[giantrobot]

> The law of supply and demand is what sets prices across an entire economy, not some grand conspiracy by every company to overcharge consumers.

Nope. Prices are set by what the market is willing to bear. Supply and demand are loosely correlated with the final retail price of things.

Demand for a good is based on its current asking price and how the consumer values that good. If the asking price ends up pricing the good out of the market's ability to pay for it the demand will drop irrespective of the supply.

As for conspiracies to increase prices, that's just a ludicrous position. All players in the market with the same incentives can move in lockstep with zero coordination. There doesn't need to be a conspiracy when every company basically lives by "make the most money".

If you see a competitor raising prices it's the perfect time to raise your own prices irrespective of your costs. If your costs haven't increased then you get better margins for free. There's no need for direct collusion when competitors are looking at the same news and have the same overall playbook.

[tonyedgecombe]

>Nope. Prices are set by what the market is willing to bear.

Only when supply is constrained, for example housing in leading cities. Otherwise prices tend to fall to the marginal cost of the item you are buying.

[notch656a]

Supply of tangible goods is always constrained, if by nothing else by physical limitations of the earth and our ability to exploit it.

[tonyedgecombe]

Except that ignores the innovation we bring to manufacturing. If a car manufacturer finds a way to use less material in a component or a furniture maker finds a way to use more of the tree in their products then that lowers the marginal cost. Their competitors will adopt the same idea or else risk going out of business.

Housing however is constrained by the price of land, outside of a few small regions like the Netherlands there is no amount of innovation that will create more of it. Hence the price of housing is set by what the market will bear.