TYPES OF INFLATION AND SHARES| CUET ECONOMICS| L-6

Inflation is an economic indicator that indicates the rate of rising prices of goods and services in the economy. Ultimately it shows the decrease in the buying power of the rupee. It is measured as a percentage.

This quantitative economic measures the rate of change in prices of selected goods and services over a period of time. Inflation indicates how much the average price has changed for the selected basket of goods and services. It is expressed as a percentage. Increase in inflation indicates a decrease in the purchasing power of the economy.

This percentage indicates the increase or decrease from the previous period. Inflation can be a cause of concern as the value of money keeps decreasing as inflation rises. 

What are the 3 Types of Inflation?

The three types of Inflation are Demand-Pull, Cost-Push and Built-in inflation.

Demand-pull Inflation: It occurs when the demand for goods or services is higher when compared to the production capacity. The difference between demand and supply (shortage) result in price appreciation.

Cost-push Inflation: It occurs when the cost of production increases. Increase in prices of the inputs (labour, raw materials, etc.) increases the price of the product. 

Built-in Inflation: Expectation of future inflations results in Built-in Inflation. A rise in prices results in higher wages to afford the increased cost of living. Therefore, high wages result in increased cost of production, which in turn has an impact on product pricing. The circle hence continues.