Have you ever wondered why this product I bought a year ago now costs more?
Behind each rise there are a series of economic forces that pushsome visible and others that go unnoticed, but that end up affecting the pocket of consumers.
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In general terms, prices go up because it occurs little or because you want to buy a lot. In other words, prices rise when there is excess demand. Nevertheless, There are several situations that can cause that too.
The professor of the Faculty of Economics at the University of Los Andes, David Perez-Reyna, spoke with the portfolio purse to better understand this phenomenon.
According to the expert, the first thing to keep in mind is that if many people want to buy a good, there will be excess demand and The natural reaction is that prices rise, to prevent scarcity. For example, when there is a lot of money circulating in the economy, more people will want to buy what is offered and prices will tend to increase.
“This can happen for greater income of people, but it can also occur when a government increases its expense: when a government spends more, among other things, it is demanding goods and services offered by companies,” explained.
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Public foods and services continue to press the cost of living.
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Now, in that behavior, other conditions can also influence that they can lead to a lower production and therefore in a lower supply. Some of these are related to The high costs that some companies must assume in terms of manufacture.
“If, to produce the same, companies must buy higher supplies or pay major salaries, and it is not possiblehe said.
Along that same line, there is a practice known as inflation expectations. This is that The company begins to increase prices of what produced prior to compensate for possible future losses. This usually occurs when the market power bass.
According to Perez-Reyna, if a company has zero market power and increases its costs, it has no alternative than raising the price of what it produces, or has to close. If you have market power, you can have space to reduce your profit margin, in order to maximize your profits.
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