Mayor raises taxes, prices go up, mayor calls it extortion by the businesses

[Jayjay]

I think it's irrelevant whether the price or soda (with or without refills) grows in proportion to the tax. Businesses charge what they can, and a tax that is levied on everyone can be used as an excuse to raise prices slightly above what they were before, that's not price gouging, that's just normal business.

 

[fast]

Is there a negative moral overtone or connotation encapsulated in the term, "gouge?" Even if an increased price exceeds the bare minimum to compensate for a tax increase, it still seems hyperbolic to characterize the excessive increase as gouging--even if the increase is mis-attributed.

Sticking it to people egregiously in a substantially excessive way (often in times where people are taken advantage of in times of emergency--think, looming hurricane) in the form of a high yet often temporary price hike would be (in my mind) gouging. That seems so different (despite similarities) to me. Increasing prices because of a legit reason yet increasing them slightly more than necessary I suppose could be considered gouging, but I don't find it egregious or carrying the negative connotation that I typically associate with gouging. They don't need a completely tax based reason to increase prices. The hassle factor alone seems to justify an excessive over tax based reason to increase in prices if they so choose.

 

[laughing dog]

First, how do you know this? And second, even if it is true, the employee at the register is a fixed cost not a marginal cost.

False - having more people in line for refills will tend to increase line length, which is either compensated for with a slight increase in average employees during busy times or longer lines, which leads to loss of customers due to too long of wait times at the margin.

Again, you are making assumptions. I asked for evidence. Why do you think there is a line or a longer line or a loss of customers or more employees?

Second, how else is the transaction on the refill supposed to occur?

It is added to your bill when the check comes.

Additionally, the initial price of the soda was x - .30 with an option to buy a refill for .00. Now the price increased to x with an option to buy a refill for .50. It is obvious that the refill used to be sold below marginal cost, compensated for by the mark-up on the initial purchase. You need to demonstrate that x plus an option to purchase a refill at .50 leads to higher expected profits than before, given the taxes and potential to not collect on that .50 given theft, plus transaction costs.

Since the price of refill exceeds its marginal cost, it adds to profits.

 

[dismal]

I think it's irrelevant whether the price or soda (with or without refills) grows in proportion to the tax. Businesses charge what they can, and a tax that is levied on everyone can be used as an excuse to raise prices slightly above what they were before, that's not price gouging, that's just normal business.

It's fair to say they will attempt to charge the price that will maximize contribution margin.

A tax will of course change this price.

To keep this at FRDB level, let's imagine the contribution margin of a single soda is 10 cents and they sell 1000 of them per day. This generates $100 of margin for the store. Now suppose the government puts on a 10 cent per soda tax. If they keep the price the same the after tax contribution margin will be $0, so it's a reasonably safe bet they will raise the price. If they raise the price 10 cents and sales fall to 400 per day they will still be better off than not raising the price.

 

[jonatha]

So, is it the case that higher taxes discourage an activity so taxed?

Surely that was the intent of this one.

 

[Jayjay]

So, is it the case that higher taxes discourage an activity so taxed?

Surely that was the intent of this one.

Actually it wasn't. And that what makes thr mayor's whining about beverage prices so inane.

 

[laughing dog]

Surely that was the intent of this one.

Actually it wasn't. And that what makes thr mayor's whining about beverage prices so inane.

I don't think it is inane - it is opportunism/cynicism to take advantage of a portion of the electorate. Given the results of most recent US election that makes it a rather astute move.

 

[Loren Pechtel]

You are ignoring the costs associated with processing the .50 refill transaction......

If the only thing that changed is the tax, and the refills were free, please how any of the other possible costs might have changed.

And, who knows, maybe he also decided he wanted a slight profit on refills after having to deal with the additional hassle.

Bingo.

I always find it interesting when some outsider presumes to know more about someone's business and the reasons behind their decisions than the business owner themselves.

I find it depressing that people seem incapable of applying marginal analysis.

- - - Updated - - -

Try to pay attention to the facts. The restaurant said he increased the price of a 20 ounce soda by 30 cents because his expense of that soda rose by 30 cents. That means the expense to him of a refill rose by 30 cents. Yet he increased the price of a refill by 50 cents. That 20 cents difference cannot be the result of the tax. I was clearly referring to the refill not the price of the first soda.

Except it can be--since they now charge for it it's something they have to keep track of.

Think about the circular logic there.

What you are missing is that by charging for the refill they now have a transaction to deal with and engaging in a transaction costs employee time and therefore money. No store sells items at cost other than as a loss leader.

 

[Loren Pechtel]

The 30 seconds of employee time was occurring before charge - that is not a marginal cost. All the other things you mentioned are either not marginal costs (working capital) or not demonstrated to exists (additional losses to due theft of soda).

You seem to be an expert on the matter with a high degree of confidence, so how did you calculate all these costs, and what number did you come up with?

You continue to confuse average with marginal cost.

No. Employee time was used to fill the glass. Now employee time must also be used to record the charge against their bill.

- - - Updated - - -

False. When someone wants a refill, they must go to the register and have the employee ring up the $.50 transaction.

