Category: Business and Money > Economics
Asked by: coco2006-ga
List Price: $15.00
02 Sep 2006 00:15 PDT
Expires: 20 Sep 2006 05:42 PDT
Question ID: 761580
IF prices of imported goods increase because of an increase in transport costs whhich takes the form of surcharges or fees imposed by carriers on shippers and then passed on by shippers to the end consumers, will it result in an economy-wide inflation? would this qualify as a cost-push inflation? what could be other conquences at the macroeconomic level of this prices increase?
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From: myoarin-ga on 03 Sep 2006 04:43 PDT
Coco, just a free comment, not an "answer" to your question. I don't think it is that simple. First, the relative volume of imports to total economy will be important. If imports are a small part, their increased costs won't have much effect. Second, if the imports are competing with domestic products (in the US, autos, for example), the producers may have to bear the increased transport costs, reducing their profit margins, in order to maintain sales.
From: jack_of_few_trades-ga on 05 Sep 2006 05:39 PDT
I would say yes, it would lead to inflation. Let's say before the increased shipping costs that it was a toss up whether I would buy a Honda or a Chevy. Then the shippers start charging Honda $5,000 extra per car to get it to the US... The shippers would then offer me $5,000 to buy a Honda. With this $5,000 incentive, Honda could (and would) charge $5,000 more for the car and it would be the exact same deal to me as it would have been before the increased shipping ordeal. Notice that Chevy's did not change in price. So the inflation would be localized to imports... but imports are calculated into the CPI so there would be some effect on inflation, and the size of that effect would be dependent on the quantity of goods being imported.
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