Comment by kbelder
4 hours ago
Ice cream is being priced too high if the ice cream sellers would make more money by decreasing the price of ice cream. If they wouldn't, it is appropriately priced.
Or, from the buyer's perspective, it is priced appropriately if the total amount buyers would spend on it would go down if the price is lowered or raised.
There isn't a correct intrinsic price that an object should be sold at that can be calculated based on the ingredients and labor. That idea is one of the fundamental flaws of Marxism. Price is a compromise between the buyers and sellers, based on the values of each.
This story is a fiction pitting the seller and buyer against each other in a context free vacuum. The reality is that between buyer and seller there are channels which are either under control of the seller or another powerfull third party. The playing field is very difficult to enter for new sellers and the number of sellers has been going down for a long time tilting the playing field more and more against the buyer.
Is it completely insane and incoherent to imagine a situation where ice cream has two equilibrium prices, one higher and one lower, and the market just settles on the higher one? Like, imagine a case where Jeni's would start losing money on every pint if they reduced the price by a dollar, but they'd make the same amount of money overall if they reduced it by 3. But they're in a local optimum, the "price reduced by 3" is identical for revenue purposes, and they choose their current local optimum. Then ice cream could still be priced too high and be "appropriately priced". Is this impossible?
> Is it completely insane and incoherent to imagine a situation where ice cream has two equilibrium prices, one higher and one lower, and the market just settles on the higher one?
It it completely insane? No. But draw a set of supply and demand curves that supports it, and then try to come up with a narrative that explains them. In the static, same time, all other things being equal case, it is hard to do.