First, how do you know this? And second, even if it is true, the employee at the register is a fixed cost not a marginal cost.

Interesting how in your world stores only have one cashier.

 

[Elixir]

What you are missing is that by charging for the refill they now have a transaction to deal with and engaging in a transaction costs employee time and therefore money. No store sells items at cost other than as a loss leader.

There is also the matter of business models built on specific gross margins. If a retailer passes on an increased COG (cost of goods) on a 1:1 basis, their gross margins are reduced. If they pass on the COG increase using their business' margin model, they are accused of gouging.

 

[laughing dog]

No. Employee time was used to fill the glass. Now employee time must also be used to record the charge against their bill.

And if that was occurring when it was free?

Interesting how in your world stores only have one cashier.

The point of that straw man is...?

 

[Loren Pechtel]

What you are missing is that by charging for the refill they now have a transaction to deal with and engaging in a transaction costs employee time and therefore money. No store sells items at cost other than as a loss leader.

There is also the matter of business models built on specific gross margins. If a retailer passes on an increased COG (cost of goods) on a 1:1 basis, their gross margins are reduced. If they pass on the COG increase using their business' margin model, they are accused of gouging.

In liberal land "profit" is something to be given to the workers. Any profit that goes to the business is theft from the workers.

 

[Loren Pechtel]

And if that was occurring when it was free?

Employee time was not being used to record the transaction when there was no charge for it! Are you actually thinking about what you write or just reflexively disagreeing?

Interesting how in your world stores only have one cashier.

The point of that straw man is...?

Once again, showing that you aren't thinking about it.

You considered the cashier a fixed cost, adding a transaction doesn't increase the employee time needed. The only way that can be true is if you have so few transactions that your cashier--singular--is often sitting idle. Otherwise more transactions = more cashier hours = more money spent.

 

[laughing dog]

Employee time was not being used to record the transaction when there was no charge for it! Are you actually thinking about what you write or just reflexively disagreeing?

It is not uncommon in restaurants for the wait staff to bring refills and the bill shows your refills. So, the "transaction" is already being recorded.

Once again, showing that you aren't thinking about.

You considered the cashier a fixed cost, adding a transaction doesn't increase the employee time needed. The only way that can be true is if you have so few transactions that your cashier--singular--is often sitting idle. Otherwise more transactions = more cashier hours = more money spent.

You are implicitly assuming that the increase in "transactions" will somehow overwhelm the current staffing model so that more hours will be needed. In other words, you assume facts not evidence.

 

[jonatha]

It is not uncommon in restaurants for the wait staff to bring refills and the bill shows your refills. So, the "transaction" is already being recorded.

Don't believe I've ever encountered that, unless of course refills aren't free.

 

[Jayjay]

It is not uncommon in restaurants for the wait staff to bring refills and the bill shows your refills. So, the "transaction" is already being recorded.

If the refills were free, why on Earth would they be shown in the bill?

Besides this assumes a fancy-pants restaurant with "wait staff". What about take-aways, fast food places and small sandwich shops where you fetch your own refills?

 

[Jason Harvestdancer]

Oh yes, what about all of those? Whenever I go to a restaurant, the price for a soda varies by size. There aren't any footnotes about "we will charge A if you refill it yourself, B if you expect us to refill, and C if you are doing takeout." It is almost as if doing such a breakdown would actually be cost prohibitive and a simpler model of "we charge X for a soda" is actually less expensive overall.

Sure, it means take-out customers are subsidizing dine-in customers. I don't really give that much thought though.

 

[laughing dog]

It is not uncommon in restaurants for the wait staff to bring refills and the bill shows your refills. So, the "transaction" is already being recorded.

If the refills were free, why on Earth would they be shown in the bill?

You would have to ask those establishments.

Besides this assumes a fancy-pants restaurant with "wait staff". What about take-aways, fast food places and small sandwich shops where you fetch your own refills?

What about those?

 

[Jayjay]

If the refills were free, why on Earth would they be shown in the bill?

You would have to ask those establishments.

I concur with jonatha, and I don't believe such establishments exist. If refills are free, the the receipt will show "1 soda" or similar, and nothing about refills.

Besides this assumes a fancy-pants restaurant with "wait staff". What about take-aways, fast food places and small sandwich shops where you fetch your own refills?

What about those?

In those cases if refills were suddenly not free, the soda machine would probably have to be put behind the counter so that the clerk fills it in and charges for each soda individually. This is clearly more effort by the staff. Even if they let customers fill in their own drinks based on a honor system, they'd still have to charge for them.

 

[laughing dog]

You would have to ask those establishments.

I concur with jonatha, and I don't believe such establishments exist. If refills are free, the the receipt will show "1 soda" or similar, and nothing about refills.

I know such establishments do exist, because I have seen such bills.

In those cases if refills were suddenly not free, the soda machine would probably have to be put behind the counter so that the clerk fills it in and charges for each soda individually. This is clearly more effort by the staff. Even if they let customers fill in their own drinks based on a honor system, they'd still have to charge for them.

I brought up a specific instance of what I think is gouging. I made no sweeping generalization about all restaurants.