Inflation and energy prices.

Subject to this morning’s lesson about why inflation is difficult to forecast.  Volatility in UK energy prices may arise due to obvious external or internal shocks along the supply chain.  This is a bitter pill for the consumer to swallow due to the low PED value of energy.  This adds to the unanticipated increases in inflation and thus the consequences of this ,(a higher opportunity cost for the consumer when deciding about energy use and consumption elsewhere; a shift in of AD and the SRAS).  Basically higher rates of inflation and lower economic activity.  This makes policy decisions at the best of times hard.  However, the article below highlights that there might be an alternative rationale behind these increases and highlights how producers, in an oligopoly market structure, often behave and work against the common good.


With reference to how inflation can be regressive and how this is manifested with lower income groups.

Heating or food.


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