The only thing that will make companies lower prices is if consumers stop complaining about paying more for the things they need and want, and actually start refusing to buy them.
This dynamic, of how consumers adjust their spending habits when prices change, is referred to by economists as the price elasticity of demand. “Obviously, there is still carryover pricing, and I don’t think we’ll do anything different than our normal cycles on pricing in the balance of the year,” PepsiCo Chief Financial Officer Hugh Johnston told analysts, according to an AlphaSense transcript.Jamie Cox, managing partner for Harris Financial Group, said as long as the job market stays strong, as it is now, corporate greed will continue to pay off.
“At some point, people are going to say, all right enough,” said Paul Nolte, senior wealth manager and market strategist at Murphy & Sylvest Wealth Management. “But we just haven’t seen that yet.”Economists use the term “price elasticity of demand” to refer to the way in which consumers adjust their spending habits when prices change.
As Harris Financial’s Cox said, consumers may be complaining about higher prices, but they aren’t yet desperate enough to stop buying.