Question

Hi my name is Elena. I’m a general contractor. I took over the family business when my Dad retired. This inflation has made my job a lot harder. The price of materials keeps going up and up. My employees and sub-contractors keep costing me more and more. I have to overbid on contracts so that I do not lose money. I win some contracts but lose out on others. On the other side with inflation being so high people are building now instead of investing their money, so my company has several big contracts that we are working on.

How is your individual affected by unexpected inflation?

Answer 1

Unexpected inflation would raise cost of production even higher. The cost to be paid to employees would be higher as opposed to what was before. Since it was unexpected, such rise in cost is not incorporated in the pricing structure of the old contracts we have taken up. This means the price quotation which would have helped us make profit earlier will not be able to do so now on the ongoing jobs.
Hence there is a loss in the revenue. Further, the anticipated demand would also fall as less people will be willing to go forward with construction due to rising prices.