New meaning of "competitive"?

[Geoff Nathan]

Reaching back into my hazy memory of Microeconomics 101, the more competitive an industry, the lower the profit margins, down to the minimum level at which firms can survive.  Consequently, if costs (such as taxes) rise, there is little room for individual firms to absorb the extra costs without beginning to lose money and/or leave the market.  As a result, either prices will rise (i.e. the tax will be passed on to consumers) or firms will go out of business.  It IS Econ 101.  At least Microecon.

Geoff

Geoffrey S. Nathan
Faculty Liaison, C&IT
and Associate Professor, Linguistics Program
+1 (313) 577-1259 (C&IT)
+1 (313) 577-8621 (English/Linguistics)

----- "Joel S. Berson" <Berson at ATT.NET> wrote:

> From: "Joel S. Berson" <Berson at ATT.NET>
> To: ADS-L at LISTSERV.UGA.EDU
> Sent: Saturday, January 16, 2010 12:41:46 AM GMT -05:00 US/Canada Eastern
> Subject: New meaning of "competitive"?
>
> ---------------------- Information from the mail header
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> Sender:       American Dialect Society <ADS-L at LISTSERV.UGA.EDU>
> Poster:       "Joel S. Berson" <Berson at ATT.NET>
> Subject:      New meaning of "competitive"?
> -------------------------------------------------------------------------------
>
> On the Osgood File on Jan. 13, Prof. Larry Harris said:  "This is a
> very competitive business --- and one thing that's always true with
> taxes is that in a competitive business, the tax gets passed on to
> the customer. So, this is a tax on financial services --- and the
> people who ultimately pay it will not be the banks --- it'll be the
> customers."
> http://tinyurl.com/yz2dlgf
>
> Didn't "competitive" once mean "fight like cats and dogs to get
> business -- and if you must, reduce prices to customers"?  So in the
> competitive world of big banking,.competition means one can freely
> increase the customer's cost?  Why am I surprised?  What did I forget
> from Economics 101 about competition and oligopoly?
>
> In the spirit of Jon Lighter, Lawrence E. Harris is Fred V. Keenan
> Chair in Finance and Professor of Finance and Business Economics in
> the Marshall School of Business, University of Southern
> California.  I guess the holder of an endowed chair doesn't teach
> Economics 101 any more.
>
> Joel
>
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