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I have been thinking about whether there are real reasons (for businesses at least) why things cost so much nowadays. Was it always this expensive just to do everyday stuff, comparatively at least? Is it totally unreasonable to wonder how movies went from 10 cents to a dollar, and all the way up to 15 dollars in some theaters today.

The curve seems awfully drastic, and I just can't imagine how products have gotten so expensive to buy. We are not talking about computers and tv's, and all that other extra stuff that is really still quite new compared to most "new" technology. Heck if you think about it, trains are still new, especially monorails and other new adaptations of the otherwise antiquated steam trains.

Where did this cost come from? Is is actually "more expensive" now? Has overhead become such a profit cutting deal nowadays, to the degree of doubling the price of something as simple as soda or milk in as little as 5 years.

Lets skip gasoline entirely, because it is just a big mess, and I see nothing beyond theory and bluffs when it comes to a gasoline economy.

Don't forget a lot of stuff has got cheaper, not everything keeps going up.

i see nothing cheaper It's costing £3.60 a pint in my local and thats the cheapest in the bars around mine. I used to go out on £30 and still get a pizza on the way home, now i'm lucky if i have change from £100!

You must also remember that there was a time when the average person only made about 500$ a year and that kept them alive since prices were also low.



EDIT- As wages and demand go up, prices go up.

I can't imagine how we could discuss this w/o charts and graphs for comparison.

BRING OUT THE CHARTS!!!

One second... let me find them.

Here is a good one, sounds a bit weird though. Average income of more than 10,000$ during the depression? Really? Is this the right graph?
http://www.visualizingeconomics.com/2008/05/04/average-income-in-the-united-states-1913-2006/

Here is a good test about inflation. I will put stuff up as I find it.
http://newyork.timeout.com/quiz/662/662-inflation

"4$ gas... lol? Welcome to the Bay Area!"

One word... Inflation.

Yes, one word indeed. Just take our 2-day course (introduction...) and you will be well on your way to actually understanding this nonsense .

http://en.wikipedia.org/wiki/Inflation

Last time I worked it out, a $4/gal petrol price was about 44p/L here in the UK, whilst at the time we were paying about £1.

Though granted that was back when we actually had a good exchange rate, but I would imagine that it still only works out to about 60p/L even now, where we are paying over £1 in almost all petrol stations.

But as has been mentioned, wage rises -> price rises.

And the banks willingness to loan out far above earnings increases the rate of price rise.

So is their a generally smooth and consistent flow to this?

Are businesses raising prices beyond that which they did before? It seems to be the case now.

I've certainly noticed that food has increased in price. The same bag of pasta used to cost £1.44 and now, from what I can remember, is pushing £3... and that is in the space of 3-4 years. I will check when I next go to the supermarket though, as I can't remember off the top of my head.

But then things like bread has remained fairly stationary as far as I can see... though that may be becuase they always seem to bring out a new "bottom of the range" bread that is even more horrible than the last. I remember my old university 24p loaf being... at least reasonable. Now the cheapest stuff is almost utterly inedible. I think it is still a simmilar price, but I can't remember.

They used to also run a lot more 2 for £1 deals on the fresh bread that was £1 a loaf, but I have not seen one of those for a year or even more (I go into the supermarket almost every day, as there is one right over the road from me... I am not just obsessed with food... though I am ).

I know public transport has rocketed in price. About 9 months ago a monthly bus ticket cost me £50, now it is £57... A rise of almost 1/5th of the cost of the original ticket in 9 months, yet fuel duty has only risen a tiny fraction of that, and fuel prices as a whole are not that much more expensive (although they have certainly risen a fair way).

Come to China. Everythings cheaper!

Public transport has risen drastically in price out here as well, I prefer to drive in pretty much any situation, and that is not a good thing. It doesn't help that the public transportation is relatively inefficient at it's job out here.

I know that milk has risen significantly over the past year or so, I am not sure about bread though, I eat pasta and rice more. All of the bulk stuff seems to have stayed pretty consistent, it is the packaged stuff that has risen in price, and that is part of what got me wondering about this.

Lukus83 wrote:Come to China. Everythings cheaper!

How much cheaper?

If we all move there won't it get a lot more expensive? Heh...

"Note"
Lukus must work for the Chinese tourism board .

Well it varies, my daily expenses (breakfast, travel and lunch) for work adds up to about 5 GBP. I think that's the biggest difference.

But yeah, I guess my main point was that china is a hell of a lot cheaper than the UK. I can't really compare anywhere else since I don't really know.

A lot of the far east is very cheap though. You can go to town on market stalls and food carts and still have change left over from £10.

Not only that but the food is usually fantastic, rather than the tasteless filth that the cheaper (yet stll more expensive) traders in the west will foist on you.

But then that is matched by (generally) lower wages, and lower cost of most goods.

