Greedflation

Not necessarily. Rather than a shift of the curve, it could have just been a change in slope.

 

Or people just paid the higher prices because of the elasticity/inelasticity of the products.

 

As you pointed out though, we didn't see increases in inflation with a constantly expanding GDP for a decade prior to the pandemic (with very loose monetary policy for that entire period as well). There wasn't an acceleration of GDP growth from 2020-2022. In fact, as you pointed out, it slowed slightly because of 2020.

 

of course not necessarily. But it is certainly a common way in which prices increase at a greater clip than costs; a simple increase in demand can cause prices to increase even if costs fall. The pt is that a departure of prices from costs is very common & is not the smoking gun it's being portrayed as.

 

That is essentially what that means. A shift in the slope of the demand curve is, functionally, a change in price elasticity. I suspect that a lot of it had to do with the behavioral aspect of people being willing to accept price increases.

This also likely interacts with competition. So, for example, people on this board are still complaining about food inflation, when food inflation is actually under 2%. I suspect that is because of Publix. As Publix has no real competitors in Florida, they seem to be taking advantage of customer perceptions about inflation to raise their prices without taking the hit in customer perceptions of unfairness in regards to their actions. In the area where I currently live, in which three major grocery chains are competing, it is harder to do that and then point at inflation, as, at some level, consumers would start wondering why only one of the chains is seeing cost increases to that level.

 

Not trying to be snooty here.
But I would ask how many of you actually work for a corporation or own a business and actually sign the front of the check not just the back?
If you are offered a job for $200,000 per year but you know the position typically and down the street only pays $150,000, are you going to say, I'll take the job but only at $150,000? Is this greedflation on your part?
Some you guys get so theoretical in your responses and your thinking and seem to forget the simplicity that several have pointed out, Supply and Demand drives it.

 

Monetary policy is trickier, but fiscal policy definitely has a big impact. Govt spending and deficits ballooned. That increased demand.

My guess is the supply impacts had a more immediate impact than the demand impact but both definitely played a factor.

 

Yeah my original intent wasn’t to be snooty, but working 30 years in businesses large and small, as well as having studied business in school - I view these actions as natural and inevitable human behavior. Companies are supposed to maximize profits, to your point just like employees maximize wages. I doubt any of these people crying about greedflation have any issues with labor unions maximizing wages.

 

Not directed at anybody here, but I see people complain about the prices of things like going out to eat, gaming consoles, shoes, clothes, coffees and teas, delivery services, tipping, and a lot of other non-essential goods and services. To me these are strictly budget management issues; any of these things go up and I am just less of a participant. I splurge in other ways, but I wouldn't expect anybody to feel my pain in terms of costs going up but relative quality to the customer going down. Now, are the laundromat prices getting out of hand? are essential groceries getting out of hand? how about maintenance for older vehicles? bus fares? I don't know, but those are the things that I would share concern for. Just my two bits. People have more resources than ever to find things to do that don't cost a lot of money, but so many pass on these to be spenders and consumers of things. Gotta have it now; gotta keep up with friends/family/neighbors.

Go GATORS!
,WESGATORS

 

No doubt. The concern here is the split between the category and economy levels. So there were certainly shifts in consumption (the example I always like to use is that there was an increase in shirt sales and a decrease in pants sales). This could cause shirts to become more expensive. However, in theory, we would then expect pants to lower their prices. So, across the economy, there could be a shift, but it would be relatively muted. Far more likely to cause inflation would be if there was a supply chain interruption, which could cause both pants and shirts to become relatively more expensive, even as demand shifts. Then, you add on the ability of companies to minimize the effects of shifts in consumer fairness perceptions, lowering price sensitivity, and you have an environment ripe for supply-chain induced price increases, even in markets without supply-chain impacts.

 

Not arguing that both couldn't have had an impact. I think the argument has more to do with the relative weight of the two impacts. And there was some dismissing of the concept that this was more driven by supply issues, which appears to have been dramatically overstated.

 

Supply and demand is heavily theoretical as well. The theories that we are discussing are the underlying theories of the theoretical supply and demand functions.

 

Minor quibble, but I think shoes and clothes are pretty essential goods, are you a nudist or something?

 

I am not the one minimizing supply impacts. It was significant. Perhaps the predominant factor. But demand impacts caused by massive fiscal stimulus definitely had an impact.

 

Not really. Real GDP declined by 2.8% in 2020, then increased by 5.9% in 2021 and then increased by 2.1% in 2022. The 5.9% increase was in large part because of the 2.8% decrease the year before.

If you look at GDP starting at 100 in 2019, then a 2.8% decline in GDP means GDP in 2020 was 97.2. Then a 5.9% increase in 2021 puts GDP at 102.8 in 2021. The net result is real GDP was 2.8% higher in 2021 than it was in 2019.

 

LOL, reread what you wrote and if you don't see what I was implying in my post then my post was absolutely spot on!!!

 

What are you implying? A discussion of supply and demand in general is no less theoretical than a discussion of the factors underlying it. Nobody is disputing the theory of supply and demand here, just how they manifested in the real world.

 

Yes, when I mentioned shoes/clothes, I'm thinking more about people who treat such things like art work (and that's fine, but it's not a need). 100% shoes and clothing in general are a primary concern.

Go GATORS!
,WESGATORS

 

so demand increased.

 

Good stuff!!!!!