It's not really a free market like that though. You cannot just go out and sell the product just anywhere. It is much more "this is the price we are paying you for your product. Take it, or don't, it's up to you, we won't be going short if you say no".
When you're stuck with a jobby load of stock, staff, family and bills to pay (probably within 14/28 days when your debtors will only pay you on up to 60day terms) you are staring down the barrel of a gun, meaning your options are nil.
Then when your costs increase after time and you're not able to pass the cost on, that just gets worse and there comes a tipping point.

I'm a bit lost on the mobile phone line rental example...
