The discussion about wages has presented many opinions both for and against. Inflation being only one of them. What that means depends on who you talk to.
Nonetheless, any discussion about inflation will invariably motivate someone to talk about hidden inflation. In short, when you pay the same price for a candy bar but the candy bar is smaller. And there is the other type of inflation. The added features inflation. Here, a product has added features of little value but justify an increase in price. The small cost of the added feature that drives revenue is called revenue enhancement.
Then we have the inflationary factor that we ourselves create with little notice and no approbation.
This is an Economics Lesson.
Focus on the Economics Only!!
For dinner, my wife and I have hamburgers with a side order of french fries. My wife butys the Ball Park ® Grilled burgers you can fry or cook in the microwave but we fry because it tastes better. She buys a package of buns for a dollar and the cheap fries.
I make a little more money My wife buys the Martin's Potato Rolls ®. Or, if you're a Republican, the potatoe rolls.
I make a little more money. My wife buys half a pound of Land O' Lakes ® American Cheese orange and we have cheeseburgers.
I make a little more money and my wife buys a package of Kunzler's ® bacon. On sale. I've already done the test and measured the shrinkage of different bacons and do a unit cost evaluation on the results: how much bacon we have after we cook it. Kunzler comes out cheaper--oops--more cost effective because I measured less, much less, shrinkage. (Op. cit. my comment on hidden inflation.)
Now we are eating Cheese and Bacon Burgers with the Ore-Ida ® Fries.
The price of burgers did not rise.
The price of cheese did not rise.
The price of buns did not rise.
The price of bacon did not rise.
The price of the fries did not rise.
Still, the cost of dinner did rise.
This increase in spending is a form of inflation.
This is not an increase in the price of living. This in an increase in the expense of living.
Yes, we are getting more. Still, we are spending more. This holds true when you look at the expense of living over the past, say, fifty years. More things have become available. Many of these things are new additions--the window air-conditioner. Other things are upgrades. A remote control to operate the window air-conditioner. Features added to the razor for that morning shave, a timer on a the coffee pot.
We still have an older 4 cup coffee maker. The on off switch has a light. The newer one has an orange sticker. That is a cost savings to the manufacturer without a decline in the quality of the product. However, that older pot keeps the coffee warmer. The hot plate is hotter.
Then, there are gratuitous design features. To keep coffee warm in an older coffee pot, you remove the plastic insert lid and place a bread and butter plate on the top of the pot. That top has been replaced with a top that has a lever built into the handle. Yes, you can remove the coffee pot top. But the design prohibits you from placing a plate on top of the pot to keep the coffee warmer.
I often wonder, how much would it add to the cost of the pot to create a hotter hot plate and replace the glass pot with a Pyrex pot? A simple increase in manufacturing costs with a real consumer benefit at a modest price increase. Right? Don't bet on it.
Warmest regards,
Slim.
Copyright (c) 2016 Bob Asken
All rights reserved.
Disclosure: The mention of products by name is for the purposes of accuracy and realism only. There is no recompense sought, offered, or accepted. The opinions are my own and reflect real usage in real life and are not necessarily a commercial product endorsement.
Logging you in...
No comments:
Post a Comment