Why prices are increasing but never decreasing? for example: food prices, living expenses etc.
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Prices do decrease in some cases, especially where there is healthy competition and technological innovation. Computers and televisions are good examples. I’d also throw in vehicles, but while the prices do continue to rise overall, the value, longevity, safety and convenience features of a modern vehicle outstrip the cost increases.
A lot of things do decrease in price over time, or at least maintain a stagnant price in the face of inflation.
Some of its branding, like the $0.99 Arizona Tea cans, or the cheap hot dogs and pizza at Costco that get customers in the door.
Some of it is improved supply, some of it is improved manufacuring techniques. Most notably in the field of electronics, you can buy way more transistors for $150 in 2022 than you could in 2002 for the same dollar amount.
Oh boy, there are a lot of really terrible answers on here.
First off, to anyone blaming increasing prices on inflation… that’s literally just the definition of inflation. Saying prices went up because of inflation is like saying your car goes fast because it’s a car.
Now to get to answering the question. There are really two parts. 1. what causes inflation? and 2. why is it that we almost always have inflation and rarely deflation?
The answer to the first question is that inflation is overwhelmingly caused by the supply of money in the economy. If there is more money chasing the same goods then prices will inevitably increase.
The money supply is directly controlled by a nation’s central bank – in the case of the US, that’s the Federal Reserve (the Fed). The reason the US has such high inflation now is (primarily) due to the fact that the Fed dramatically increased the money supply to stimulate the economy during COVID.
Next – why do we almost always have inflation? That’s because the Fed deliberately tries to create inflation, targeting 2% in a normal year.
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The economy is manipulated to always have some level of inflation. The opposite, deflation, is very dangerous and the government will do anything to avoid it.
Imagine wanting to buy new sofa that costs 1,000. Next month it will be 900. Month after it will be 700. Would you buy it now? Or would you wait and save 300 bucks?
Deflation causes the economy to come to a screetching halt because people dont want to spend more than they need to, so they decide to save their money instead.
Because of this, a small level of inflation is the healthiest spot for the economy to be in. Somewhere around 2% is generally considered healthy. This way people have a reason to buy things now instead of wait, but they also wont struggle to keep up with rising prices.
Edit: to add that this principle mostly applies to corporations and the wealthy wanting to invest capital, i just used an average joe as it is an ELI5. While it would have massive impacts on consumer spending as well, all the people telling me they need a sofa now are missing the point.
If I were to summarize the last 30 years of my life, it would be this:
Wants get cheaper, needs get more expensive.
In my lifetime, things like tv’s, cell phones, computers, and clothing have gotten cheaper (sure, clothing is also a “need,” but not the way America consumes it).
Meanwhile healthcare, education, and housing have all gotten more expensive.
In my country a juice company had to raise prices in 2019 for two years due to having a miserable harvest. They printed a message on their bottles – We’re sorry, either that or we shut down, the prices will go down again beginning with 2021, we’re grateful for your choice to still buy our product.”
Anyway, many juice companies had to raise the prices and we happily gave the only one who told us why the price went up and promised to go down again, our business. At 2021 when they wanted to reduce the price to an even lower one than the price before, the supermarket franchise stopped them. They denied the price reduction, went to court, fought from january 2021 until around february 2022 and they lost. Instead of reducing the price they cancelled the contract with the juice company. They said “people would be confused why the price went back again, they’re used to the high price, why would that company offer their juice so cheap compared to their competitors, the consumers would assume the juice isn’t healthy and would stop buying it.”.
Companies want to make money.
The few good ones out there are swimming with sharks and end up getting eaten by them.
There are some horrendous answers here. In the spirit of ELI5: prices, in general, increasing and not decreasing is called inflation. Prices, in general, decreasing is called deflation.
The ‘price’ of something has how much money it costs to buy it. The government is continually increasing the total amount of dollars (or whichever currency) there is, meaning that the value of a single dollar is constantly decreasing. Put (overly)simply, if you make more of something that is values because it is scarce, the value of it decreases. [Douglas Adams’ story about leaves](https://www.goodreads.com/quotes/685739-if-the-management-consultant-said-tersely-we-could-for-a) is the best ELI5 way of explaining this.
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