Knowledge - 'Inflation'

Inflation

INFLATION AND DEFLATION

Inflation simply means increase in the price of goods and services, and deflation means fall in the price of goods and services.

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ation takes places when the demand is high for a particular good or service, here the supplier has in upper hand as his goods are in demand, he can charge higher prices for the same good and the consumers will pay the high price. Why ? Because they want more of those goods.(demand being high) Manufacturer/supplier benefits from inflation as they are able to earn more profits at higher prices.

Where as in deflation,the demand is low for the goods and services, so in order to make the customer buying the goods, the supplier reduces the price. Here customer gets an upper hand as he benefits from the relatively cheaper goods.

So extreme of anything (be it inflation or deflation) is bad for the country's economy and the government needs to strike a balance between the 2 sides so that it's beneficial for all.

Added: 5 years ago