Nearly two thirds of the population think that if inflation is halved, the price of goods will go down

[MereDintofPandiculation]

AIBU to think this means that we need to get a lot better at teaching maths?

Source: Survation poll quoted in Guardian

Hmm.

But in day to day terms, we were so used to cheap food prices in the UK that the very slow creep of prices going up a tiny tiny bit gradually FELT like prices didn't go up - compared to they way things are now.

I have no idea what the rate of inflation was in 2013 for example. Presumably prices did gradually go up, year on year. But food prices didn't feel like they kept rising, because we had cheap food and compared to now the gradient was almost imperceptible.

So yeah technically the price of milk went up by 2p in 2013 (I dunno, just guessing) over the course of the year, but it's so small it doesn't feel like the prices are rising - it essentially feels like prices aren't moving.

If you know how to interpret it and relate it to what you’ve been taught.

the reason Martin Lewis is popular is because he explains it in a way people can understand. That should be taught in schools, it might be a maths lesson people can see a use in. Instead of half the lessons I had that bare no relation to day to day life.

In that case, @MereDintofPandiculation, the second question is very clear.

The first question is less clear, especially as polls are often done by phone so you don't get to read and think about what the question means. I suspect when people hear the phrase "goods and services in general", their first thought will be to consider their biggest expenses - mortgage/rent, utilities, and food. They will be thinking about a possible decrease in interest rates if inflation slows, so lower mortgage and rent costs, and that utility bills have recently dropped. They are probably answering intuitively without listening to what the question is actually asking. I mean it's not a test, it's an opinion poll...

If a 4 pinter of milk cost £1, an inflation rate of 2%, which was about right back then, in a year it would go up to £1.02, which you might not notice. Now food inflation is closer to 20%, so that milk would have gone up by 2p, then 2.2p, then 2.24p over the last 10 years. Say it was £1.20 a year ago. Now it will be £1.44. That's a huge rise. Even if next year it's only 5% the milk will be £1.51 next year.

I used to do these phone surveys where you were finding out what people thought about economy, inflation etc. It was terrifying logging people's answers.

In a period where prices were largely flat, people would confidently say they were sure prices generally were rising by at least 50%.

@keyboardkat You're basically right. If was being a complete pedant (and I am) I'd say increasing something that cost £110 by 5% comes out at £115.5 not £115 because you get 5% of the 10 as well as 5% of the original 100.

Yes, but you don't need to know about the gradients of functions etc to understand that inflation is a measure of how fast something is increasing rather than a measure of an actual increase But that is a gradient of a function. And if we taught maths better people would understand what that meant and be able to transfer it over to practical things.

@keyboardkat Yes, you've got the principle exactly right. What @SOBplus is referring to is that they quote inflation rates on an annualised basis, ie compared with a year ago. But it doesn't go up in clean steps, it's somthing that is continuously happening. But in terms of understanding principles, simplifying it into discrete steps is sensible.

@ginnybag Well said!

If you know how to interpret it and relate it to what you’ve been taught. Which you would if you were taught well.

I agree with ginnybag but I’d also say basic economics is severely lacking. It shows on here too, particularly over the last few years

Thanks all for the reassurance! I realise my interpretation is not perfect but in general it's good to know I'm on the right track.

I kind of based it on the fact that I've rarely known a time when goods REDUCED in price year on year, so on that basis, even if inflation reduces, the current price of the good won't reduce - which I think is the crux of the misunderstanding by many. Unless there is a negative inflation figure I guess, as pp mentioned.

I think maybe this relates to why prices are high - brexit? Gas/electric/fuel/ housing
goods relatig to those cou!d drop.
we are all hoping those drop.

if we all boycott some non essentials maybe it woukd drop as pp said its comanies making huge profits.
competition and the supermarket might restart deals.

I've used the car speed analogy to explain a few times. When someone has something like "they say inflation has gone down but prices are still going up" I ask if a car is travelling at 30mph and slows to 15mph do you think it will go backwards? It works as it links to something people are familiar with.

That's a really good analogy x

UP to a point! Rate of inflation is acceleration not speed. If you nip out into a gap in traffic and floor your accelerator so as not to annoy the guy you nipped out in front of, that's high inflation. Then the speed limit increases, you're still accelerating to come up to the new speed limit, but inflation (acceleraion) is lower. Once you've got your foot very lightly on the accelerator (just enough to overcome road friction etc) and are maintaining constant speed, you're at zero inflation (no acceleration), and when you start to brake and slow down, you're into negative inflation (deceleration)

Countries do their best to invoid negative inflation because people stop buying things because it will be cheaper next month. and the economy goes into decline.

But analogies are never perfect, and a simpler inaccurate analogy may further understand better than a more accurate analogy which is more difficult to get your head around.

@BertieBotts I only said that ‘inflation is the gradient of price’ because someone said this wasn’t about maths. It is a fundamental application of maths.

The gradient of ‘blah’ is just the measure of how ‘blah’ changes (when ‘blah’ is well behaved, as price models are). Inflation measures the change in price.

