#inflation #prices #shopping #rent #gasoline #groceries
If something costs too much, don’t buy it.
That can’t be said for everything, since we all need housing (rents), fuel for cars (gasoline), medication and food (groceries).
But, according to Christopher Rugaber, business and economics reporter for the Associated Press, companies are starting to lower their prices because people just aren’t buying their products in the volume they would like, at the prices they want to charge.
Apparently, it’s working. Last week, inflation dropped below 3 percent for the first time since 2021.
Rugaber’s article on the subject was published August 13, 2024, in The Atlanta Journal-Constitution.
Before Rugaber’s article, McDonald’s reportedly started lowering their prices on some of its most popular items because there were too few diners at many of their restaurants. It showed in their earnings report.
It’s good also to remember that government has little leverage in bringing down prices. It can do what it can for things it can regulate, such as bringing down the cost of insulin to $35 for senior citizens. One big lever they have is allowing Medicare to negotiate prices. This has helped bring down the government’s cost for 10 popular drugs.
But, what really helps bring down prices is the lack of buyers.
It’s simple economics. Set a price, see whether the market will bear it and adjust as the market adjusts.
For businesses, particularly small businesses whose product is not an absolute necessity, it’s a much tougher decision. Usually, these businesses know what prices the market will bear for their finished product. But, can they produce that product at a cost that not only covers what it costs them to make it, but also puts a little profit in their pockets?
It’s a struggle for some of these businesses, many of whom are facing labor shortages. When workers are few, they will demand higher wages. Can these businesses keep their workers happy, pay for ingredients that produce high quality products, pay for their workspace AND make a profit?
The bigger corporations have more pricing flexibility. If they, like McDonalds, see less traffic in their retail spaces because of prices, they usually can adjust to that more easily.
Sometimes that doesn’t work well for some of those who work for them, since labor is one of the places that corporations adjust.
In all, reports say that, given the labor shortage, most workers have seen their pay rise. A lot of the things we buy are priced higher to pay workers more. In most cases, workers’ raises are more than the price increases they are paying for necessities.
As Rugaber’s article implies, consumers are working hard at changing what markets will bear – whether they realize it or not.
So, here are some handy rules for buying: If it is something you need to survive, try to use less of it. (Don’t drive around in a 4X4 pickup truck if you don’t need to haul anything). If it’s something you want badly, but don’t absolutely need, look for bargains. It may not pay to drive five or six miles to save two cents on a gallon of gas, but it might make great sense to shop around if you’re in the market for, say, a big-screen TV.
Another rule: don’t long for the days of the pandemic when prices on just about everything were lower because people weren’t going anywhere. The disease was too much of a cost just to have lower prices. (By the way, the air was also cleaner during the pandemic, but that’s a story for another day).
Inflation ultimately adjusts when fewer people buy. So, work hard at your job, make as much as you can and try to spend carefully. Also, try to pay yourself first by saving a little of that paycheck for your future.
Peter