What make me laugh is that so many are comparing this to real economics, as if we are making a product to live off. Most WOW players base producers of goods, would best described as part time producers, meaning there main income isn't from selling thing in the Auction House, but there real job is doing quest for money. Most also farm most of their mats, so there is very little real term material cost, which mean they can sell items at a low cost to make a profit.

Also we all know most players are making their product solely to raise their trade skill. Which like in real life has an investment cost , many players early in each expansion spend tons of money beyond what they can sell their goods for to get to the higher skill level goods quicker than the rest of the players, so they can make larger profits on those high end items later on. This is called opportunity cost in economics, which hold very true in the WOW universe as well. The first players to reach make skill level usually make the most money of their products until others finally catch up.

But for me I am usually fairly independent of the Auction House and the WOW economy, as a whole. Most of the Items I make that I don't need, gets disenchanted by my enchanter, to raise that skill level. Most of the gems and enchants I need come from an alt, so there is no need to buy them. There is somewhat of a tradeoff in doing it yourself, but like in real life being self reliant has it tradeoffs as well.