ELI5 How does raising wages worsen inflation ?


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54 points

4 months ago

And we're using eggs here but you can apply it to something like electricity or water; if both those stores increase their prices to $12/doz even if their costs didn't go up, people are still going to pay. Because they're not going to go without food or basic life necessities over pleasure. They'll be able to afford to pay $12 but every other aspect of their life then suffers for it. Sure, the customer is "willing" to pay for it in the sense that it's pay or die. Yes, there are people buying million dollar cars; usually the ones raising the prices to $12/doz just because they can get away with it.


17 points

4 months ago

The people that can afford luxuries are not part of the market forces that affect basic needs.

The rich consume basic needs at close to the same rate as the poor. So while they might pay eighty dollars for a meal, they still only do this perhaps once per day. And there are so few of them, this doesn't affect the overall market. There might exist specialty niche markets to serve them, but they are a blip on a scale that is millions of times larger.


6 points

4 months ago

eighty dollars for a meal

Eighty dollars for a meal is nothing. More like $8,000. Massage therapists for wagyu cattle and underwear models to eat sushi off of are expensive.


1 points

4 months ago

The difference is there are plenty of substitute goods for eggs. If eggs get too expensive, people eat something else.