If I tried to explain it in terms of calculus people would just blank over, so yes, much better to keep it simple but not perfect. Most people don't need to understand the maths but they do need to understand that lower inflation doesn't mean falling prices and I've even come across a senior manager in a bank that thought that😲.
And yes, generally falling falling prices in an economy are a disaster. Why buy today when you can buy Cheaper later and why produce today if you won't be able to sell at a price that reflects today's input costs. Can work for individual products when input costs ar falli g due to increased productivity etc but not when it's across the board.

Prices are governed by supply and demand. If you do boycott and therefore reduce demand, prices will drop. However, if the price drops to a level lower than whatever it cost to produce it, producers will not be able to afford to make it so will (assuming that they can't cut the cost of production) cut the number of goods produced and this will make the price rise again.

Take vegetables. Farmers are under a lot of pressure from supermarkets and their margins are wafer-thin. They can't cut the cost of production because fertiliser manufacturers cannot afford to produce it for less than it cost them to buy gas and turn it into fertiliser. If a farmer cannot get a good price for his vegetables, they will just be left to rot in the fields because it is cheaper than paying someone to pick it and sell it at a loss.

The one commodity that is at the base of all this is gas. We use natural gas to make fertiliser, which helps us produce food. We also use it to generate about 40% of our electricity so if the price of gas spikes, so does the price of electricity.

Firstly when we were using less energy during the pandemic production dropped to match, then as lockdown ended production struggled to catch up, so prices rose. When European countries panicked last year and paid over the odds to make sure that their reserves were full before the winter, without using Russian gas, the price shot up to a high of £640/thm in late August 2022, before dropping once reserves were full and demand therefore stabilised.

For context - just to show how big an increase £640/thm was - before the price started rising in summer 2021 when lockdowns ended, the highest recorded wholesale gas price in history was £110/thm in 2005, it spent most of the 2010s around £75/thm. We had a fairly mild winter so Putin's plan of freezing ourselves into submission didn't work, and Europe's gas reserves were easily replenished. Wholesale gas prices therefore decreased steadily to £100/thm. I'm on an agile electricity tariff and have certainly noticed prices dropping.

So the answer to getting prices down is to not have our energy supplies in the grip of hostile dictatorships. Not just Putin's gas, I'm also referring to Arabian oil - we are very dependant upon crude oil, the tractors, harvesters, and lorries that bring food from the fields to your supermarket all run on diesel so if the price of oil goes up, so does the price of food.

We need to invest in a nuclear power baseload and supplement it with renewables, building interconnectors to balance the peaks and troughs in renewable generation across Europe. Would you believe that while they were considering blackouts in the South East of England due to high demand, they were simultaneously paying Scottish wind farms to switch off? The reason is that we haven't built enough transmission capacity to take the energy to where it is needed.

Until then, fossil fuels are the ones to boycott. Even if the price doesn't go down (because the OPEC cartel will just cut production), you are still saving money and helping the planet in the process.

If I tried to explain it in terms of calculus people would just blank over, so yes, much better to keep it simple but not perfect. I wasn’t suggesting calculus! Just that more accurate analogy is inflation as acceleration rather than inflation as speed.

I’ve just read the AQA GCSE maths syllabus an it is pretty basic. But it covers percentages well, and that’s something that isn't well understood .

AQA A level does cover differentiation and second derivatives, and since we’re told that maths is the most popular A level, hopefully we’re going to see more people understanding inflation.

The ‘analysis’ on the covid threads showed that the majority of MN have a poor understanding of risk and statistics. It follows that there is also a widespread lack of understanding of simple economics

What’s really worrying that even if it is halved it is still 2.5 times higher than the the target.

It’s quite natural for it to halve this year, as one would have expected the peak to have been around March. Shamefully Rishi will take credit for it.

Also what’s frustrating is that the people that are being targeted (mortgage holders) aren’t the ones causing it. Government must tackle inequality first.

I think a lot of people will lose their houses this decade. I will blame the Tories.

Inflation means "the rate by which prices have increased" and does not mean "the rate by which prices are increasing".

A positive inflation rate does not necessarily mean that prices are still increasing, prices could be increasing or falling.

Consider this particular item and its price:
May 22 = £1.00
Dec 22 = £1.03
May 23 = £1.10 inflation is 10%
Dec 23 = £1.08 inflation is 5% (actually 4.85%)
Inflation has halved and the price is falling.

Even more surprising is that inflation can increase when prices are falling:
May 22 = £1.00
Dec 22 = £0.98
May 23 = £1.10 inflation is 10%
Dec 23 = £1.09 inflation is 11% (actually 11.2%)
Inflation has increased yet the price is falling.

@jcyclops the ‘rate of inflation’ depends on the time period over which the measurement is taken. Your last has shifting start points.

Nothing says we need to compute inflation based on 12 month increments. In fact, your example shows why that is a bad idea.

Good models are based on continuous functions to avoid this problem

@poetryandwine Mathematically, I totally agree. The trouble is when "inflation" is being discussed everybody misses out the "annual" prefix. All my examples show "annual inflation" so I have used starting points 12 months earlier. Also prices are not continuous functions as they go up (or down) in steps (ie discontinuities).

I am in no way surprised that understanding of "inflation" is so low. I would estimate over 90% of the population don't have a full understanding. For example, how many people know that CPI is partly based on geometric means, not arithmetic means, and how many people know what geometric means are?