<p>Real prices are fundamentally determined by supply, demand, and the market structure.</p>

<p>As you say, it cannot be a supply effect, as the supply of, say, coconuts, appears to be constant to you.</p>

<p>It could be an increase in nominal prices at the rate of inflation. In that case, prices for some goods just become more expensive because the relative supply of money is growing, <em>real prices</em> do not change. </p>

<p>Alternatively, you could be facing more international demand for your goods. If international demand for coconuts goes up, exports and local demand have to "<em>fight</em>" for the supply of coconuts, leading to an increase in prices.</p>

CC BY-SA 3.0
2015-04-10T22:27:41.363Z
2015-04-10T22:27:41.363Z
FooBar
<p>To make it simple: let say your coconuts production is constant over time but the population is growing. It's a constant supply but an increasing demand, resulting in an increase of coconuts price.</p>

<p>If the prices were constant, the demand would be higher and thus not fully satisfied.</p>

CC BY-SA 3.0
2015-04-10T23:43:39.100Z
2015-04-10T23:43:39.100Z
Yann
<p>For example, in my country, the price of coconuts steadily rises, despite the fact that we still have plenty of coconuts. The same with vegetables.</p>

<p>Is this caused primarily by an increase in the cost of labor as a factor input, or are other forces at play?</p>

<price-theory><commodities><cost><living-cost><asset-prices>
Why do prices of consumer products seem to rise independent of their supply?
HANZEL HARRY FERNANDEZ
# Why do prices of consumer products seem to rise independent of their supply?

(Asked by: username_0 on 2015-04-10)

For example, in my country, the price of coconuts steadily rises, despite the fact that we still have plenty of coconuts. The same with vegetables.

Is this caused primarily by an increase in the cost of labor as a factor input, or are other forces at play?

**Tags:** price-theory, commodities, cost, living-cost, asset-prices

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## 2 answers

### Answer by username_1 on 2015-04-10. Score: 1 | Accepted answer

Real prices are fundamentally determined by supply, demand, and the market structure.

As you say, it cannot be a supply effect, as the supply of, say, coconuts, appears to be constant to you.

It could be an increase in nominal prices at the rate of inflation. In that case, prices for some goods just become more expensive because the relative supply of money is growing, *real prices* do not change.

Alternatively, you could be facing more international demand for your goods. If international demand for coconuts goes up, exports and local demand have to "*fight*" for the supply of coconuts, leading to an increase in prices.


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### Answer by username_2 on 2015-04-10. Score: 2

To make it simple: let say your coconuts production is constant over time but the population is growing. It's a constant supply but an increasing demand, resulting in an increase of coconuts price.

If the prices were constant, the demand would be higher and thus not fully satisfied.


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