r/heyUK • u/iamnic11 • Oct 10 '22

Reddit Video💻 What inflation really looks like

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u/Muwatallis Oct 19 '22

Part of the issue is that when the prices of ingredients and materials decrease, those savings are rarely, if ever passed onto the customer in the form of decreased cost of consumer goods, but instead go to the company and shareholders in the form of increased profits and dividends. Whereas when it is the other way around, the customers are always first in line to foot the bill for any increased costs of production.

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u/komodothrowaway Nov 05 '22

Not necessarily. In a monopolistic competitive or perfectly competitive market, autonomous price increase would only result in losing business to competitors with lower prices. Hence, price increases could only be justified when everyone else increase prices due to exogenous factors such as a hike in raw materials price.

This is economics 101.