Is everyone actually aware of the difference between inflation and price increases?

submitted by MightyMorphinFaggot from self.AskSaidIt

Randomly seen day time tv talk shows, which are bad, but everyone calling in is moaning about prices increasing but none of them understand what inflation actually is.

I'd assume you all know, but if inflation is (for example) 10%, EVERY cost should increase by 10%, including how much you get paid, but it doesn't mean anybody makes any more money, relative to everything else.

Actually wild when women are calling in moaning that the gov wants to put a tax up 4%, when in reality it should be +10% to remain the same, so they're actually lowering the price even though the number is getting bigger.

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[–]SoCo 2 insightful - 2 fun2 insightful - 1 fun3 insightful - 2 fun -  (0 children)

Just some relevant things you got me thinking about...

The optimal inflation rate is generally regarded around 2%, but many argue for a couple percent more.

People seem to regard it as some factor of supply and demand of money, such as liquidity. Yet, since we aren't racing to print greenbacks in an economic overheating and money is mostly on paper anymore that doesn't seem much the case. I don't think I've truly wrapped my head around the reasoning, or reason for it being desirable to a point, as of yet, but I've tried quite a few times and it seems quite a deep topic. Just enough to pass a few entry level economy classes, seems all I've been able to chew.

While a slight recognition of inflation is factor in pay, with a huge sticky lag, wage rates are dominated by the supply and demand of labor so much we'd be hard pressed to notice. The mount of labor demand changes as employers automate, products and services needed shift and manufacturing techniques change. At the same time, population usually continues to increase, giving an expectation of increasing labor supply. Then, as employment needs shift, so do the skills and requirements of labor they demand. This all keeps the motivators being wages shifting, while ever increasing government regulations whip it into a unpredictable mess.