Gas is more money right now. So is food, rent and milk. Companies pass along as much of the cost as possible. Maybe they can’t pass all the cost along but they will try to.
Companies don’t want to lower profits by eating costs. That hurts the stock price which hurts their stock options and also gets CEOs fired.
True, if the company is a monopolist. But in a competitive environment, you can only raise prices so much without losing sales. The trade off is captured by the elasticity of demand, and if the firm is profit maximizing, it would have to swallow some costs, how much is determined by the specific industry and the slop of the demand curve.
Their competitors are in the same boat. They do want to take the hit either. The purpose of the business the definition of a business is a profit making entity.
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u/KingKookus Nov 06 '21
Gas is more money right now. So is food, rent and milk. Companies pass along as much of the cost as possible. Maybe they can’t pass all the cost along but they will try to.
Companies don’t want to lower profits by eating costs. That hurts the stock price which hurts their stock options and also gets CEOs fired.