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Re: Image comments for Into a corner
Posted by: pulse
Date: 23/06/2022 07:11AM
Except for when it is helped by the cost of a commodity.
If the production of your goods uses fuel; and fuel goes up by 20%, then the production cost of your goods goes up; which you will need to reclaim, by increasing the wholesale price.
Then you need to ship your goods, be it around the corner or around the world. This has also gone up 20% now; except it hasn't, because shipping has gone up 600% in the past year due to various backlogs and price gouging by shipping companies. But let's pretend it's a flat 20%. Now getting your goods to retail has gone up, so your widget that cost $10 to make, and retailed for $20, now costs $14 to get to retail.
Well, the retailer still want their cut. So the $14 widget is now $24 to maintain the same $10 profit, OR $28 to maintain the same percentage profit ratio.
This is a VERY simplistic way of looking at things. Let's say your $10 widget is made of 10 parts, each of which now costs 20% more to ship to you, etc etc etc. It doesn't take much to become an inflationary issue WITHOUT adding more money to the economy.
If your goods are in short supply, then there's also higher demand for each individual part, driving up costs.. it becomes a vicious cycle until it cools down.
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