It’s basic economics. As prices rise sales drop, you just need to adjust to find the point of maximum profit. Since market information isn’t perfectly known you’ll occasionally see overshoots like this.
Yes, but once you progress beyond demand elasticity and possibility frontiers, you learn about how externalities and marketing distort the tidy micro/macroeconomic theories.
“Perfect information” and “rational self interest” are the two biggest inbuilt crutches to economic theory, and capitalism evolves its profit-taking modalities daily. If marketing can convince consumers that an objectively inferior brand is equal or better to the competition, then the price inelasticity raises dramatically
It’s basic economics. As prices rise sales drop, you just need to adjust to find the point of maximum profit. Since market information isn’t perfectly known you’ll occasionally see overshoots like this.
Yes, but once you progress beyond demand elasticity and possibility frontiers, you learn about how externalities and marketing distort the tidy micro/macroeconomic theories.
“Perfect information” and “rational self interest” are the two biggest inbuilt crutches to economic theory, and capitalism evolves its profit-taking modalities daily. If marketing can convince consumers that an objectively inferior brand is equal or better to the competition, then the price inelasticity raises dramatically