Vincent. Old joke. His was the voice on the Thriller Album, the one the legendary one-gloved pedophile made. But...we digress.
Creak. Creaaakkk. Creak. Do you hear that? It’s the sound of prices, creeping slowly, but surely, upward. Maybe it’s movie tickets, or stocks...or God forbid, coffee.
A price creep is when the price of a good or service slowly gets larger and larger...and people are generally cool with it. It’s when we keep paying for the thing, even as its cost rises slowly but surely over time. This is different from inflation, which is when prices (and wages) go up as the economy expands and more money is pumped into the economic system. Price creeps are looking at real costs, not nominal.
Price creep affects us in the real world: our investment portfolios, what we spend our fun money on, and more. It’s interesting, since prices creeping upward kind of goes against most basic economic theory. In theory, people should demand less for a good as its price rises, unless it’s deemed “inelastic.” But usually only goods we really need are inelastic; we’re willing to pay higher prices for them because we feel like we don’t have a choice (think: food, gas to drive to work).
Price creeps be creeping economists out.
Related or Semi-related Video
Finance: What is Disinflation?5 Views
finance a la shmoop what is disinflation disinflation often confused with dat
inflation refers to the decline in inflation rates over time in 1973
America was fully juiced with Warbucks from Vietnam inflation hovered around [soldiers firing weapons]
the mid going on high single digits and then higher from there like 7% or more
depending on where you look him and Jimmy Carter stepped in on this guy and [Carter walks into office]
raised the federal rates the Fed rates their massively stamping out the wild
bull economy and putting the brakes on inflation but it didn't happen until
after Carter was actually out of office and Reagan took over inflation [Reagan replaces Carter in office]
eventually had rocketed all the way up to about 14 ish percent on an annualized
basis looking at the monthlies in the 1980-81 period right here
well the crux of dis inflation is that inflation is still positive it's just
becoming well less positive and or like you know how you feel not long after you
say I do and the honeymoon is over and you have to take out the garbage so
under Carter the US inflation rates were attacked in a variety of ways the [Carter in a boxing ring]
biggest of which was to make the cost of renting capital very expensive which
cooled the economy but it took a long time like note how slowly inflation
rates came down and well really it was decades before things fully stabilized
you can see how things slowly disinflation the raging levels that
peaked at post-vietnam era 1314 percent then slid all the way down to a 1 to 3
percent way down there where it's hovered for a
while so that's disinflation still inflation but just less of it deflation [Disinflation deflating]
is when inflation turns negative like prices are actually declining and yes
we've had periods of deflation before albeit very short ones like in the post
mortgage crisis Mallove's in 2009 right here yes yes it's rare but it happens
got it okay class dismissed
Up Next
What is inflation, and if we poke it with a pin, will it pop?