Why Everything Seems More Expensive

Via LearnVest By Cheryl Lock ~

expensive gasIf you’ve been confused by the news that inflation hasn’t risen much recently (you know, because the prices of certain products still seem to be rising) don’t worry you’re not crazy.

Inflation, it seems, is more of an all-or-nothing deal. According to Time, “price hikes for a particular item here or there don’t qualify as inflation. If one thing gets more expensive but something else gets cheaper, that’s what economists call a relative price change. Inflation is a simultaneous increase in price across the board.”

Of course this explanation makes the overall “low inflation” news somewhat less exciting for average Americans in our day-to-day lives. For example, while the cost of some important household products, like food and housing costs, have remained relatively moderate, others, like gas and taxes, are growing by leaps and bounds. When the recession ended, gas was $2.60 a gallon, but it’s $3.68 today an increase of 41% in four years.

One great indicator of the overall price increases, as pointed out by Time, is the McDonald’s Big Mac. The popular sandwich, which is available in many countries and reflects the cost of food, fuel, commercial real estate and basic labor, has risen from $3.57 to $4.37 since the recession ended, or 5.2% a year.

So what’s the takeaway? In general, it’s clear that lower inflation doesn’t necessarily equate to a steady price in everyday products.


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