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To: Thurston_Howell_III
Sure, but now you're talking about a dynamic price along a dynamic demand curve. Depending on the elasticity, if you shift the price you also shift the demand.

In the case of a retailer such as Wall Mart (or CVS in this story) it is not about shifting the demand curve --- it is virtually a fixed demand. Only so much soap or toothpaste or prescription drugs are demanded by the market. Lower price does not increase aggregate demand.

It is about capturing market share from competitive retailers by lowering price and spreading their fixed costs over a far greater number of units sold while also gaining increased purchasing power from manufactures and lowering variable costs as well.

In the meantime, the consumer benefits from lower retail prices by making the entire supply chain more efficient.

17 posted on 06/28/2010 10:57:38 AM PDT by Ditto (Nov 2, 2010 -- Time to Clean House.)
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To: Ditto

Sure, like I said, elasticity is an issue, its not a blanket “pass through” to consumers for all products.


18 posted on 06/28/2010 11:49:51 AM PDT by Thurston_Howell_III (Ahoy polloi... where did you come from, a scotch ad?)
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