Inflation is the general rise in prices in an economy over time
The ConsumerPrice Index (CPI) measures monthly changes in the prices of a range of goods and services and compares these changes to earlier periods, calculating the rate of inflation
increased costs-
Workers often demand higher wages to compensate for the increase in the cost of living
Suppliers increase the cost of raw materials and components
Utilities such as electricity become more expensive
higher repayments on loans
Interest rates usually rise as the Bank of England uses the base rate as a tool to control inflation making new and variable rate borrowing more expensive
consumers change spending habits-
Deters consumers from making significant purchases and they may reduce demand for usual lower priced wants too e.g cinema tickets
Purchasing on credit becomes more expensive
International competitiveness reduces
UK businesses are less likely to be competitive and lose sales
Imports of overseas competitors are likely to cheaper than domestic goods
Uncertainty -businesses cannot predict prices even in the short term
Spending and contract decisions are likely to be delayed
demand pull inflation is when there is too much demand this happens when there is a increase in disposable income as people buy more and business cant supply goods quicker
cost push inflation- rising costs push up prices it can make profit margins go down if a business doesn't decide to put up their prices