You make widgets that the market will buy at $1.00. You have a 50% markup so you make $.50 per widget.
There is heavy demand for widgets and the market is willing to buy them at $10.00. Your cost goes up to $5.00 and you maintain your markup. You make $5.00 a widget.
The people don't like the fact that you're making $5.00 a widget so the goobermint takes over the widget industry. The price of widgets is set at $.50. Widgets are cheap. There are no widgets to buy.
Or if you will look up USSR history not so many years ago. You could buy all the cardboard shoes you wanted at dirt cheap prices....but there were none to buy.
There is heavy demand for widgets and the market is willing to buy them at $10.00. Your cost goes up to $5.00 and you maintain your markup. You make $5.00 a widget.
Increased production doesn't always in increase manufacturering costs, many times it lowers them, thus increasing profits. But what you senario leaves out is competition. This is what is missing in much of today's so called capitalism. In true hands off capitalism it is not just supply vs demand but also *competition* that limits profit - high profit should invite competition. In the "Big Oil" big profit senario this would mean a competitor would built a refinery resulting in the added supply smoothing out supply crunches and the retail price. But that isn't happening is it?
why did my cost go up?
You're not being serious