A-Z Popular Blog Economics Search »
Economics
 Advertisements
Related Guides

5 Types of Shrinkflation

 , updated on
Shrinkflation is a product or service that gets more expensive with changes that reduce its quality or make it physically smaller. This can be considered a type of inflation as value for money has been reduced. This has several unique causes and variations:

Sticky Prices

Customary prices that make it difficult for producers to pass on the costs of inflation to customers. For example, in Japan drinks from vending machines commonly cost 150 yen. As the nation increased its value added taxes in 2014, beverage companies found it difficult to pass on these costs as customers perceived any price above 150 yen as overpriced.

Commodities

Products and services in highly price competitive commodity industries may find it easier to cut quality than to raise prices. For example, an airline that makes seats smaller as opposed to raising prices. This occurs when customers almost always choose the lowest price without regard to quality for a particular product or service.

Affordability

Offering things that people can afford when input costs have risen. For example, a city that has experienced a property boom may see developers offering smaller and smaller houses and apartments.

Dematerialization

Design improvements and innovation tend to make things smaller with time. For example, a flashlight that is just as bright and useful as historical models that has become smaller and lighter. Such a device could potentially be more expensive than previous designs despite using less materials.

Revenue & Costs

Employees at firms commonly need to justify their salary by increasing revenue or decreasing costs. One easy way to do this is to cut the size of a product in a way that customers may not notice. For example, a shampoo with redesigned packaging that makes it difficult to see that its volume has been reduced. This has potential to both increase revenue and decrease costs.

Notes

Shrinkflation is an example of why inflation statistics can be quite complex to calculate. In many cases, inflation statistics try to account for quality changes. It is commonly argued that inflation is overestimated due to massive increases in the quality of technology. For example, a modern smart phone could easily be sold for millions of dollars in the 1940s as it would be the most sophisticated computer on the planet. Such large increases in quality typically apply to technology but not to essentials such as food and housing.
Overview: Shrinkflation
Type
Definition
A product or service that gets more expensive with changes that reduce its quality or make it physically smaller.
Related Concepts
Next: Sticky Prices

Economic Problems

This is the complete list of articles we have written about economic problems.
Bubbles
Capital Flight
Deflation
Economic Issues
Economic Outcomes
Economic Problems
Excess Burden
Hyperinflation
Inflation
Supply Shock
Trade War
Unemployment
Zombie Company
If you enjoyed this page, please consider bookmarking Simplicable.
 

Economic Problems

Several types of severe economic problems.

Inflation vs Hyperinflation

The difference between inflation and hyperinflation.

Fiscal Dominance

An overview of fiscal dominance.

Inflation vs Deflation

The difference between inflation and deflation.

Protectionism vs Free Trade

The difference between protectionism and free trade.

Currency War

The definition of currency war with examples.

Speculative Bubbles

The common types of speculative bubble.

Scarcity

A complete overview of scarcity with examples.

Capital Flight

The definition of capital flight with examples.

Economic Issues

A list of common economic issues.

Economics

Everyday examples of economics.

Economics Definition

The definition of economics with examples.

Comparative Advantage Examples

The definition of comparative advantage with examples.

Supply

The definition of supply with examples.

Supply And Demand

An overview of supply and demand with examples.

Demand Examples

Common examples of demand in economics.

Quality Bias

The definition of quality bias with examples.

Value

The five common definitions of value with an example.

Scale

An overview of economic scale with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map