Inflation refers to the increase in prices of any goods and services, whether essential such as food, clothing, housing rent, property (apartments, land) prices, transport (cabs, buses, trains), or non-essential such as cosmetics, jewellery, cars, etc.
Let’s consider a real-life scenario to understand inflation. Suppose the public transport (buses, trains) of a city stops for a month because the drivers are protesting demanding an increase in their salaries. What will happen? A lot of people ( let’s assume around 60% people of a city) are dependent on public transport and when they aren’t operational, they think of other options to go to their workplaces right? And it is cabs and autos, right?
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The opposite of inflation is deflation. It happens when the price of a commodity falls, which occurs rarely.
Now you know that inflation has a direct impact on the economy of a country.
To learn about Economy, click here.
Power Words :
- Cascading effect
- Interest rate
- Price index