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
Businesses exist primarily to make money for their owners. Corporations are owned by shareholders, and if the business makes enough profit, they can give some of that back to the shareholders in the form of dividends. That makes shareholders happy and keep their money in that business, and attracts other shareholders.
There are many calculations that go into the prices business charge for their goods. They look at the market and decide how much they can charge without losing business to competitors or making customers not buy at all. They maximize the amount in order to make a profit for their owners and invest capital back into their businesses, or invest in other businesses. It isn’t “greed,” it’s duty to their shareholders. They aren’t charities.
Latest Answers