You just stepped out of 12th grade, looking for courses after 12th grade, and you’re starting to see terms like GDP, inflation, and GST everywhere: the news, conversations, or your textbooks. “Economics” may seem intimidating, but it is for everyone! Whether you are buying a phone, ordering food, planning your career, or at any stage in life the Indian economy and understanding the economy is important and will help you make better decisions.
In Part 1 of our blog - “ Understanding Inflation Through Economics”, we gave you a quick tour of what GST, GDP, and inflation actually are, and what they mean for you as you transition into the world of economics. If you haven’t yet read it, we encourage you to do so now. It can be a perfect start for you to become fully acquainted with how these terms relate to your everyday life.
If you are exploring courses after 12th that will provide you with actual career opportunities and give you a leg-up in understanding how the world works, it’s a great start to know the basics of the Indian economy.
In this blog, we will talk about GST, inflation, and GDP in the most relatable way possible. No jargon, no boring theory - just honest and useful information to help you be smarter with money, smarter with decisions, and smarter about your future strategy.
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What is Inflation and Why Should You Care?
What is Inflation in Economics?
Inflation simply refers to the general level of price increases of goods and services over time. In other words, your money does not go as far as it did before. A great example is if you purchased a chocolate bar for ₹10 last year, and now that chocolate bar costs ₹15. The price increase is inflation.
What causes inflation?
There are two reasons for inflation:
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Demand-pull inflation - Imagine when a new video game becomes super popular and there is only a limited amount of copies available. In this case, many people want it, so sellers raise the price because the demand is greater than the supply.
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Cost-push inflation - An example of this would be if the price of petrol goes up significantly. The cost of transporting fruits and vegetables, and other goods, goes up, so sellers transfer that cost onto you via a price increase.
Daily Life Example - Think of your phone bill every month. If your internet or mobile service provider raises their rates every year, that is inflation. Even though you are using the same amount of data or calls, you will pay more money for the same usage.