Text reads: 5 Big Questions About Rising Prices

Shutterstock.com (all images)

5 Big Questions About Rising Prices

The cost of everything from groceries to gas has gone up in the past year. Here’s what you need to know.

December 19, 2022

1. Is it strange for prices to go up?

Not at all. Prices of goods, like food and clothing, tend to go up over time. It’s called inflation.

But during the past year, prices have climbed more quickly than usual.

Last summer, inflation in the U.S. was the highest it’s been in 40 years. Many goods are still much more expensive than they were a year ago.

2. What causes prices to go up and down?

The prices of products depend on supply and demand. Supply is the amount of a product that is available. Available means it’s ready to be used. Demand is how much consumers want of a product.

How Does Supply and Demand Work?

Supply

When supply is HIGH but demand is LOW, businesses often LOWER their prices.

Demand

When supply is LOW but demand is HIGH, businesses often RAISE their prices.

3. Why have prices shot up?

Covid-19 had a big effect on supply and demand. When the disease first spread, many factories slowed down or stopped production. That meant a lower supply of products.

Many people stayed home and spent less. Then we began to get Covid-19 under control. And consumers started shopping again.

Some companies have had a hard time making enough products. The supply of items like new cars is low. Demand for these items is high. So prices have gone up.

4. Which product has inflation affected the most?

In June, the price of gas was the highest it’s ever been. After the summer, gas prices dipped a bit. But they are still higher than they were a year ago.

The jump in gasoline prices isn’t hurting just drivers. When fuel prices increase, the cost of shipping goods by truck or plane also goes up. Stores often raise prices after shipping costs go up.

5. What does this mean for consumers?

It means that money doesn’t buy as much as it used to. In April, many families spent hundreds of dollars more each month. That was to just pay for the same goods they had bought a year earlier.

In time, inflation will slow. Experts say the best thing Americans can do now is spend their money wisely.