Inflation or Rising of prices - BA English Essay

Inflation or Rising of prices - BA English Essay

Inflation is defined as the persistent increase in the general prices of the commodities. Anything under the 10% in bearable, but as the inflation rate gets more than 10% it is a matter of concern for the economists of the country. Pakistan has also been a victim of inflation during the past decade. People who have not studied economics might be alien to this term so I would like to expound it in simple terms. If there is a sudden increase in the price of oil and you have not received an increment in your salary that means that the increase in the oil price was due to inflation.

There are two main cause of inflation in any economy in the world and the same are the causes for the inflation in Pakistan. The two major causes are demand pull and cost-push inflation. Demand pull on inflation is when the demand for the product is so high that the producer contemplates of increasing the price of the product in order to earn abnormal profits. Cost-push inflation occurs when the cost of production increases for most of the products in the county. Cost-push inflation is normally caused by the action of the government. For instance there are 2 things which will cause the increase in the cost of production for everything being produced in the country. The first one is the fuel price and the second thing is electricity tariff. This is the real reason prices of the things fluctuate every week and it has made impossible for the people to manage their personal budget.

Inflation to a certain extent is good for the economy as people earn more money and they are even paid more money, but the situation worsens when the economy is hit by hyperinflation. Hyperinflation is term which is used to define inflation above the rate of 20%. Everyone is adversely hit by hyperinflation. It adds to uncertainty in the market and people stop investing at all. Employees on fixed income have to face the problem of a reduction in the real income, as the real value of money diminishes with inflation. People who have lent money also suffer as the real value of the money decreases and they lose a lot of money.

There is nothing a local businessman can do in order to control the inflation in a country. The initiative will have to be taken by the government and after setting a precedent the government should get people involved in it by holding different seminars and workshops to control this problem.