Starbucks, McDonald's, Amazon - all protect huge profits by making customers pay more There are many shortages affecting consumers and businesses around the world as industry experts warn that the supply chain crisis prompted by the coronavirus pandemic could last for many more months and even up to two years. Long standing structural issues in labour markets together with labour shortages, partly caused by the pandemic, have driven up wage costs bringing inflationary pressures in world economies not seen for some time. While most of the price increases now affecting the US and global economies have been the result of global supply chain problems, this doesn't explain why big and hugely profitable corporations are passing these cost increases on to their customers in the form of higher prices. They don't need to do so. With corporate profits at near record levels, they could easily absorb the cost increases. They're raising prices because they can - and they can because they don't face meaningful competition. A National Economic Council report in December suggested: Businesses that face meaningful competition can't do that, because they would lose business to a competitor that didn't put prices up but accepted more normal profit levels. Starbucks is raising its prices to consumers, blaming the rising costs of supplies. But Starbucks is so profitable it could easily absorb these costs - it just reported a 31% increase in yearly profits. Why didn't it just offset the cost increases against the huge profits, rather than just passing them on to the consumer in higher prices? The same appears to be true for McDonald's and Amazon, whose revenues have soared but who are nonetheless raising prices. These and many other companies continue to rake in record profits but also continue raising prices. All are able to pass cost increases on to consumers in the form of higher prices because they face so little competition. Meat prices are soaring because the four giant meat processing corporations that dominate the industry are using their market power to extract bigger and bigger profit margins for themselves, according to a recent report. The report tied higher inflation directly to monopoly power. Showing the connections between corporate power and inflation is not business-bashing. Society expects powerful corporations to behave responsibly. (Source: Adapted from Reich R, The Guardian, February 20 2022) Question A21 Using a short run AD /AS diagram illustrate and explain the type of inflation described in the first paragraph of the article. Question A22 Consider the characteristics of monopoly and or oligopoly and briefly explain why the corporations in the article might not face meaningful competition