I’m not sure if there’s a formal name for this fallacy, but it’s pervasive in almost all financial reporting: the sticker price has nothing to do with the cost of materials; it’s driven only by how much people are willing to pay.
As a manufacturer, if the cost to produce something is higher than what customers are willing to pay, then you simply don’t sell it.
There are commodities where this doesn’t apply as much because there’s enough competition keeping downward pressure on the price so it floats just above the actual raw materials price, but other than that, this concept applies to most products.
As a manufacturer, if the cost to produce something is higher than what customers are willing to pay, then you simply don’t sell it.
There are commodities where this doesn’t apply as much because there’s enough competition keeping downward pressure on the price so it floats just above the actual raw materials price, but other than that, this concept applies to most products.