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Does inflation increase if people spend less or more?

User Kyle Grage
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2 Answers

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We were just learning about this in my class today so I think it is more
User Xahed Kamal
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Answer:

Inflation generally increase when people have a higher demand for a certain product. Remember, there is such thing as a "supply vs. demand", which would help determine the pricing of the product.

Generally, as a rule of thumb, the higher the price, the lower the amount of purchaser, as consumers want lower prices (however, this is not the case all the time, for consumers may want to purchase a higher-quality material instead, which would, of course, cost more). The lower the price, the higher amount of purchaser (especially if the item being sold is extremely popular).

When this is coupled with an extremely high demand that makes it so that the demand is more than the supply, inflation occurs, which is the rising of the price because of the logistics needed to create using materials and transport the finished product to consumers.

Of course, there are more than just supply and demand, such as the strength of the country's currency (as you will hear the term of "strength of the dollar" against another country's currency in real life), how politics would effect inflations, etc. etc.

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User Gilead
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