Justin here. I have breakfast every Thursday with some guys over at Biscuitville. Across the street there is this Dry Cleaners shop that obviously didn't think through all the implications of inflation (pardon the poor picture; I snapped it with my phone.)
Not only is the new name on the sign $1.75 Cleaners, (note much bigger "7") but you can see on the window that they call themselves $1. 0 Cleaners, twice!
There is some equation in economics with a cute chart that dictates when you decide to raise prices (I think it's when Marginal Return equals Marginal Cost or MR=MC) . . . I think it should really read MR = MC + new signage.
Friday, October 31, 2008
Inflation Hits the $1. 0 Cleaners
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The supersized "7" in the sign screams, “We’ve RAISED prices. A business owner says “we’re losing money on every shirt,” his partner replies, “We can make it up on volume, just press more shirts,” one of the two says, “Hey, you know that big “7” in the dumpster? We can raise prices...and it won't cost us a dime."
ReplyDeleteThis logic always comes to grief: Raising prices without learning why MC exceeded MR in the first place is how the handyman whose only tool was a hammer does things. To him, every problem looks like a nail, and in this case, a 7d (that’s “7 penny” for you non-carpenter types). It only costs a little more to do it yourself. Which is why, whether changing a sign or managing your portfolio, you need a professional.