Thursday, July 24, 2008

Economics for Aggies

There are some stupid people in the world. Yes, it's true. Here's an example from an article about the upcoming minimum wage increase on Thursday:

David Heath, owner of Tiki Tan in College Station, Texas, said the increase will force him to raise prices for his monthly tanning services by about 12 percent. Tiki Tan had been paying its employees $6 per hour.

"There just isn't any room for profit, and so this is why prices will have to go up," he said, citing the wage increase and higher fuel costs. "I have to recoup those costs."


But the thing is, you're not supposed to charge customers based upon how much something costs you. You're supposed to charge them based upon how much they'll pay. And so if this guy wasn't making a good profit, yet could make more money by increasing his prices by 12%, he should have done so earlier. And the only reason why you shouldn't raise your prices is if it would make you less money. That's just basic economics and anyone who doesn't know how to price their goods or services shouldn't be in business.

But of course, how does he know a 12% price increase will make him more money? He doesn't. Maybe his prices were already set properly and a price increase might just send him right out of business. He seems confident that this price increase is necessary to fix rising costs, but the truth is that he was just talking out of his ass. He's probably some Republican a-hole who just doesn't like the minimum wage and wants some excuse to tell his customers why he's raising the price. I mean, he's an Aggie, for christ's sake. Nuff said.

And while 12% sounds like a lot, I just found this dude's website, which says that their "most popular" tanning package is unlimited tanning for $19.99 a month. So we're only talking about $2.40 monthly increase for most customers. And again, if he could have made more money charging $22.39 a month instead of $19.99, he should have. This guy's a fool if he really believed a price increase could increase profits, but refused to do so. But again, we are talking about an Aggie, so I guess that really didn't need to be said.

2 comments:

Reverend Robbie said...

Hey, don't tar all us Aggies with the same brush. Some of us believe in a living wage, and not just the bare minimum. (Hey, David Heath - what's that old saying about you get what you pay for? Minimum wage, minimal employee effort...)

Doctor Biobrain said...

Sorry Reverend, you're absolutely correct. The dumb jokes are one thing, but it really is a bit harsh to suggest you guys are all Republicans. I apologize.