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I think the OP is suggesting that there’s a “natural” market price that was perturbed by an extraordinary and temporary event, but that skewed/irrational custom

I think the OP is suggesting that there’s a “natural” market price that was perturbed by an extraordinary and temporary event, but that skewed/irrational customer perceptions and market inefficiencies let current sellers milk that perturbation for longer than the original disruption would theoretically warrant. And that this behavior can become a ratcheting change that drives price inflation entirely through profit-taking. I’m sure there’s developed economic theory around this phenomenon and more sophisticated language than they used, but it felt like they got the point across.

skissane 4y ago
> I’m sure there’s developed economic theory around this phenomenon and more sophisticated language than they used, but it felt like they got the point across. Isn’t this what economists call “elasticity”?
rcme 4y ago
That doesn’t really make sense. Raising prices not supported by demand would result in less profit in theory. For instance, prices may go up in a supply disruption, but the loss in sales means suppliers earn less. So if prices were artificially high, it would actually be more profitable to lower them.
- naasking 4y ago
  They wouldn't lose sales on necessary staples like eggs, milk and such, all of which have seen significant increases.
  - rcme 4y ago
    Demand for milk and eggs is definitely elastic. And we're seeing inflation in other goods that aren't staples as well.
    - candiodari 4y ago
      Not at the price points they're at. If milk halved in price, would milk consumption significantly rise? Not at all. So yes, milk consumption is price elastic, but not at these prices. They're too low. Same goes for eggs, bread, ...
      - rcme 4y ago
        I could definitely see milk consumption increasing if prices were lower. Tons of products use cheap fats that could use butter instead if it were cheaper. If milk products were cheap enough, you could use it as animal feed. If it was really cheap you could burn it for energy. Also worth noting is that the dairy industry is subsidized by the government, so the amount of milk being consumed is already higher than you would expect if the price was set at the market price. For eggs, similar things could occur. Soy lecithin is a common emulsifier, but could be replaced by egg lecithin if eggs were cheaper than soy.
abigail95 4y ago
the theory and evidence behind it shows the opposite, "sticky prices" are usually always sticky in one direction. wages is the biggest one, very hard to decrease wages but very easy to increase. consumer goods are the same, it's easy to discount your stock to sell it - but if you raise it you have to deal with "price gouging" and "profiteering" and "causing inflation".

skissane 4y ago

> I’m sure there’s developed economic theory around this phenomenon and more sophisticated language than they used, but it felt like they got the point across. Isn’t this what economists call “elasticity”?

rcme 4y ago

That doesn’t really make sense. Raising prices not supported by demand would result in less profit in theory. For instance, prices may go up in a supply disruption, but the loss in sales means suppliers earn less. So if prices were artificially high, it would actually be more profitable to lower them.

naasking 4y ago
They wouldn't lose sales on necessary staples like eggs, milk and such, all of which have seen significant increases.
- rcme 4y ago
  Demand for milk and eggs is definitely elastic. And we're seeing inflation in other goods that aren't staples as well.
  - candiodari 4y ago
    Not at the price points they're at. If milk halved in price, would milk consumption significantly rise? Not at all. So yes, milk consumption is price elastic, but not at these prices. They're too low. Same goes for eggs, bread, ...
    - rcme 4y ago
      I could definitely see milk consumption increasing if prices were lower. Tons of products use cheap fats that could use butter instead if it were cheaper. If milk products were cheap enough, you could use it as animal feed. If it was really cheap you could burn it for energy. Also worth noting is that the dairy industry is subsidized by the government, so the amount of milk being consumed is already higher than you would expect if the price was set at the market price. For eggs, similar things could occur. Soy lecithin is a common emulsifier, but could be replaced by egg lecithin if eggs were cheaper than soy.

abigail95 4y ago

the theory and evidence behind it shows the opposite, "sticky prices" are usually always sticky in one direction. wages is the biggest one, very hard to decrease wages but very easy to increase. consumer goods are the same, it's easy to discount your stock to sell it - but if you raise it you have to deal with "price gouging" and "profiteering" and "causing inflation".