As prices keep increasing oddly enough the postage prices are set to go down this weekend. The U.S Post Service is not very satisfied with this decision since they will be loosing about $2 billion this year. This article mentions that the USPS has not lower their postage prices since July of 1919. This is challenging for them because they mostly create revenue through their services such as selling the mail postage. The USPS is not funded by the government, therefore, it is unfair that they are being force to lower their prices. Also, they have reached their borrowing limit.
http://money.cnn.com/2016/04/08/news/companies/stamp-price-decrease/index.html?iid=SF_LN
This article is very interesting and informative regarding the US postal service. However I am wondering why they would cut prices if they would lose 2 billion dollars. It does not make sense to me, because if the USPS is not funded by the federal government, you would think they would operate at the profit maximization point.
ReplyDeleteI also am interested to see why the loss would be so drastic. It doesn't make any sense as to why they would lower their prices when they are not funded by the government, and they are going to lose $2 billion in revenue. A question that should be answered in this article is how can the government force them to lower their prices when they don't fund the USPS?
ReplyDeleteI am so surprised after reading this article. First, it is incredible that this is the first time that the price of postage has dropped since 1919. Like we discuss in class during our discussion of the IS and LM curves, the fact that they will automatically return to the equilibrium through the movement of prices is definitely relevant. Since this is only the third time that postage has dropped since the Civil War, it can clearly be observed that postage is an example of a "sticky price" in the short run. The article also mentioned that USPS lost around $5.1 billion dollars in the previous year, so perhaps by dropping the price, they are trying to capture a larger population of consumer that are incentivized by this lower price.
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