Legal Definitions - inflation

Definition: Inflation is a situation where the general prices of goods and services increase, while the value of money decreases. This means that you will need more money to buy the same things you used to buy before. There are two types of inflation:

• Cost-push inflation: This type of inflation happens when the cost of producing goods and services increases. For example, if the cost of raw materials used to make a product increases, the manufacturer may increase the price of the product to maintain their profit margin.
• Demand-pull inflation: This type of inflation happens when there is more demand for goods and services than there is supply. For example, if there is a shortage of a particular product, people may be willing to pay more to get it, which can lead to an increase in its price.

Inflation can have a negative impact on the economy and people's lives. It can reduce the purchasing power of money, increase the cost of living, and make it harder for people to save money.

Examples:

• When the price of gasoline increases, the cost of transportation also increases. This can lead to an increase in the prices of goods and services that require transportation, such as food and clothing.
• If there is a shortage of housing in a particular area, landlords may increase the rent for their properties. This can lead to an increase in the cost of living for people who rent homes.

These examples illustrate how inflation can affect the prices of goods and services that people need and use every day. When the prices of these things increase, people may have to spend more money to maintain their standard of living.