Inflation, is the simple answer. But what causes this? Why couldn’t society just keep on keeping on with prices? Examples, a $0.25 for a candy bar, $0.75 for a fast food burger, $30k for a home etc. It worked then, so why not now, why not just agree to lower the prices of everything?
In: Economics
Most people don’t understand what inflation is and say it’s “government printing money”, which isn’t what inflation is. Inflation, in the simplest terms, is just the observation that prices have gone up. Prices increase/decrease based on supply of goods and services or demand of all that.
Your assumptions that everyone can agree to keep prices static forever is assuming that cities don’t grow, new people aren’t born or die, new workers enter the workforce, etc.
With your candy example at $0.25, let’s say the candy factory can only produce 4 bars for 4 people per day. What if people the city grows and now 8 people want the 4 bars? The factory can’t make more so the 8 people fight for it and the 4 richer ones are willing to pay $1 to the factory for each bar. Yea the factory will take the $1 and the new price of candy bars is now $1.
And if you ask “why doesn’t the factory make more bars”, but why would they do any extra work if they can make $1 over $0.25 for doing the exact amount of work. Would you? This explains the greedflation currently happening with companies that are refusing to lower prices that we all got used to paying during the pandemic.
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