It doesn’t make sense to me. I used to be all like but then everything increases in price still Yada yada. But recently… why can’t we just lower the prices of petrol artificially. Why can’t we just lower housing prices by law?? Why can’t we erase inflation seeing as it’s completely made up anyway.
In: 0
This is how I eli5 inflation.
Imagine you live in a small village. And there’s one carpenter who makes chairs. He can only make so many in a day.
He has one chair left in his shop and two people come in to buy it. The first says “I really want this chair, I’ll give you £50 for it”. The second says “well I really neeeeed the chair. I’ll give you £60 for it”.
They bid against eachother until one gives up.
Now imagine this happens every day. The carpenter can only make one chair a day. And everyday two new people want to buy it. Suddenly the value has changed, so the carpenter just sets a higher price.
The issue is there is only ever one chair. That is what is causing inflation. Too much demand for not enough goods. You can try and enforce lower prices by law, but then we’ll just run out of goods.
The terrifying thing about what we call the ‘cost of living’ crisis in the UK. Is this is the cost… Of living. Literally the cost of what it takes to live in modern society is becoming unaffordable, because we do not have enough supply of goods (and energy) at the moment for everyone.
Latest Answers