My question is why price of goods and services always increase Is it a law like (entropy always increases) . But in electronics price always decrease.

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    $\begingroup$ "Always" is too strong a word here $\endgroup$
    – Henry
    Jul 20, 2023 at 0:21

1 Answer 1


First, your statement is not factual and contradictory.

  1. Electronics are goods so both statements you make cannot be true.

  2. Price of goods and services do not always increase. There are many goods and periods of time for which prices decline, even outside electronics. For example, price of natural gas in EU between Sep 2022 and Jul 2023 declined as data show.

  3. You maybe meant to ask about average prices/CPI, but average prices also do not always increase. For example, in the US average prices declined rather sharply after 2008, and there were also various other periods of time where prices declined as data show.

However, prices tend to increase over time on average. This is just trend/tendency not an iron economic law as you suggest.

The reason for this trend is that in most countries central banks on purpose pursue policy that leads to inflation, as economists generally believe low inflation, i.e. increase in prices, (inflation in ballpark of 2%) is good for an economy. As a result governments, or to be more specific central banks, consciously pursue monetary policy that tries to engineer low inflation, even in situation where prices would decline if economy would be completely left to its own devices.

However, to engineer inflation you only need to pursue monetary policy that makes prices increase on average. If economy would be completely left to its own devices prices of goods that become more abundant or easier to produce or less in demand, ceteris paribus, would decline, while prices of goods that are becoming more scarce or harder to produce or demanded, would raise. Monetary policy can affect these prices through making money less valuable thus making prices higher than they would be if value of money would not change. However, since policy only tries to target average prices if some goods or services experience price decline that is faster than decline of value of money, the prices of such goods will still decline, although less so than they would in absence of any policy.

Electronics is a category of goods where there is constant rapid innovation. For example, there is empirical tendency of number of transistors on chip of same size to double roughly every two years (e.g. see Moore's law). As a result of this and other advancements, that allow firms to produce more electronics with same/similar resources prices of these declines, and because the progress is so fast the prices tend to decline faster than value of money drops.

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    $\begingroup$ Your answer is mostly very good but I'd like to nit-pick one sentence, "Monetary policy can affect these prices through making money less valuable" - this is like saying "we made it bigger by making it bigger"... Did you actually mean "Monetary policy can affect these prices through making money more/less plentiful"?... $\endgroup$
    – Mick
    Jul 19, 2023 at 5:03
  • $\begingroup$ money becoming more or less valuable is consequence of them being more or less plentiful, I focused on the downstream consequences in that sentence $\endgroup$
    – 1muflon1
    Jul 19, 2023 at 9:58

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