Sometimes, the market is highly elastic and cutting prices hugely expands the total market by bringing in new large classes of customer, and everyone benefits (e.g., PCs during the 80's and 90's). Eventually, though, the market is bounded and you return to the scenario in the first para, like PCs now.
With moderate elasticity, price cuts can sometimes yield higher profits, as long as your competitors don't follow your action. Usually, your competitors do, there's a price war for a while, and then everyone realizes they have cut their own throats, and prices go back up to more profitable levels.Game theory. Businesses don't act without expecting their competitors to react.
With moderate elasticity, price cuts can sometimes yield higher profits, as long as your competitors don't follow your action.
You have done little more than construct a very poor and limited argument on which you hope people will generalize.
Sorry the economy as a whole is much broader more flexible than the limitations that you would like to artificially impose.
No change in overall sales volume is even required, merely adjustment in pricing offsetting repeal of business income & payroll taxes and the lower tax related overhead costs that come with that, with profit maintained.
Therein lay the fallacy of your elasticities argument.
As I challenged you before in #249, quantify it across the broad economy as has been done by others. Lets look at your methodology and test your results against broad sectors of the economy as it exits, not just a mere hypothetical in generalized language.
Very few sectors of the economy meet your restrictions. Those conditions you lay would especially be challenged considering a major change in mode of taxation from income taxation to an overt retail sales tax. Such a change would of necessity include large changes in market elasticities simply by virtue of the open incentives to the consumer to save & invest taxfree and spend more later, or spend less now and be taxed.
The pressure on business to reduce prices by the savings in overhead costs attendant with the repeal of the business income and payroll taxes will be tremendous.
With the added pressures place on business by the consumer/investor, as well as competitors more than happy to attract that consumer to their companies, producer level prices will indeed come down to the advantage of those that adapt, those that refuse to will be left hanging in the breeze of being passed by.