Sunday, November 25, 2007

Ignorance is Bliss

The other day, I was thinking about how much I should increase the price for products that I sell. I knew that inflation will be 10%+ next year. But I can not really increase my prices by that much because there is competition.

Apparently my competition and the vast majority of the Jordanian population are ignorant of the concept of inflation. Which is a good thing. I mean if every one increased their salaries or prices by 7 or 10% then the inflation numbers would be in the mid teens or lower twenties.

Just to get an idea about how much inflation has hurt the Jordanian economy, if you made 300JDs in 2002, you should make 464 Jds in 2008. This is using the official government numbers. And while many people take the government numbers with a grain of salt, I think that on average they are somewhat accurate. Calculation of inflation does not take a lot of things into account. For example, price of laptops, computers, monitors, printers, fax machines, and other office equipment has seen a sharp decline of more than 40% over the last 5years. Blank CDs, and DVDs, USB flash drives have become dirt cheap. You can now have all the office equipment that you want for a fraction of what you would have paid 6 years. I remember that not every one could afford to have a copy machine in their company or office because the price ran in the mid 1500s. On the food front, meat prices on average have remained somewhat stable during the same period as meat is now imported from places like China and Brazil.

So in conclusion it is a great thing that most people do not adjust their income for inflation, otherwise it would be a great mess.


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