Quote from: Maegfaer on March 06, 2015, 05:09:21 PM

Quote from: tee-rex on March 06, 2015, 04:36:07 PM

I have just one question. What are you as a producer going to do with negative profit, i.e. a loss that you may incur as a result of decreasing prices? Remember that you have to pay wages, and your employees don't care about your ideas but love cash.

If in your example there would be deflation due to an increase in aggregate supply then you're simply failing as a company to keep up with the rest of the economy, since apparently your company's increase in productivity did not match the economy's average.

If on the other hand in your example deflation is due to a collapse in aggregate demand, then yes, the company has a problem.

I thought it was evident that we were discussing here deflation due to aggregate demand contraction. I guess many have an intuitive assumption that company profits would be decreasing in proportion to the decrease in prices of the goods the company sells (hence comes the idea that their real income will increase despite the drop in prices).

This is flat-out wrong.