Dropping pound versus laws of supply and demand

RHemmings

As we all know, the pound has dropped massively. In some cases, I've seen imported goods increasing by 50%. I've been on forums where retailers have been talking about these "new prices". And there seems to be an assumption that people will just go on buying goods at much, much, higher prices.

Particularly given the economic situation we're in, I can't see business just continuing on as normal in the face of such huge increases. I believe that demand will fall considerably, and retailers will go to the wall. But the retailers I've tried to discuss this with won't respond to queries about what will happen to demand.

Just curious to know whether people have noticed huge price rises for imported goods, and what they think will happen to the market for these goods?

chalkysoil

imported food has risen already, guess there weren't big stocks of it hanging around in warehouses. Maybe the euro etc will drop against the £?

RHemmings

chalkysoil wrote: »

imported food has risen already, guess there weren't big stocks of it hanging around in warehouses. Maybe the euro etc will drop against the £?

Hmmm..... Food is an essential, you can't not eat. But things like cameras, musical instruments, other things. They aren't essential and people might just decide not to buy.

chalkysoil

I wonder what percentage of people will buy x at a certain price and how it tails off as the price rises? As unemployment increases there is bound to be less buying anyway. When petrol got dearer (from 85p to 1.25 approx) I think I heard (from the tanker drivers) that there was a 20% drop in sales.

RHemmings

chalkysoil wrote: »

I wonder what percentage of people will buy x at a certain price and how it tails off as the price rises? As unemployment increases there is bound to be less buying anyway. When petrol got dearer (from 85p to 1.25 approx) I think I heard (from the tanker drivers) that there was a 20% drop in sales.

Good analogy with the petrol. A lot of shops are hurting anyhow, and sizeable drops in purchases could send some to the wall.

The wikipedia page on supply and demand discusses demand curves, but I suspect there are more interesting descriptions around somewhere.

http://en.wikipedia.org/wiki/Supply_and_demand

Steve_xx

I appreciate that the fall in value of sterling will make imports more expensive and that retailers will have to charge more than they did for goods. However, at least some of that additional cost should be offset by the falling cost of fuel which results in lower delivery costs to retailers. The government reckons that inflation is falling and that we could have deflation. However, looking around the shops, and particularly at staple foods, I cannot see that prices are falling. Quite the reverse, I can actually see prices rising very sharply.

Mistymaid

Just out of interest, I saw a piece in The Guardian a couple of weeks ago saying that food inflation is now at 12.5%. The CPI figures that the government churn out are for all the stuff in the basket.

stephen77

Depends where the food is coming from.
The pro of this is that home grown british food will not be more expesnive than european. so hopefully helps british farmers etc