In a move that surprises nobody, democrat lawmakers in California are unable to understand the difference between margins and gross/net.
If somebody is making a 3% margin this means that for every $100 dollars of purchases they will net $3. The price of a good is normally set by evaluating the cost of the good plus the cost of services and facilities to deliver it.
Again, our nice $100 item. The cost of the good is how much was paid for that item. I.e. the person selling it bought 10 for $500 setting the base cost at $50/unit. There is the cost of shipping. The cost of the store itself (taxes, rent/mortgage). The cost of utilities to keep the lights and heat on. The cost of the communications and marketing. Cost of upkeep on the building and warehouses. Cost of equipment. And then the big one, labor costs.
Labor includes paying for every person that is employed. This includes everybody from the guy that cleans the floor to the CEO trying to keep his business afloat. And that adds up.
So with a 3% margin, the cost of the good is $50 + $47 leaving $3 in profit.
That profit goes to everybody that owns a part of the company and to all improvements to the company, research, development and so forth.
The problem that has happened is that the cost of the good has gone up. It is no longer $50, it is $125. Expenses have gone up, it is no longer $47, it is $80. The total cost of the goods is now $205. The company still wants its 3% so the price of the good is set at $211.
Now we have the math. Our company is sill making a 3% net on that good, but instead of taking in $3 they are taking in $6.
Multiply this by thousands of sales and the net is way up. Even though the margin has stayed the same.
With California drivers paying more than $6 for a gallon of gas and state officials deadlocked for months over how to provide relief, lawmakers in the state Assembly on Monday announced they would investigate oil companies they say are “abusing a historic situation to suck profits from Californians’ wallets.”
—California Democrats to investigate cause of high gas prices
There is no ability to look at root causes. For a democrat every problem is always greed and somebody else. They have no sense of responsibility.