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This isn't convincing, why should company profits be immune from inflation but wages stagnate and fall below the rate of inflation as has happened this year? Co

• Khaine 4y ago
  Because companies are profit making entities? They are going to do what they need to, to make a profit. Which is why when inputs rise, they typically pass those costs on to consumers. You will note that Dominos share price fell by ~30% because they noted that demand had been down as they tried to pass on the increased cost of inputs. If you are an investor, you will want a return on your capital. Would you invest in a business, where the return is lower than what you can get in a bond? If your profits fall too far, unless you can convince investors that its temporary, they are likely to withdraw their funds, and then your business will end. Prices are also less sticky than wages which means they rise and fall in response to supply and demand, whereas wages are more sticky.