javanator999 t1_iuf3bxy wrote on October 30, 2022 at 9:06 PM

There are a number of different causes. Sometimes, something specific to that product happens. Like if there is a bad frost in an apple growing area and all the apple blossoms get destroyed, then the price of apples will rise as they have to be brought in from other areas.

Sometimes price rises are more general. If the central bank creates money faster than the amount of goods and services is growing, then all prices will rise, in roughly the same proportion.

Finally, a rise of price of one good can cascade through the economy. Russia was a big gas and oil exporter. With their supplies closed off, most industries have increased costs. They have to pass these costs along to their customers, so most prices rise.

What's going on now is a combination of the last two reasons and then the economic disruption of the Covid pandemic.

What can be done about them? Not much actually. Price controls just cause prolonged shortages. The high prices will bring in more suppliers and pricing will moderate, albeit at a new generally higher level.

Zer0Summoner t1_iuf3zce wrote on October 30, 2022 at 9:10 PM

I think an important factor in the current round of rising prices is when sellers in oligopolies detect that demand is a bit more elastic than previously believed, or in other words that consumers can and will pay more for goods, the prices go up because me want more money.

I think supply chain disruptions caused prices to go up during covid and the Ukraine war, but then once some of those disruptions started to go away, sellers were like "when he had to charge twice as much for these products, people paid it; why wouldn't we keep charging twice as much? Maybe we should try three times more, see if they pay that." Nobody in an oligopoly is going to be the one to undercut, they all just match. Hence, a rising wave.

javanator999 t1_iuf47ln wrote on October 30, 2022 at 9:12 PM

Actually, they would raise prices if demand is in-elastic. A demand elasticity greater than one would mean that demand drops faster than prices rise, so revenue to seller goes down.

Zer0Summoner t1_iuf784u wrote on October 30, 2022 at 9:32 PM

Yeah you're right. My BS in business is from 11 years ago and I never worked in that field so sometimes I get the terms confused these days.

tiredstars t1_iufbtr0 wrote on October 30, 2022 at 10:04 PM

> If the central bank creates money faster than the amount of goods and services is growing, then all prices will rise, in roughly the same proportion.

A small correction here: most money these days is created by private banks, not by the central bank. Part of the idea here is that it makes the money supply more responsive to demand - when there's lots of demand for borrowing, banks will create more money.

Central banks do have the main responsibility for overseeing this though, and can influence the money supply via interest rates and regulation.