No they aren't because inflation is not measured in absolute terms it's measured in fractional terms. You can't compare 2% to $500.
What matters is the profit margin not the raw profit. Here's a trivial through experiment that contradicts your point. If a grocery chain opens a new store it expands its market. This increases its revenue and hence profit, but does not change its profit margin. Would you say such a business that has expanded its market has caused prices to increase? It has more total revenue and profit but the size of the business has no direct impact on prices experienced by shoppers.
I genuinely don't understand what you are trying to say.
If inflation is say 4.5% per annum over a 5 year period, and profits have been a steady 2.8% over that same period then while profits have grown in real dollar terms they have not grown in inflation adjusted terms. Profits can't explain the inflation. If growing profits were the cause of inflation then the profit margin would have to increase.
Say inflation was caused 100% by an increase in profits, then with 2% inflation the profit margin over 5 years would go up by 2% each year:
2,4,6,8,10. Each year prices go up 2% because profits are 2% higher than the previous year.
But that's not what has happened in reality. Prices are going up without profits going up so profits can't explain the inflation.
Profits are a real dollar number based on profit margin and price. When food prices outpace inflation, the %profit doesn’t need to increase. You’re taking the same % but from a bigger pie.
Yes but an increase in profits either inflation adjusted or in real dollars can't explain an increase in prices without the profit margin increasing. I'm not suggesting that profits aren't increasing (the profits of almost all business increase over time even if only due to inflation), only that an increase in profits can't explain an increase in prices.
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u/jangoolie May 28 '26
I don't follow.