this post was submitted on 18 Jun 2023
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Isn't this $5 extra you're overcharging the consumer, because inflation would affect the supply chain as well. 25% would raise cost of production to $100, keep your profit at $20 and cost to consumer will rise to $120.
Of course, demand on a widget might rise or fall during inflation too.
In real terms the $25 post inflation is the same value as the $20 was pre inflation.
Look at it another way. You are a worker bee who makes $20 an hour. If inflation is 25%, your employer should give you a raise to $25 an hour to maintain your compensation at the same level. If they do not, they have effectively given you a pay cut.