Fair Pricing or Price Gouging? Pre-Covid and Post-Covid Pricing.

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Are the high prices we are experiencing the result of greed or a true disaster or misfortune? As one of the largest countries and wealthiest we have a responsibility to be aware of the transactions that are taking place in our country and our world. There are all kinds of transactions. Honest and dishonest. Internal and international. Which ones apply to us? Are we only responsible for transactions we engage in or should we take into account the transaction others get involved in? Does their actions or transaction affect my life or are we living in an independent unit immured to what everyone else does? As a responsible citizen of this country and an intelligent consumer and a consumer advocate, I feel we must ask all the questions mentioned above, further down this article and some that I am sure I failed to bring up.

What is a Transaction? Every time there is an exchange of good or services for money, that is called a transaction. Such transactions repeated multiple times per day everyday contribute to a healthy economy. The exchange of such good or services for money typically involves a percentage of profit. This profit is usually repeated at a larger scale for more profit.

A pair of jeans made for 10 dollars, turned around sold for 18 dollars will involve a certain level of capital to obtain or develop the jeans (10 dollars), a certain level of capital to market, transport, display and sell the jeans which is part of the operating expense (4 dollars) and finally a certain level of profit margin sometime called a margin 4 dollars. Income tax is usually paid on this amount. Do some companies incorporate the tax they have to pay into their pricing so they can assure their margin? It is possible to add another 5-10% to the price, let us say total of 19 dollars total sale witch brings margin up to 5 dollars total.

In this example 4 dollars is 22% percent of 18 dollars. Depending on the business, the product, or the service they provide range a 5% a very low profit margin up to 35% margin a healthy profit. The low profit margin businesses at times usually have a bonus added after a period attached to it as an incentive for good or continuous performance. A car salesperson may get 3-5% commission but a total sale within a period of 3-12 months may bring an additional bonus or the commission rate gets to a higher percentage such as 8-13%. Every business and manufacture functions differently so the rules vary for everyone to a degree.

Such mark up on prices when doing business as a Retailer/Reseller, wholesaler, Distributor, or manufacturer can be considered a fair price increase. I say can because notice the number of middlemen who are playing the part of being “In Business”. In this example there are 4 bodies that mark up the price anywhere from 5-35% increase. If every one of these selects a 35% mark up in the price, then take a wild guess who will pay the final price? Yes,”You” the consumer. Imagine now if there were more middlemen involved. Such as import tax, and fees. This typically adds an additional 2 more bodies to this structure. If there is an exclusive sales or distributor involved well, take another guess. The middlemen just increased again by 2 more adding a total of 8 bodies you the consumer will have to pay. Let’s not forget sales tax to our government you will also have to pay. So, the 10-dollar jeans now has become anywhere from 55 dollars (assuming 5% per every 8 bodies) to 170 dollars (22% per every 8 bodies) for the jeans. Do you see how quickly the cost adds up to 10, 15 or even 20 times the actual cost of the product before you get your hands on it? Believe it or not this is fair market pricing, and the businesses make these rules. Since you are not forced to buy it and you pay for it in cash or even use a credit card, you simply support that standard of practice. Congratulations. We just learned two valuable lessons. One is called inflation, and two, we all are responsible for the inflation, but often we turn with anger to our government for what we have actively agreed on our own free will as a fair transaction. Keep in mind we could have been more selective and ask the question “did I really need the product?” or “did I just wanted the product?” Very few of us ask these questions as an Intelligent Buyer or Responsible Consumer. To stay objective and focused with this topic, let’s not focus on Jeans, a required article of clothing just so we can function in our society and focus more on our behavior and how that contributes to inflation. If its easier, replace the word Jeans with a gold watch.

My favorite topic, Price gouging is the act of increasing the prices of goods and services and even commodities to such a high level that is considered beyond reasonable or fair pricing. I am referring to prices being increased to 45%, 60%, 100% or even over 200%. Often this happens when there is a natural disaster, but it is becoming more commonly practiced as a standard of practice but displayed as a necessity due to a natural disaster. Covid can be argued either way. The most obvious example are the current high prices for products are today’s pricing in 2023. On an average we are out of the covid crises anywhere from 1 to 2 years out of covid and yet high prices are still being imposed on people who’s income not only may have not gone up by 45%, 60%, 100% or even over 200% but some may have even lost their jobs. A perfect demonstration of human greed in times of need. This is when the true colors of business are coming out and must be recognized by consumers, “you” to recognize and stop supporting business who continue with post covid pricing. Failure to return to pre-Covid pricing may not be realistic in some cases and every case must be evaluated on its own. This truly depends on the consumer, the intelligent buyers “you”. If a beef burrito, toilet paper and milk and used or new car is still a post covid pricing, then more intelligent questions must be asked and the consumers must consider their spending habits as a responsible citizen and an intelligent consumer by putting a stop to an unnecessary inflation we have self-imposed on ourselves. Remember there were two parties in this. The business owners and the consumers. We the consumer/buyer have control over both. They can ask for whatever amount, but we do not have to buy it unless we really need it.

Source: Cambridge Dictionary, Merriam Dictionary, Wiki.