What is the cause of the general rise in prices over time? (inflation)?

Answer 1

I like the second answer: it's usually demand-driven, rather than supply driven, except for products that are especially-well differentiated. So, there continues to be a demand for my product, I want to make more money (or have to), so I inch up the prices as much as I dare. OK, things are still good, so I inch them up farther. OK, the competitors are also inching theirs up, we're all still selling, that sort of thing.

Often, companies have to get kind of tricky to raise prices. Gillete comes up with new types of razors that are not compatible with the old type of refills--so you have to buy all-new refills and razor, if you are convinced you want it. Usually, they can't convince men that it's that much better, so they release their new products around father's day or christmas, and the women in their lives buy it for want of something to get them. This creates inflation because it re-sells something someone already had for a higher price than before.

Microsoft does the same thing with new versions that are not backwards compatable.

Sometimes there are claims to supply-side inflation: the cost of the components of a product went up (labor, gasoline, whatever), so they have to raise prices, whether there's demand for this or not. This is harder to do, and it creates a consumer awareness that if they fight the supply-side costs, they can get cheaper prices. (The message is: nobody chose this, we don't want to do this, but we gotta. The answer is: fine, then when labor costs go down, or gas prices drop, we expect a price drop again.)

Anyway, fascinating stuff to think about.

Cheers.

Answer 2

Money represents truly items, however has no significance in itself. If you've an financial system with one tasty cake and one buck, the cake bills a dollar. When you've 2 greenbacks and one financial system (or cake), the financial system now bills 2 greenbacks. If I take everyones 2 buck invoice and write 500 on it, no one has any further cash. There isnt extra meals simply considering that the volume of bucks expanded. So how does this hit the trade supervisor so rapidly? Well I post that the trade supervisor honestly does understand how many greenbacks are available in the market. If he is aware of credit score can be low-priced, he can spend extra at times pay much less again later. If everybody does that, the rate of items will get bid upwards rapidly. The rate of commodities like wheat can expand rapidly considering that of funding. If low-priced credit score turns into to be had, extra money can be unfastened to take a position on it riding expenses up. I do believe firms difference their expenses rapidly based on call for, for probably the most aspect. The largest difference within the financial system in in trade funding. Business funding is approximately 20% of the financial system in any given yr. It fluctuates greater than loved ones spending, and it's pushed by way of low-priced credit score. Printing cash supplies a brief time period reap earlier than expenses regulate. It supplies no longer term reap. it makes taking a financial institution mortgage and making an investment it in a trade or spending it extra stunning within the quick time period, but it surely handiest distorts the quality longer term selections. It makes trade spend on matters that they in any other case could no longer spend on. When printing cash is going dangerous is while it's not used for constructive funding. When there's no prospect of monetary progress, firms won't borrow and make investments or spend. Then there can be extra greenbacks, however no longer extra monetary pastime. That way the cash men and women have stored up is now valued at not up to it was once earlier than. That isn't well. It makes men and women spend extra money now, however no longer make investments for later. The difficulty in America is that the cash isn't headquartered on gold or something else. They can print or curb the amount of cash and toy with us up to they prefer.

Answer 3

I work for abc.

I Want a raise,

so they give it to me ( yearly moslty)

so, for them to make the same earnings,
they now have to charge more for the same product or service they sell

so the price of whatever goes up.

Answer 4

the basics econ 101 answer would be: demand for an item or more exceeding supply, then domino effect.