[ExI] Prices/was Re: Food Production

[Dan]

--- On Thu, 4/23/09, painlord2k at libero.it <painlord2k at libero.it> wrote:
> The problem with food prices in developed contries is that
> we usually see only the final products costs. The cost of
> bread, in Italy, is only 10% dependent to the cost of flour,
> the rest is transportation, labour, capital goods, etc.

Prices, where markets operate, depend on supply and demand.  Governments often interfere with this by setting prices or setting quotas, especially with food, energy, and transportation.  (These, in effect, and to the extent of the interference, become "make believe" prices -- with the extreme example being comprehensive economic planning, where all prices are set by the government and have no relation to anything other than bureaucratic whim.)  Costs, per se, do not create prices.  If costs did create prices, then we would never expect to see someone selling below cost or anyone making the mistake of making something and later finding out the expect price was too low.

Regards,

Dan