More simply; if it costs you $X to produce a product and the market is willing to pay $Y (which has no relation to $X), why would you price it as a function of $X?
If it costs me $10 to make a widget and the market is happy to pay $100, why would I base my pricing on $10 * 1.$MARGIN?
alt Hacker News
> That's not a business 101.
It kinda is, but obscured by GP's formula.
More simply; if it costs you $X to produce a product and the market is willing to pay $Y (which has no relation to $X), why would you price it as a function of $X?
If it costs me $10 to make a widget and the market is happy to pay $100, why would I base my pricing on $10 * 1.$MARGIN?