Inflation vs Price Elasticity

Inflation makes things more expensive, and no one likes that. But in some cases,

people keep buying even as prices rise, with or without inflation. Take the iPhone.

Prices keep rising, yet demand barely changes. Compare that to products like Peloton,

where prices went up and demand fell quickly because customers had plenty of alternatives.

The difference comes down to price elasticity. That is how willing customers are to walk away when prices

rise. When demand is less sensitive to price, people keep buying even as prices increase.

This usually happens when substitutes are limited, switching costs are high,

or the product is deeply embedded in daily life. Inflation helps explain why prices