In the following articles I will present the elaboration of an alternative price inflation theory. It is based on two simple observations:
• the prices of goods and services only rise only because their sellers raise these prices;
• those sellers have only two reasons for increasing those prices: to pass on an increase in the cost of their products to their customers and/or to try to increase their profit margin.
NB. I use the word try deliberately because those sellers have no direct influence on their profit margin. If they raise their prices, this could lead to such a decrease of their sales volumes that they will achieve the opposite, which is a decrease in their profit margin.
The consequence of these two observations is that if you want to explain why price inflation (hereinafter: inflation) occurs, you will have to determine how the development of that cost price comes about, and under what circumstances those sellers can successfully increase their profit margin.
In the first article, The ingredients of inflation, I will map out what these prices in the aggregate are made up of. This information forms the basis for the elaboration of the alternative price inflation theory. This elaboration will be presented in a number of articles, which will subsequently be added to this website in the near future.