Price Inflation

When we talk about inflation, we usually refer to the increase in the price of commodities. This is called "Price Inflation". But what causes the price to increase?

Let us have an example. Suppose today, we have only 100 rupees in hand. We can spend only for 100 rupees maximum. But if we have 1000 rupees, we can spend that entire 1000 rupees. Hence our purchasing power has increased.

On the other hand, in case we don't have enough options to spend, i.e., if the consumables are less in quantity compared to our purchasing capacity, demand would start increasing for the consumables, for people would be ready to shell out more money for something that cost less in the past. This causes price inflation, wherein the price of the commodity would start increasing.