What is shrinkflation?
Shrinkflation is a phenomenon that occurs when the size of a product is reduced while the price remains unchanged. It is an economic term used to describe situations where manufacturers reduce the size, quantity, or quality of products while maintaining the same price to boost their profit margins. While on the surface it may appear as though consumers are getting a better deal than usual, in reality, they are being taken advantage of by paying for something that costs less for companies to produce.
How does shrinkflation affect the economy?
Shrinkflation is an economic phenomenon wherein prices remain the same while the sizes of products shrink. This can have devastating effects on an economy, as it lowers consumer spending power, reduces the availability of goods, and distorts pricing signals. Additionally, shrinkflation raises questions about the cost-effectiveness of production and consumption. Businesses are discouraged from investing due to the uncertainties surrounding product quality and quantity, resulting in a decrease in overall economic growth and development.
Shrinkflation vs Inflation
The difference between inflation and shrinkflation is subtle yet important. Inflation is the overall general rise in prices as a result of economic variables, while shrinkflation refers to when goods and services lose value but the cost remains the same or even increases. Shrinkflation occurs due to manufacturers reducing product sizes while keeping the cost constant or increasing it slightly with inflation. This practice affects us all and can deal a heavy blow to consumers who don’t have the right information or access to competitive goods.