Greetings.
I have recently saw a title for the article named “RBC CEO sees inflationary pressure building as economy bounces back”.
What does inflationary pressure means?
Thanks in advance.
In: Economics
Inflation is when prices rise, forcing companies to increase wages. These can reduce companies’ profits if they have to pay more for goods/materials and labor but can’t raise prices to compensate for the full impact, or face reduced sales by doing so.
Say it costs Starbucks $2 in per-unit costs for the coffee beans, cup, milk, sugar and labor to make the drink they sell for $4. Now, those costs rise to $2.50. Starbucks can see their margin fall to $1.50/unit or they can raise prices to $4.50 but risk reducing sales with higher prices. Either way, it can hurt their bottom line.
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