What are the causes of inflation?
Inflation is when the prices of product or services rise over time and inflation rates often fluctuates depending on the countries economic situation including those listed below.
Cost-push inflation
When production costs increase this is passed on to consumers through the higher prices for the finished product.
The production costs include raw materials as well as wages for staff. When wages rise as they have done this April, businesses will have to make up for this added cost by rising their prices.
Demand pull inflation
When there is a strong consumer demand for a product or service then the prices could rise to compensate for the price of the added supplies as they start to decrease when the demand increases.
Built-in-Inflation
With the expectation of rising costs in the future workers begin asking for higher wages in preparation and in order to maintain their standard of living. This increases the disposable income for workers which in turn increase demand for products and services.
