Wednesday 15 February 2012

Not putting up prices ‘slows down’ rising prices, new inflation figures reveal


inflation slowing down due to VAT

New figures released yesterday show that it you don’t deliberately make things more expensive, then prices don’t rise as quickly as when you do.

Inflation fell to 3.9% as a result of last years VAT increase no longer affecting the year-on-year price increases.

Economics expert David Waltham told us, “What you’re seeing here is yet more proof of the poorly-understood economic effect of deliberately making things more expensive – things go up in price more quickly.”

“Conversely, not making things more expensive tends to make prices rise more slowly.”

“I mean, hypothetically, if you added another 2.5% tax on pretty much everything, overnight, then you will almost always see prices go up more than if you didn’t add 2.5% tax.”

“We’re not yet sure of the exact economic mechanism which links those two facts, perhaps we need more well-funded research?”

Inflation

People who don’t really understand this sort of thing have asked if reducing prices could also slow down rising prices.

As one economist said. “It’s a good question, and you’d think so wouldn’t you?”

“But if you’re expecting the chancellor to lower VAT in order to meet the government’s infaltionary targets then you’ll have a bloody long wait.”

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