Prices will generally increase the closer you get to tourists, who can afford higher prices, and cheaper as you get closer to most of the locals.

Which demonstrates that price is linked to earnings... Tourists usually earn a lot more than locals (in the far east anyway).

Wrexasaur wrote:So is their a generally smooth and consistent flow to this?

Sort of. The general rule of monetary economics is that prices are the total level of money in the economy divided by the total amount of stuff being produced and sold.

The total amount of stuff produced from year to year goes up and down, but mostly goes up and on average that increase is somewhere in the realm of 3 or 4%. So basically speaking last year we built 100 cars, 50 houses and 200 televisions, this year we built 103 cars, 52 houses and 206 televisions.

Now, if the money supply stayed exactly the same you'd end up with deflation (you could buy more with a dollar each year than you could the year before). But the money supply doesn't stay the same, as each year the various reserve and federal banks of the world release a little more currency, with a very rough average of around 5 or 6% new money over what was available the year before.

The end result is that if you have around 6% more dollars to spend floating around the economy, but only 3% more stuff available to buy, then prices increase by 1.06/1.03, or 3%.

Are businesses raising prices beyond that which they did before? It seems to be the case now.

In general the price level is affected far more by the policies of government than it is by the choices of individual businesses. The level of inflation is basically defined by the extra amount of money government decides to print each year.

But that's at a very general, economy wide level. Within individual products you'll get supply shocks that will force the prices of individual products up (a few years ago tornadoes in Queensland wiped the banana plantations out and bananas became almost ten times as expensive for a year or so). There are also surges in demand that will drive prices up (in the build up to Iraq oil production didn't actually drop, but uncertaintly about future oil availability led to many governments and companies increasing their oil stockpiles, considerably increasing demand and driving prices up).

Does that help?

Lukus83 wrote:Well it varies, my daily expenses (breakfast, travel and lunch) for work adds up to about 5 GBP. I think that's the biggest difference.

But yeah, I guess my main point was that china is a hell of a lot cheaper than the UK. I can't really compare anywhere else since I don't really know.

Chinese are usually able to negotiate to a low price ( however , if they know you are new to the place, they'll eat you alive )

Sebster wrote:

Wrexasaur wrote:Are businesses raising prices beyond that which they did before? It seems to be the case now.

In general the price level is affected far more by the policies of government than it is by the choices of individual businesses. The level of inflation is basically defined by the extra amount of money government decides to print each year.

But that's at a very general, economy wide level. Within individual products you'll get supply shocks that will force the prices of individual products up (a few years ago tornadoes in Queensland wiped the banana plantations out and bananas became almost ten times as expensive for a year or so). There are also surges in demand that will drive prices up (in the build up to Iraq oil production didn't actually drop, but uncertaintly about future oil availability led to many governments and companies increasing their oil stockpiles, considerably increasing demand and driving prices up).

Does that help?

Yes it did and thank you.

Governments regulate prices right? As in a product cannot be irrationally overpriced, depending on the situation? Most irrationally overpriced goods don't sell very well either way, you have to really want a banana to spend 10x the normal price... I mean really though, who actually bought any?

I suppose raising prices in an area that has more money would help keep a smooth flow to the economy. On the other hand someone always benefits from you having money, unless you are keeping all of it in your mattress or something. I have never had a lot of money so I can't say how I would feel about the economy if I did. I have also never been an over the top spender, it just generally goes against my morals. If I can have a mercedes or a fleet of standard trucks, I would go with the trucks simply because I could make money with them, a mercedes would just cost me money to keep around.

Very few governments regulate prices, at least in western style economies.

Governments can influence prices through taxes and import tariffs.

Computers and consumer electronics generally shows quite rapid price deflation, when you factor in the increased power of the equipment.

Wrexasaur wrote:Yes it did and thank you.

Not a problem.

Governments regulate prices right? As in a product cannot be irrationally overpriced, depending on the situation? Most irrationally overpriced goods don't sell very well either way, you have to really want a banana to spend 10x the normal price... I mean really though, who actually bought any?

Governments don't directly regulate prices. There are exceptional circumstances where government steps in to stop predatory pricing (taking advantage of the unfortunate circumstances of an individual to really crank up the prices) but those kinds of things are really rare. For the most part the price is based entirely on what price level the company feels will maxmise profits.

What government does control is the total amount of money in the economy. Release too much and you get inflation and hyper-inflation. Release too little and you get deflation.

I suppose raising prices in an area that has more money would help keep a smooth flow to the economy.

Those kinds of things tend to happen naturally. Studies of prices in wealthier areas on things like groceries show pretty significant mark ups on products. So a grocery store in a working class area, where money is tight causing people to shop around for the cheapest bag of flour, will price flour lower than in a grocery store in an affluent suburb where people don't care so much about saving 50c.