WHAT CAUSES INFLATION?

There’s a positive and negative side to this intro. Positive because wages are increasing and negative because the inflation rate is also increasing. This might not be obvious in Australia as the one that’s been impacted the most are the Asian countries.

What causes Inflation?

To describe, inflation is a general increase in prices and fall in the purchasing value of money. Inflation happens when the main products run out stocks but still high on demand. Let’s say and the most relevant sample to use is the oil. The Middle East countries are the main supplier of oil. Almost all countries depend on their supply which is bought from them, transported in the country and then it will be distributed and sold by the gas stations you see in every corner of a highway or city.

When a supply of oil suddenly decreases (the factors can be many) but the demand is still increasing, the balance between the supply and demand may be broken, thus, allowing the oil to increase in market price which is a trend that every individual will experience. It’s a domino effect that can’t be stopped.

Another sample is a supply for sugar. If a region that’s the main producer of sugar in your country was hit by a storm and all its crops or agriculture is devastated, it will have a sudden stop in supplying and a need to balance the supply in the country will have to be done. The problem is the demand is always constant and not unless the reserve supply is enough to fulfill the demand, then no increase in price shall be made. But if there wasn’t enough and people are in need of it, a sudden balloon of increase price will surely happen.

Economists are the one expert in knowing if the inflation is just a hyped used by the dirty businessmen to take advantage of the situations or it’s really happening. Government agencies take control of this market prices and so any price increase not dictated by them comes with a punishment and crime.

There are many factors as to why the supply increases. Some because of unexpected events, an increase in petroleum prices, and some caused by hoarders wanting to take advantage of gullible consumers.

And we, as consumers are responsible to know if we are being given the right price. So consume and pay wisely.

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