Why is it against the law to have progressive price increases on a popular item?

@RedDeerGuy1 ”...textbook said that you are not allowed to raise prices as a product is sold over time.”

In all my years studying economics, I have never heard that. Please provide an example.

I don’t know much about economics but I’ve heard, when demand for a certain item increases, it’s price also goes up because of shortage of item itself.

@zenvelo Sure.

One sells an appliance for $1000, then the store raises the price to $1100, then sells another for $1200 and so on. To balance out the cost for multiple units for sale.

It was the example given in my first year microeconomics class. I don’t have the textbook anymore was in 1997 semester..

@RedDeerGuy1 Your example does not occur not because of any law but because that is not how the world works. The production cost per unit does not go up the more you make; it goes down because each additional unit absorbs more of the cost to set up a manufacturing system.

A firm can raise prices because of increased demand; it happens all the time.

Your recollection of your microeconomics class is faulty.

That is most definitely NOT a law I have ever heard of in the Western World.

What you might be mis-stating is that there are many places that have laws against what if often called “Price Gouging”, which is increasing prices on critical goods during a local emergency. For example bottled water, generators, food, gas, etc in the wake of a hurricane.

In the wake of a disaster, supply chains are typically disrupted for a time meaning supply plumments and people nearby are more desperate so demand skyrockets…which bids up prices. But people who don’t understand economics think this is unfair. You only paid 50 cents for that bottle of water (or less probably), you shouldn’t sell it for $10, even if (or especially if) someone is desperate enough to pay for it.

The problem with that is that it means that ALL of the water, generators, TP, etc quickly get bought up and hoarded and then no one has any of these supplies. High prices encourage conserving the resource (do i really need TWO generators for my house?), but also create a larger profit incentive to encourage people to bring more supply to the area. For example, in the wake of bad hurricanes, there are people who will take their pickup trucks and make trips hours each way to load up on bottled water to sell at ‘gouging’ level prices…because it’s profitable to do so. Thus, there is more water in the area it is needed.

Price Gouging laws are widely criticized by most economists. However, they are VERY popular with journalists, politicians, and the Twitter-mob. And so alot of states have them.

Is THAT maybe what you’re thinking of?

@Entropy No. The example I read from my text-book was for washers/dryers. Hardly an emergency item.

@zenvelo Maybe we should wait untill someone with a economics background answers before we declare that my memory is faulty?

@RedDeerGuy1 I have a degree in Economics from one of the top ten public universities in the United States. I have an economics background.

@zenvelo Ok. Maybe it’s a Canadian thing. Thanks for answering. It’s not life or death that I know the answer. Just bugging me.

@Entropy It might be price gouging. Thanks for answering.

@RedDeerGuy1 – Either you are misremembering what your textbook said, or you’re mis-stating it. Because raising prices in response to demand is absolutely a thing that happens all the time. Floating prices is the general rule. Not a rule without exceptions, but it is the general rule.

Gas for example definitely shoots up with demand. Home energy prices can go either way depending on locality. In some, energy prices are EXTREMELY inflexible, set with statewide price controls. In others it floats to demand BY THE MINUTE. The latter tends to produce a better operating grid, but the former is more politically popular.

The main thing holding back rapidly fluctuating prices is that there’s a certain expense related to changing them frequently and most consumer goods just don’t fluctuate that rapidly. Produce at your grocery store goes up and down by supply/demand equilibrium. So does meat. But you’ll find that most retail items fluctuate very little, if at all. Most retailers just aren’t set up to support frequent price changes. That’s a testament to how good our economies are most of the time at matching supply to demand.

@Entropy Another guess is when buying multiple items. Where the price increases as you purchase them.

Thanks @all for helping me.

@RedDeerGuy1: When buying a large quantity, you mean? For example, when buying promotional items (custom items) from a logo place, if you buy, let’s say, tee shirts, 100 may be $8 each, 500 may be $5 each, 1000 may be 4.50 each. So the more you buy, the cheaper each one is. Kind of like shopping at Costco or Sam’s Club – a large quantity of something may not be a whole lot more than a small quantity elsewhere.

@jca2 Yes, but in reverse. Where the price goes up with additional purchases

@RedDeerGuy1: When the price goes up because of additional purchases, that’s just math – if you buy one item at 3 dollars and another item at 4 dollars, the total will be 7 dollars. If you add on another item at 4 dollars, the total will be 11 dollars. Is that what you mean?

@jca2 I don’t understand? No. I am describing one item that the price goes up on the same item after each additional purchase.

The seller sells items at the price that gives the greatest profit. Unless an item is very rare, the optimum price will not change from one item to the next.

I want to say, that it depends on if the retailer got a cut on the price of the item. Lets say, the whole saler bought items from the manufacturer. The manufacturer sold the item to the wholesaler and made a 25 percent profit. Now the wholesaler sells it to the retailer who want to buy more and is offered a cheaper price if they buy in bulk. So they normally would make themselves a 25 percent profit but they are now actually only making a 20 percent profit. They make more money selling more but less overall profit. So they can then tell the retailer that they are fine selling it cheaper but they can’t go over the 20 percent profit margin when they sell the item, or if they want to sell it for more then they have to agree to pay their original asking price. At least this is what I remember from economics class. They can also set an minimum amount sometimes as well to make sure they don’t undersell something to just out sell their competators. This is so other retailers will keep buying from them.
Now that was eons ago so things may have changed.

Maybe it is some sort of law in Canada. In America there are laws against:

Loss Leaders (only illegal in some states).

Gouging is another (it would be nice if healthcare fell under federal gouging laws).

Fictitious Pricing (when items are always marketed on sale).

Maybe there is some rule about raising prices significantly in a certain time frame when cost of goods has not increased?

Edit: I was just thinking maybe it was a resale law? Like ticket scalping?