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
> Is that a result of some sort of inherent greed that you see an opportunity to get even more money by raising prices?
A lot of people don’t seem to understand that this isn’t just common, *this is the thing that makes capitalism work*. Capitalism weaponizes the greed of human beings to efficiently plan the economy.
>Why not just enjoy the fact that many people can afford your product?
Just because more people can *afford* your product, doesn’t mean that more people can *get* your product. If more people are trying to buy the same amount of goods, and the price doesn’t increase, that means that you’re going to run out of product before you run out of customers. There’s now a shortage of the product. Of course, companies could expand production, but that takes money. You need to hire more workers, buy more equipment, rent a bigger property. The money necessary to expand, to actually make *more* products, not just cheaper products, comes from the higher profits you get by raising your prices.
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