High Inflation Ruined Your Price Radar. Here's How to Fix It.
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Here's your money briefing for Tuesday, April 12th. I'm J.R. Whelan for The Wall Street Journal. We've been talking a lot on the show about high inflation and how it can seem like prices are up every time you go to the store. But inflation at levels that haven't been seen in decades can also have a more subtle effect. It makes it hard to gauge what's a good price for something and what isn't.
When prices are so high and everything feels expensive, it's harder for us to recalibrate and get a sense of what is a good deal and what is not in our budget or, you know, too high to pay.
On today's show, we'll talk with our personal finance reporter, Julia Carpenter, about the psychology behind inflation and how changing the way you think about prices can make you a smarter shopper. That's after the break.
High inflation isn't expected to light up anytime soon, and the relatively low prices we saw for food and gas a year ago could be a distant memory. So amid persistently higher prices, how can shoppers determine if they're actually getting a good deal? WSJ personal finance reporter Julia Carpenter has been looking into how high inflation changes our perceptions of prices and what we can do about it, and she joins us now to discuss. Hey, Julia, thanks for being with us.
Thank you for having me.
So Julia, inflation rising at the pace we've seen in the past several months is new to a lot of people, right?
When I talk to people about this, they're talking about going to the grocery store, going to the gas pump, really noticing an enormous jump in prices, not just the usual fluctuation, not just the summer price creep, which we are typically familiar with. Prices increase a bit in the summer because more people are traveling. There's vacation costs. People are noticing some of the things that they normally spend are a little bit pricier, again, mostly because of transportation costs.
What is the episode about and why does high inflation matter to shoppers?
So we're familiar with that, and we're familiar maybe with just normal price fluctuations in different items. We've talked a lot about supply and demand and the supply crunch we've seen, but this is different. This is multiple dollars difference on items that people consider key to their budgets.
Okay, so you've been speaking with experts about how people think about prices, especially in a time of high inflation. What do they say about factors that typically go into how we think about prices and what a quote good price is?
Research shows our understanding of prices and affordability is disproportionately affected by those key items that make up our budgets. So if I'm somebody who buys chicken breast every single week, I sort of notice when the price of chicken breast goes up 25%. And I think in my head, wow, everything is going up 25%. If you don't buy chicken breast, you have some other item that makes up that mental benchmark that we're kind of equating here. So it's interesting to see that we notice this on an individual level and then sort of extrapolate it to the larger economy.
So a lot of this is in our heads?
It's not that it's in our heads. It's actually happening. I mean, look at your grocery store receipt and you'll see. But it's much more individualized than maybe we think, you know? For example, I don't drive, but my sister does. So her understanding of gas prices is different than mine. My understanding of gas prices is, you know, I notice it at the pump when I drive by it, and I've noticed it in Ubers when I pay for it. But she notices it on a daily level.
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