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I agree the scenerio is simplistic, and we can make it a lot more complicated. But I think those who question the simplicity and the assumtions are trying to take the easy way out of dealing with the real delimas faced by real business manager every day.
At some point, you have to address your labor costs if you want to stay in the market.
Fundementally, if you leave the market most if not all jobs are lost. That is not good for employees.
If you do nothing, and leave your price higher than the competition, you loose market share, and jobs will be lost.
If you continue to cut other expenses and fail to earn a profit and re-invest, the business with deteriorate and jobs will be lost.
If you address labor costs, you may be able to save the business and save jobs for many while only sacrificing either the jobs of a few or lowering wages/benefits.
It seems that no course of action would be acceptable to some of you, but let's assume you do address labor costs. How would you do it?
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