TEXT & CONTEXT: GREEDFLATION AND ITS COUNTER ARGUMENTS
Greedflation refers to price inflation caused by corporate greed for high profits.
TEXT & CONTEXT: GREEDFLATION AND ITS COUNTER ARGUMENTS
• Greedflation refers to price inflation caused by corporate greed for high profits.
• the proponents of the idea argue that corporate profit margins have risen significantly since the pandemic even though the larger economy has struggled and that this had contributed to high inflation
• How this would work is that corporations increase the prices of their goods by more than what is necessary to compensate for higher input costs caused by supply chain bottlenecks
• However, a counter argument is that businesses set their prices based on what consumers would be willing to pay. If a business sets the price of its product too high, this would cause it’s good to go unsold.
• In short, while businesses have the freedom set their prices, ultimately it is consumers who determine market prices
• Moreover, inflation refers to a general rise in the price level across the broader economy rather than in the prices of individual goods and services.
• Greedflation has been compared to other theories of "cost push inflation" which attribute inflation to a rise in input costs. What is to be noted is that even the cost of producing any good is itself determined indirectly by the consumers.
• Causes of inflation–
I. Cost-push inflation: Prices get pushed up because input costs have risen;
II. Demand-pull inflation: Prices are pulled up because there is excess demand.
• The current bout of inflation in the U.S., is much better explained by the Federal Reserve's expansionary monetary policy during the pandemic which put more money in the hands of the consumers.