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Define skyrocket4/2/2023 ![]() ![]() ![]() WEBER: President Biden has called out that the prices for unfinished gasoline were down by 5%, where the prices at the gas station went up by 3%. The president said he would have the Federal Trade Commission investigate possible market manipulation or price gouging in the energy sector. MARTIN: So the Biden administration in November took aim at energy costs. In the earnings reports, companies have bragged about how they have managed to be ahead of the inflation curve, how they have managed to jack up prices more than their costs and as a result have delivered these record profits. And as a matter of fact, what we have seen is that profits are skyrocketing, which means that companies have increased prices by more than cost. And everybody has some sort of an understanding that, oh, yeah, there are issues, so, yes, of course companies are increasing prices in ways in which they could not justify in normal times.īut this does not mean that the actual amount of price increase is justified by the increase in costs. No one knows how much exactly these prices should be increased. So we can explain to our customers that we are raising our prices. And this creates an opening where they can say, well, we are facing increasing costs. WEBER: Companies always want to maximize profits, right? In the current context, they suddenly cannot deliver as much anymore as they used to. But I guess the question would be, what is the line between kind of normal market functioning and market manipulation? Is there a lot, and who decides what that line is? You know, if people want to buy things and they're in short supply, of course they will be more expensive. And suddenly, companies, even very large companies, have difficulties delivering. But what's happening now is that suddenly, because this gigantic conveyor belt system, if you want so, is not working properly, stuff gets stuck. So if demand goes up, they basically react by delivering more of the stuff that they are producing. I mean, first of all, we have to realize that the supply chain issues are very real, right? So in normal times, companies, also very large companies, mainly compete over being able to deliver their products quickly, attracting customers through advertisement and so on. So what's your take on why those two things are happening at the same time? And at the same time, corporations are reporting record profits, and that just seems counterintuitive to many people. MARTIN: So we see the price of pretty much everything going up, and we are told that these are supply chain disruptions or labor shortages, both of which are pandemic-related. ![]() ISABELLA WEBER: Thank you so much for having me, Michel. She has studied pricing policies in the context of rapid economic transitions, and she is with us now to talk about all this. She is a professor of economics at the University of Massachusetts Amherst. Commerce Department shows that corporate profit margins are the largest they've been in 70 years, and that's caused progressive leaders like Senators Bernie Sanders and Elizabeth Warren to cry foul, saying some companies are using the pandemic as a cover to raise prices far more than is warranted.Īs is often the case where economic theory is concerned, there are a variety of opinions about this, so we've called Isabella Weber. While families are dealing with sticker shock, profits for companies that put these goods on shelves - well, those are skyrocketing. The consumer price index showed a 4% rise in housing, a 12% increase in the price of meat, and the cost to buy a used car is up more than 40%.īut here's another reality. This week, the federal government reported a 7.5% increase in the cost of goods all across the board compared to a year ago. Prices are up all over the place - at the gas pump, at the grocery store, at the car lot. ![]()
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