[Kellis91789]

[...(non-competetive markets in general) and certain imports without domestic competition (Flat Panel LCDs for instance.)]

This logic always amazes me. What is it that you think has determined the price for these items ?

The prices of goods in non-competitive markets are a reflection of the disposable income of the customers.

If the PIT has left the typical customer with enough income to pay 1% of annual take-home pay for an LCD monitor, then the new FT-inclusive price for an LCD monitor will also be 1% of the new total income. That is the value that the present customers have assigned to the item. As the price (defined as a percentage of disposable income) falls, more people will decide to purchase. If the price rises, fewer will purchase.

If customers earned $35K under PIT with take-home of $30K to afford a $300 LCD monitor, then under the FT, the price of that LCD monitor will shift to where it's FT-inclusive price will be 1% of $35K = $350 means retail price drops to $270 before adding the FT.

Let's not forget that imported goods contain profits for both the manufacturer and the local distributor and retailer. Otherwise, the maker would not be in the US market to begin with.

In competitive markets, prices fall to the lowest price that provides an acceptable investment return after all costs have been covered.

In non-competitive markets, prices exceed the above formula but must establish their value as a percentage of the customer's disposable income.

[Dimples]

Your analysis is precisely why economics is considered the "dismal science." There is neither a family nor a company on the planet which will engage in the analysis you suggest for the pricing of a flat panel LCD. In noncompetitive markets, price will be set to maximize profit; it will NOT be set to keep consumer's purchasing power at any particular level as you keep suggesting. In highly competitive markets, price will be set to market (some will attempt to buy or maintain share despite profit levels.)

MOST consumer purchases have an emotional component to them (Starbucks or Folgers, Sierra Nevada Pale Ale or Bud, Loaded with Options and in Red or base model in white ???) Even in highly competitive markets. Since most won't do the math, they'll never figure out whether the higher FairTax price is justified or not ... that's why most "rebates" never get claimed.

In competitive markets, prices fall to the lowest price that provides an acceptable investment return after all costs have been covered.

Tell that to GM.

[Your Nightmare]

In competitive markets, prices fall to the lowest price that provides an acceptable investment return after all costs have been covered.

Prices in a competitive market are not directly related to costs. The price is where the supply curve meets the demand curve (the equilibrium point). If a producer can't make a profit at the market price, they will eventually leave the market. This reduces supply, shifting the supply curve to the left, and, thus, raises price. But note, the remaining supplier's costs did not change.

The reverse happens when new suppliers enter a market.