What The Dickens Is Going On With Inflation?!

[TWB103]

Over the last year it's been really disparate. Most foods and drinks have gone up by by 40-50% but electrodomestics, tools etc have gone up by much less, some are the same price and some are even cheaper than they were a year ago.

I don't know about other sectors but that's odd. In the Won Decade everything went up with inflation at more or less the same rate.

Any clues as to the huge disparity now?

 

[Girino]

My guess is that large distributors at least try to find a logic behind their price increase because they deal with larger volumes and foreign suppliers, while the small fish panic and start doubling/triplicating prices based on how they feel from day to day. Plus, consumers here are uneducated and not used to shop around, so they involuntarily fed the small resellers' habit to fix their own prices randomly and not based on a serious market comparison.

The same thing that in a store costs 1x, on the next block costs 1.5x. This is still unbelievable to those like us coming from stable economies where they compete on small cents... in a normal economy they would have closed business long ago if setting prices this way.
However, the crazy inflation is both a result and a cause of this behavior.

For example: suppose you are selling today from a stock of product you bought years ago. How do you decide how to price it? In a normal economy prices wouldn't shift that much, so you'd pick the cost, add taxes, add your reasonable markup, check what your competition is doing and you'd get a selling price.
In Argentine economy the item cost to you is so small today that your markup becomes unreasonable and totally arbitrary, buyers won't shop around too much and other elements factor the buying choice (sellers' reputability, ability to pay cash, ability to pay in quotas, fear to be scammed, availability of an extended guarantee when buying large home appliances, unaccessible item from abroad, embargoed products).

 

[BAJeffpat]

Another point to keep in mind is prices do change to the rate of inflation. Instead, inflation is calculated from the change in prices of a selected basket of goods. The average of a basket of goods is used because not all firms react to increased costs in the same way. Some prices are not easy to change. They are "sticky." This could be due to inperfect information in the market, irrational decision making, or a reaction to strong comsumer expectations.

Also, as Serafina points out above, very few sectors of the Argentina have well functioning markets.

 

[Crema Americana]

I think one of the problems with the market here is that normally sellers aren't too willing to part with their goods too quickly... so the markup is extreme. Eventually someone will come by and buy it... and if not, it's okay, it can sit there. I've come to the conclusion that they prefer to sell ONE at five times the price, than sell 5 at a more reasonable price. Unfortunately goods hold their value better than the peso, so they lose nothing.



I think what's happening now may be that "luxury" goods aren't selling as well since people are more strapped for cash (between inflation, the rise of utilities, and less credit)... so the price is pretty stable. But you need food to live, so they can get away with jacking those prices up. Hopefully things settle... we don't want to fall into deflation, either.

 

[Rich One]

Argentine Economics Rule of Supply and Demand Laws revisited...! If a merchant sees his sales drop he increases the prices to obtain a constant total Sales Revenue...

 

[Pensador]

Over the last year it's been really disparate. Most foods and drinks have gone up by by 40-50%

That has to hurt for allot of Argentinians sometimes I wonder how they get along with inflation like that. It is expensive here in URU too and to be honest I have no idea how the poor can raise a family with these prices but somehow they do. But I have found you can save money at the farmers markets and get great produce at the same time.