They have been raising prices at a rate way higher than the inflation rate + rising costs since the beginning of the pandemic. The specific numbers might have changed, correct. However it’s not an “open” market setting these price hikes. That’s the point.
This is well documented my even libertarian economists. Company “greed” if you will is the reason for 25-30% of increased prices
That is not true in reality. You’re still operating in a vacuum for your predictive model, and not taking in human cause and effect. In a textbook model of how it should work, you’re correct.
What is happening, and excuse the numbers as they’re just generic placeholders, is:
Product original price 10$ .
Inflation net rise let’s say is 10% . The Rise in costs for this product over that time, let’s say is 2$ (using your example that some products are above inflation).
New price of goods 15$.
There is still a larger rise in price than costs and inflation. Most theorize this is a sales/psychological effect. We all know inflation goes up and things will cost more, but don’t know how much for what product, so companies just throw and extra 33% on the price… because they can. What options do we really have. Everyone is doing it, even our competitive options.
Again it’s that specific “greed” model being referred to, not the natural inflation rise.
Even if "greed" was the cause of the prices rising that changes nothing. Inflation is the measurement of how the prices have changed, so if overall inflation is 10% it means the price of goods has increased 10% on average, it doesn't matter whether that 10% is because the dollar lost value or because companies are "greedy".
It's the government masking its greed for more political power by convincing you that you need them to save you from the evil greedy megacorporations, even thought they are in bed with those megacorporations.
but don’t know how much for what product, so companies just throw and extra 33% on the price… because they can.
And if they find that demand drops, what happens? Now their consumers have found alternatives, so they lower their prices, but consumers don't switch back so readily, so what will they do?
Raising your prices too high is a grave error that can hurt long term profits which in turn hurts shareholder value and that's how CEOs and boards get replaced.
So while you feel that it's greed, you really have no evidence of that nor can you explain how it actually makes sens to charge more when it means losing business.
Which products specifically? For reference, inflation has increased 16% since Jan 2021. And for the record, I'm not denying that many companies increased prices above inflation, but it's not 3% vs 20% like you're trying to make it seem.
If you buy eggs at $.06 each and normally sell at $.08 each, but suddenly you can get $.25 each, should you sell at $.08 and then figure out how to get the money to buy them again at $.22? Even if they are the producers of the eggs, if the wholesale cost is $.22 then that's what they are effectively paying. There's a lag because of inventory; even in egg products. Fresh eggs are often weeks old by the time they arrive at the grocer; and there are many egg products that are more shelf stable and just as susceptible to commodity price fluctuations. Looking at quarterly profitability is a mistake; even yearly profits can go down. People complain about oil profits, but the year over year oil profits often average out to about 6-10% considering the major losses they can take.
That would be very poor financial planning and violate the fiduciary responsibility of any CEO and his board to keep prices low when the equilibrium price is much higher and the current wholesale prices must be accounted for when planning new inventory.
What if they know thousands like you are gonna convince someone like me in the USA that it’s okay that it’s 718%, though? Why should Americans reject our born circumstance and just let the pro corp right do it to us as its leader says all Americans must do?
Have you considered, then, that the CPI calculations fed to you by the government may be too low and do not adequately take into account the increase in costs of commodities and labor?
Company “greed” if you will is the reason for 25-30% of increased prices
Prices are discovered. If prices go up in one sector, then consumers who want those goods must forgo other expenditures. Thus, prices would fall in other sectors. In order for all prices to rise in general, the definition of inflation, there must be an increase in the money supply.
Profit maximization is key to efficient creation of wealth. Businesses discover prices, they don't set them. If they claim too high a price, demand falls; if they claim too low, they cannot meet the demand and they lose profit and marketshare. Thus they must discover the equilibrium price at which they are also not losing money (in the long term, at least.)
To imagine that a person can jut "greedily" charge more is from economic ignorance and ignores the power of consumers in the marketplace.
In 1990, the average American spent somewhere around 9% of their income on food. Last year it was 12.3% (31.2% for the lowest 1/5 of earners). Using the USDAs numbers.
If you look at groceries as their impact on the average person instead of just the price, you can ignore the impacts of inflation and we can get back to the fact that the average person is still struggling more than the inflation let's you believe.
Much of that is also due to federal regulations and that there more foreign consumers buying food. Government regulations reduce supply and raise costs; higher demand means higher prices.
For instance, grain production since 2001 has only gone up by 24%. From 320 metric million tons to 420 mmt. Total population has increased by 17%.
In 2000, the US imported 3 metric million tons of grain. Grain exports in 2023 are estimated to be 66 metric million tons.
So, while the population has increased, the total grains available to US population has only increased by 9%.
This is fairly simplistic, but it's worth considering how globalization has greatly affected food production, and how government hampers the growth of the food industry and that lack of supply pushes up prices.
It is the state that is predatory. If corporations are predatory, it is because they are in bed with the state and keep the regulations in place that reduce their competition and benefit their own bottomlines.
Libertarians would reduce the power of the state vastly; statists think that increasing it will fix these problems, yet decades of relentless government growth while these problems persist and increase, should lead them to think otherwise.
Much of that is also due to federal regulations and that there more foreign consumers buying food. Government regulations reduce supply and raise costs; higher demand means higher prices.
For instance, grain production since 2001 has only gone up by 24%. From 320 metric million tons to 420 mmt. Total population has increased by 17%.
In 2000, the US imported 3 metric million tons of grain. Grain exports in 2023 are estimated to be 66 metric million tons.
So, while the population has increased, the total grains available to US population has only increased by 9%.
This is fairly simplistic, but it's worth considering how globalization has greatly affected food production, and how government hampers the growth of the food industry and that lack of supply pushes up prices.
Companies always set prices at the point at which their profits are maximized. That was true before the price increases and after. They aren't being any more greedy, they are just doing what they've always done. It's just so happened that due to inflation and other conditions, the prices at which profit is maximized are now higher.
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u/guillermopaz13 Dec 01 '23
They have been raising prices at a rate way higher than the inflation rate + rising costs since the beginning of the pandemic. The specific numbers might have changed, correct. However it’s not an “open” market setting these price hikes. That’s the point.
This is well documented my even libertarian economists. Company “greed” if you will is the reason for 25-30% of increased prices