / demand assessment. As stated above, the 'taking' of profitability curves bend toward keeping any gain in margin, etc , and not participating in a re-investment of excess into the employment of production resources and people...that denies the purposeful reason for a  successful macroeconomic plan, as a nation, simply by prima facie evidence.
commented ago by (2.6k points)
Thank you for your thought.

I agree with you, but there is a set of rules that can correct market mistakes. So if the profit is higher decreasing production, despite of decreasing economic activity (what could be dangerous in the future for your own business, taking into account blindness and short-terminism of a few managers) I think that government can close the profit margin setting a higher firing payment to workers, in order to reduce that behavior when firms are in the black, starting to be applied when the dismissals reach a limit not very ample.  I think that classical theory doesn't take into account a few important matters in its models and we can't produce behaviors in a model the most of the time, so the probability can't be calculated or predicted as you say. Thank you again Sir.
commented ago by (2.6k points)
edited ago by
Check my question* again if you want to. It wasn't very clear and I'm very absent-minded in my main job. Maybe you can share more thoughts. Thank you again and sorry for the mistake.

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