inflation

• Inflation is the general rise in prices in an economy over time
• • The Consumer Price 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