Its funny how the market adjusts instantly when prices go up
Finally, a benefit of being way below the poverty line in my late teens/early 20s. Couldn’t afford to drive so petrol prices don’t matter to me!
In economics, nominal rigidity, also referred to as price stickiness or wage stickiness, describes a situation in which a nominal price is slow to adjust or resistant to change.
There is a strong incentive to raise prices when the cost of inputs goes up (because otherwise you operate at a loss). But a weak incentive to lower prices when the cost of inputs goes down (because gasoline is an inelastic good).
If it makes you feel any better, wages are the ur-example of nominal rigidity for a reason. Delivering a pay cut to employees is practically impossible. People hate that shit and will immediately start sabotaging business productivity in response, then leave at the first lukewarm opportunity, resulting in a net-negative long term return for the employer.
The optimal response to price stickiness is to jettison the source of the cost. In the case of labor, this means layoffs (people get angry at a wage cut but feel comparatively relieves when they end up with more work at the same pay scale because their coworkers got fired). In the case of vehicles, this typically means transitioning to EVs or adopting public transit.
To add: inflation is an automatic yearly pay cut. Your wage will grow much faster by switching jobs than it will by raises.
At least it fall. When is the last time you see a restaurant decrease the price after they increase it when in some random crisis period?
I’m a hell of a lot more sympathetic to a privately owned local restaurant employing people in my neighborhood and using that profit in my local economy than I am an oil company, though
