Profiteering? No, Common Business Sense
But it does contribute to inflation.
Try this out. You own a business and your costs increase, say by ten percent. You want to continue to make the same profit, so you raise your price by ten percent. But what if you could raise the price still further, another five percent and not lose any business. Should you do it? Of course, you have been charging too little.
Now other things may be involved. If you are competing with others who make and sell the same product what is to keep them from offering a lower price and gaining market share. Even in semi-monopoly conditions (rather common today in many industries) there is still some level of competition.
And if they don’t. If instead they match your higher price. Now you both make a higher profit. You or they might have played it differently, try to increase market share at a lower price. But there are risks. You may not be able to increase production in the short run. Raw materials may be limited. There will be a lag before the consumer makes the price comparisons you are hoping they will make. Brand loyalty may be strong in the industry. People won’t change just for a few additional bucks and they may feel your lower price indicates an inferior product.
The above scenario is complex. Suppliers have contracts with sellers. Transportation logistics may not allow additional on-time shipments. And any increase in production that costs new hires and plant expansion will involves fixed costs that you will be stuck with if demand falls or your competitor matches your lower price.
Better to rachet up your price and wait to see what happens.
Some of what will happen is indeed unpredictable, but increased Inflation as a result is not.
This is what a capitalist market looks like. No bad guys. Just responsible people taking care of business. And their decisions partly explain inflation.