I understand that demand-pull type of inflation is a result of companies raising prices when consumers have more money? But why would they raise their prices and not just enjoy the fact that purchasing power of the consumers has increased? Is that a result of some sort of inherent greed that you see an opportunity to get even more money by raising prices? Why not just enjoy the fact that many people can afford your product?
In: Economics
If people have more money, but the amount of goods available for them to purchase doesn’t increase, either companies will raise their prices, or someone else will see the opportunity and scalp the products for a profit.
Consider a PlayStation 5, which was very difficult to get a console at MSRP for some time. Sony couldn’t produce as many consoles as were demanded. However, stores continued to offer them at MSRP. Scalpers came along, realizing that they could make a tidy profit by buying as many as they could and then reselling them at a much inflated price.
It’s the same problem, when there is less supply than demand, the price will go up one way or another until supply matches demand.
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