why if change manufacturing of a product not change the price for the buyer?
In highly developed and competitive industries companies tread a continuous and very fine line between maximising shareholder profits by keeping prices up while making products as cheaply as possible, vs competitors lowering prices when they work out a way to make equivalents cheaper. In the short run you will quite often see companies hold onto large portions of efficiency savings (particularly if they make a major breakthrough in a specific manufacturing process etc) by holding old prices up, but in the long run competition pretty quickly lowers prices as the companies trying to keep high margins and prices get ruthlessly undercut by smaller competitors happy to make a bit less.
"The real answer why the government is ""allowed"" to do something is because they are the government and they make the rules. There are lots of laws that I think make no sense. I ran into a similar situation to yours. I bought a house during a time when the market in my area was way down. The previous owner had paid $140,000 but I got it for only $80,000. The government appraised it for, I forget the exact number, but over $100,000. I appealed, and the argument I made to the appeal board was that the law says it is supposed to be appraised for ""fair market value"". The definition of ""fair market value"" is the amount that a willing buyer would pay to a willing seller, absent special conditions like a sweetheart sale to a relative. The house had been advertised for a higher price and the seller had to drop the price several times before getting an offer, and finally accepting mine. This is pretty much the definition of ""fair market value"". The appeals board replied that it was not FMV because the market was bad at this particular time and so I got a good deal. I said that that's the definition of market value: it goes up and down as market conditions change. If the market happened to be up when someone bought a house and they had to pay a high price, would the government assess the house at a lower value because that was an unusually high price? I doubt it. They ended up reducing the assessed value, but not to what I actually paid. All that said, arguably a foreclosure sale might be considered special conditions. Prices at a foreclosure sale tend to be lower than ""ordinary"" sales. In a foreclosure, the bank is usually trying to get rid of the property quickly because they don't want to be in the property-management business, they want to be in the money lending and management business. Of course you could say that sort of thing about conditions surrounding many sales. Maybe the price is low because the seller needed cash now to start a business. Maybe the price is high because the buyer was too lazy to shop around. Maybe the price is low because the buyer is a very skilled negotiator. Etc etc.  My watch just broke and while I was shopping for a new one I found two listings for the exact same watch, I mean exact same manufacturer and model number, identical picture, on the same web site, one giving the price as $24 and the other as $99. What is the market value of that watch? I presume anyone who saw both listings would pick the $24 one, but I presume some number of people pay the higher price because they never see the lower price. In real life there isn't really one, exact, fair market value. That's an abstraction." "Yeah, exactly. The difference is that Ferrari is making money.  EDIT: to clarify...  - Ferrari sells a niche product to a boutique customer-base willing to pay a premium in terms of both price and purchasing difficulty for exclusive, super-premium cars that are manufactured to artisan standards with little or no regard for cost-efficiency or price-to-value ratio, etc. People buying Ferrari are not looking for a ""sensible deal"", they are people who can afford to pay for something special, rare, and uncompromising. Tesla is in a similar market-position.   - Ferrari actually makes money selling their cars. They do a low-volume boutique business, and charge prices that reflect a low volume of artisan-made specialty product. I am sure that certain special-order customers have to wait some time for delivery, but I drive by a Ferrari dealership every day on my way to work that has maybe 50 Ferraris sitting in a lot, that you can drive off with same-day, if you want. You can literally drive up, test-drive, and buy one tomorrow (if you have the scratch).   OTOH...  - Teslas are cheaper than Ferraris, but they are still deep into the super-premium price category. They are well outside the ""value-proposition"" customer-base. They are also (perhaps even more than Ferrari), in a market segment without meaningful competition. There are several super-premium 2-seaters in the $100-200k price range, but I suspect most Tesla shoppers are not mostly comparing them against Porsches or Vipers or Benzes. The all-electric supercar market is not a highly competitive one.   - There is massive demand for Teslas, as is evidenced by the extremely thin used market, the year-plus-long wait list, and all that in the face of extremely customer-unfriendly sales/distribution and almost zero marketing... That is, people are waiting up in 18-month long lines to buy cars that they can't inspect at a local dealership, have no way to test-drive, and often have never even seen in person, and they are putting down cash deposits to do so, in amounts that could buy some pretty nice sports cars for the deposit alone. Moreover, it's not like Tesla buyers are going to change their minds and get a Chevy Volt or Honda Insight instead (although they might get both).   This is any startups wet-dream:  - You have a product that is not only already in production, but that you have been shipping for several years-- you *know* the tooling, manufacturing, support, and delivery costs, because you have actually been *doing it* for *years.*  - You not only have no issues whatsoever with regards to building a customer-base, you already have paying customers and genuine orders *already booked* through 2014, more than you can keep up with.  - You have a product with massive demand and almost non-existent price-pressure. You've got orders booked over a year out at asking price with virtually zero marketing or advertising, most customers buying site-unseen purely based on concept and reputation, and your customers are paying super-premium prices with no direct competitor alternative.   This is a goldmine. This is the kind of thing that business-school textbooks tell you never happens. Rational-market theory says it's impossible to have a big-ticket product offering with essentially unlimited demand and zero meaningful competition.   Moreover, this is happening in an environment where the business is not only receiving direct gov't subsidies, but where borrowing costs are close to negative in real dollars. A going concern with booked orders and guaranteed revenue through 2014 should, if anything, be *borrowing from banks to buy back equity*, not selling equity to raise capital.   If Tesla needs to raise capital, then something is seriously wrong with the underlying business. As in, wrong enough that its current sales are not only un-profitable, but that currently-booked future sales will continue to be un-profitable for the foreseeable future (otherwise they could just borrow).   You can plead ""startup"" when you have a small customer base but a great concept. You can plead ""startup"" when you first start shipping product in small quantities at low prices. But you can't plead ""startup"" when you have been shipping a product for years, and when you have customer-orders booked years out, at full asking price, with no meaningful price or product-competition." Business, complex economic operations concerning those functions that govern the production, distribution, and sale of goods and services for the benefit of the buyer and the profit of the seller. The economic transformation ushered in by the Industrial Revolution brought with it new and constantly changing ways of conducting business, and the creation of new forms of business organization that themselves have subsequently evolved to a greater or lesser degree. The main forms of business organization are described below. &gt; The alternative is to do nothing.  Well, what many people do not realize is that even if all man made CO2 magically ceased to be created that the climate would still change. Climates change, always.  So, you think that something that accounts for .04% of the atmosphere is the key to humanity's survival on the planet, really?  The market will reduce CO2 production as it already has (the only reason that the US is in line with the Kyoto protocols as it was not ratified by the Senate). As prices lower, you will see cleaner sources of energy (i.e. solar) become more and more prevalent.  Ironically, poor people (through burning of wood for heat and to cook with) actually have a much greater impact on CO2 levels than to rich people. Go figure. All that is certain is that what the 99% you quote agree on is that mankind is responsible for some of the warming. There is no consensus over the magnitude of the change (I have seen estimates from a .5 to a 4 degrees of Celsius change over the coming decade) or over how to address the issue. If markets were perfectly efficient, the price should reflect everything that is currently known about the future of a commodity.  If it is known that silver is currently under-valued, then investors would be buying it -- driving the price up.  Conversely, if silver is currently over-valued, then investors would be selling and the price would be going down.  Added to that is emotion.  If the price is currently trending up, then people expect it to keep going up, and the price continues to rise.  Until enough people think it can't go any higher and start selling, which drives the price down.  Since this is driven by emotion, it cannot be predicted when this will happen. "have you by chance been to the middle east? (UAE, Qatar or Saudi specifically). or perhaps been exposed to any part of the US industrial revolution (im not sure of your nationality), hell, even the french revolution. a review of any of those, and thats just relatively recent examples, would show why you are wrong.  saying it doesnt work is a broad statement without actually saying what the problem is, nor does it take any steps to underlying the root cause or possible solutions. when you say ""it doesnt work"". what specifically is not working." Here are some significant factors affect the company stock price performance: Usually, profitability is known to the public through the financial statements; it won't be 100% accurate and people would also trade the stock with the price not matching to the true value of the firm. Still there are dozens of other various reasons exist. People are just not behaving as rational as what the textbook describes when they are trading and investing. "That happens all the time. The best situation for this to happen is when you have several products, each a bit better and a bit more expensive than the other, and you add a new product which is the cheapest. That gets people into the store to look at the cheapest product, and then you show the the next more expensive which is so much better for only a little more money, and the next more expensive which is again so much better... You might not sell any of the cheapest product but it helps you sell the others.  Also happens the other way round: You add a really expensive item, unaffordable for most customers, that is really, really nice. Then customers look at it and you show them that for half the price they can have something that is almost as nice. The expensive product increases the amount that customers think is ""the right price"" for that kind of product. A customer might think that $2,000 for a diamond ring is an awful lot of money, but if you show them another ring for $5,000 then suddenly the $2,000 doesn't look that expensive anymore. And if it is almost as nice as the $5,000 ring, you sell a lot of rings for $2,000 because you had the more expensive ring in the store."