Cause of Inflation

All the causes of inflation are due to the gap in demand and supply of commodities.

Types-

• Cost-Push Effect: When the cost of production of commodities increases such as labor wages, and raw materials. Which is transferred to consumers by making higher prices of commodities.
• Demand-Pull Inflation: This happens when the supply of the commodities could not match the demand in the market. This could be understood by, when you want to buy a cricket match ticket from a dealer there were 3 tickets but if the number of customers is 7 then the dealer will increase the price of the ticket to get more profit.
• Built-in Inflation: This type of inflation occurs when the workforce starts demanding higher wages which leads to businesses raising the prices of their goods/services in order to keep up with their cost and expenses. This scenario leads to built-in inflation.

Causes-

• Money Supply: This increased money supply will increase the purchasing power of the customer then they will bid for a few commodities in large amounts, which leads to demand-pull inflation. Even some governments used to print more money to get more votes from the public but this ultimately hampers the economy of the country.
• Policies and Regulations: Giving free commodities to the public will increase in demand for that commodity. Giving people something for free, then the price of that particular thing will become 0, but to get the production cost of this free thing, the government will make other things expensive.
• Wages Inflation: When the money in the hand of the people would increase resulting in their purchasing power increasing hence there could be a shortage of commodities due to more purchasers. Also when unemployment is low there is a low chance of replacing the employers thus increasing their wages and leading to wage inflation. 

Have you ever thought that what you used to buy in some rupees earlier, over time you pay more money for the same thing? For example, earlier you used to buy 1 packet of biscuits for 20 rupees now you pay 25 rupees for the same. But why the price of this biscuit has increased, the quality seems to be the same and if you understand this in another way, What happened to the money that earlier it can buy biscuits for 20 but now it will be able to buy the same biscuit for 25. So to know the reason for this, we have to understand inflation. 

Inflation is the prices of goods increased in the economy or how much expensive commodities have become over a certain period. It is a familiar word in economics. This inflation has put many countries in the instability stage. In 1974 United States President declared Inflation a Public Enemy.