What is Inflation?
Most of us live in a world where we have to buy and sell products and services. For these transactions, we have to pay a price.
A loaf of bread costs $4.50.
A cup of masala chai costs Rs. 50.
A property in London costs 1,500,000 GBP.
Well, you get the idea.
Prices of things vary with their demand and supply, which varies with time. The rate of increase in prices over a period of time (a month or a year) is in general called inflation.
More specifically, in economic terms, inflation is measured as the rate of increase in prices of a select set of products and services within a specific economic zone - eg. a country. This set is typically selected as a representative set of products and services that an average person in that population uses. Eg. Food, Gasoline, Natural gas, Electricity, Apparel, Housing cost, Medical services etc.
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