Doesn’t supply and demand control prices? Doesn’t supply and demand drive all economics? Can’t consumers reduce prices by lowering demand? No, no, no! Supply and demand without government oversight and management will not control prices. Supply and demand without government oversight and management does not drive all economics. And consumers do not have the ability to control prices in markets dominated by oligopolies and virtually all markets are controlled today by oligopolies.
What can consumers do to reduce the price of food? What can consumers do to reduce interest rates on mortgage loans, auto loans, or credit card loans? What can consumers do to reduce the amount that a doctor charges for a normal office visit? What can consumers do to reduce the costs of operations and other medical procedures? What can consumers do to reduce the cost of health insurance, auto insurance, or life insurance? What can consumers do to reduce the price of a college education ? What can consumers do to reduce the fees charged by lawyers? What can consumers do to reduce prices on goods or services that they require? Obviously, the answer to every one of these questions is ‘nothing’. A person cannot stop eating. A person cannot stop going to the doctor. A person cannot avoid getting an education.
Capitalism is not a bad thing. In fact, capitalism is a good thing and necessary for the economy. It is the uncontrolled, inordinate, exaggerated, and radical form of capitalism that is bad and unfortunately, it is this variant of capitalism that controls the economy and the government today. It is this uncontrolled or ‘out of control’ capitalism that is the root of the severe problems affecting both the US economy and government today. And it is the modification of capitalism by Christian economic principles that is the solution to these problems.
The theory of supply and demand is the basis for the economics system of this radical form of capitalism. This economic system is a set of theories developed by capitalists for the exclusive benefit of capitalists. The main objective of this system is the domination of the working class by the capitalist class, the domination of the majority by the select few, and the perpetuation of this imbalance on to the end of time. Radical capitalist economics hold that the capitalist is superior to the worker, and the worker is subordinate to the capitalist. In fact, the worker is looked upon as somewhat less than human. This is clear based on how workers are classified within an organization. Workers are no longer considered as personnel (persons), but as resources (human resources) and capital (human capital)—things that are used and things that are owned.
The key theory of radical capitalist economics involves price, supply and demand. While economics is a social science, the theory attempts to establish the relationship between supply, demand and price as a scientific fact. It is amazing how extensive mathematical models have been used to try to demonstrate and prove this theory. The complexity of these models overwhelms students of economics who merely acquiesce and accept these theories out of a kind of religious faith rather than on the strength of their arguments. Underlying the capitalist theory on price, supply and demand; is the theory of maximization of profits. The capitalist theory on supply and demand promotes and supports the maximization of profits for businesses, companies and corporations and ignores the concept of maximizing the wealth of virtually everyone through economic balance and equity
Does price have to increase as demand increases? Does price have to increase in a captive market? The following example provides the answers.
The ABC bakery makes and sells bread. It operates successfully and generates an after tax net profit of fifteen percent. Because of good economic conditions, the bakery experiences an increase in customer demand. Because of this increase in demand, the bakery hires additional workers and buys new equipment. Because of increased demand, the bakery’s sales have increased significantly. The increased sales have resulted in increased profits, yet its percent profit is still fifteen percent. Given the strong demand for bread, the bakery could increase prices in order to increase profits further, but, does it have to raise prices? The customers are happy. They are buying enough bread to satisfy their needs at a fair price. And the bakery is operating near capacity and making a good profit. What good to the customers would come from the bakery increasing the price of bread? Since the customers’ income is limited, an increase in the price of bread will lead to either the customer buying less bread or having to buy less of some other items that they also need. If the customer buys less bread, then how is that good for the bakery and how is that good for the customer? Does price have to increase as demand increases? Certainly not! It is a deceit of radical capitalist economics to make people think that price has to increase as demand increases. Unfortunately, people accept this and end up being manipulated by radical capitalists into buying things at unfairly high prices—all because the radical capitalist wants to maximize profits.
The ABC bakery above is located in a rural area. Due to a family situation, the only other bakery in the area has closed and now there is no competition for ABC. The consumers in the area are within a captive market; they have no other choice but to buy bread from ABC bakery. ABC bakery makes a reasonable profit on the sale of bread. Since it is the only bakery in the area, it could charge significantly higher prices—but does it? Does ABC bakery have to charge higher prices for bread? Is there some economic principle that forces it to raise prices? Does price have to increase in a captive market? The answer to these questions is ‘no’
Of course, it is true that businesses raise prices when demand increases and within captive markets. But they don’t have to. Businesses see opportunities to increase their profit margins in these cases and they ignore what is fair and just. Is it fair to charge a person a higher price because there is high demand? Is it fair to charge a higher price when there is no other place to buy the item? Why are the prices for food so high at theme parks, sports stadiums and vacation towns? Why are rental property prices so high in college towns and vacation towns? Fair and just prices are prices which are fair to both company and consumer. The theory of supply and demand totally ignores what is just and actually helps businesses take advantage of consumers. Businesses hide behind this theory and consumers blindly accept unjust prices because of this theory.
Consumers and even some businesses (primarily small businesses) are powerless when it comes to unjust prices. There are three types of unjust prices: unfairly high prices, unfairly low prices, and extreme changes in prices.
The price of a good or service is unfairly high when it is grossly out of line with prices for comparable goods or services within the same market, and when it is out of line relative to the economy. Unfortunately, there are many markets which are now dominated by a few corporations. In some local markets there may only be one supplier. In these markets prices can be unjustly high because of collusion by these few dominant corporations to set high prices. While price fixing is illegal in the United States, the government virtually ignores the practice even though it is the responsibility of the government to prevent and eliminate unfairly high prices not only because such prices are unjust and harms the consumer or business which is forced to pay the unfair price but also because these unfair prices affect the economy.
It is estimated that there are over 140,000 convenience stores in the United States and the number is growing. Most gasoline stations and most pharmacy store chains such as CVS and Walgreens are also convenient stores. It is a known fact that prices at convenience stores are higher than the prices of comparable items at supermarkets. While it is not unjust to have a slightly higher price at a convenient store, it is unjust to have a significantly higher price. Consider as an example the price of a gallon of milk. If the average price at local supermarkets is $2.00 a gallon, what would a fair price be and what would an unfair price be at a convenience store? If a milk product that is comparable to the milk product that is sold at local supermarkets is sold at a convenient store for $2.20 a gallon, a 10 percent higher price, then that would not be considered unjust. But if that gallon of milk sold for $2.50 a gallon, a 25 percent higher price, then