We have all heard our parents or grandparents say that things weren’t as expensive in their days as they are today. So, why do prices go up and why are things more expensive today? The answer is simple: inflation. We come across the term inflation quite frequently in our day-to-day lives but what exactly is inflation and how does it impact the economy and the consumers in general?

Inflation

Inflation is the continuous increase of prices of goods and services over time in an economy. This affects the  purchasing power of money. This means that over time you buy less for the same amount of money. For example, if you were able to buy a litre of milk for Rs 48 five years ago, it may cost you Rs 62 today due to inflation. So, in effect, you would buy a smaller quantity of milk for the same amount of money you paid over five years ago.