[ExI] Prices

[Dan]

--- On Thu, 4/23/09, painlord2k at libero.it <painlord2k at libero.it> wrote:
> Il 23/04/2009 20.17, Dan ha scritto:
> > --- On Thu, 4/23/09, painlord2k at libero.it<painlord2k at libero.it>
> > wrote:
> >> The problem with food prices in developed
> countries 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.
> 
> I wrote about costs, not prices.

Then how would you interpret this:

"The problem with food prices in developed countries 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."

It seems to me a reasonable interpretation of this statement is that its writer believes costs do determine prices.

> They can sell bread at the price people want pay, here.
> In fact, the price difference from North and South Italy is
> large.

Which probably reflects both differing demands and supplies between the regions.

Regards,

Dan