Cost increase is sometimes the impetus for testing higher prices, but the market ultimately decides what you can get away with.
If you’re in a competitive market and raise your price $1/unit because your costs raised $1/unit, if the rest of the market stays the same, all that price increase does is lower your profits. You just have to eat that loss or find another way to increase your margins. If all the producers have the same cost increase and try the same price increase, you might get away with it, but it depends on how badly people want your product (demand elasticity).
If you’re selling something like overpriced, mediocre fast food, a lot of customers just won’t buy your shit anymore if you raise the price. You have to eat the loss or increase your margins some other way.
![[CW: meat] The horror. More people would buy more groceries, stay home and cook for themselves.](https://hexbear.net/pictrs/image/4b226b5d-403e-429a-aa2f-a359e564d54d.png){kind=link}
The prices go up based on the price of production sometimes but never down.
Cost increase is sometimes the impetus for testing higher prices, but the market ultimately decides what you can get away with.
If you’re in a competitive market and raise your price $1/unit because your costs raised $1/unit, if the rest of the market stays the same, all that price increase does is lower your profits. You just have to eat that loss or find another way to increase your margins. If all the producers have the same cost increase and try the same price increase, you might get away with it, but it depends on how badly people want your product (demand elasticity).
If you’re selling something like overpriced, mediocre fast food, a lot of customers just won’t buy your shit anymore if you raise the price. You have to eat the loss or increase your margins some other way.