3 ms·
Is it really inflation or higher prices due to higher than normal demand? When the demand goes up the market clearing prices naturally increase (until more effi
by whatever1 5y ago
Is it really inflation or higher prices due to higher than normal demand? When the demand goes up the market clearing prices naturally increase (until more efficient suppliers join the game)
- ajmurmann 5y agoHigher prices due to demand outpacing supply is one of the three types of inflation. The other two being based on cost of production increasing and build-in (everyone expects it, so it becomes true).
- PEJOE 5y agoYes, if prices relax, then we will see the deflation reflected in the numbers. A shift of both demand and supply, resulting in increased prices, is one way inflation can happen. What is important in CPI inflation are the prices consumers pay. How that fits into bigger picture money supply * money velocity is a different conversation