Price Inflation

AAA

DEFINITION of 'Price Inflation'

An increase in the price of a standardized good/service or a basket of goods/services over a specific period of time (usually one year). Because the nominal amount of money available in an economy tends to grow larger every year relative to the supply of goods available for purchase, this overall demand pull tends to cause some degree of price inflation.

INVESTOPEDIA EXPLAINS 'Price Inflation'

Price inflation can also be seen in a slightly different form, where the price of a good is the same year over year, but the amount of the good received gradually decreases. For example, you may notice this in low-cost snack foods such as potato chips and chocolate bars, where the weight of the product gradually decreases, while the price remains the same.

VIDEO

Loading the player...
RELATED TERMS
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  2. Value Deflation

    When companies cut their costs without increasing prices for ...
  3. Inflation

    The rate at which the general level of prices for goods and services ...
  4. Producer Price Index - PPI

    A family of indexes that measures the average change in selling ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise ...
RELATED FAQS
  1. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Bonds & Fixed Income

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  3. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  4. Options & Futures

    Fight Back Against Inflation

    Inflation is often a consequence of economic recovery. Here's how you can protect your financial portfolio.
  5. Mutual Funds & ETFs

    GLD vs. IAU: Which Gold ETF is Better?

    Looking to play gold with ETFs? A look at SPDR Gold Trust Shares (GLD) versus iShs Gold Trust Trust Units (IAU).
  6. Economics

    What is the Income Effect?

    In economics, the income effect is the change in the consumption of goods caused by a change in income, whether income goes up or down.
  7. Economics

    What is Fiat Money?

    Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity.
  8. Economics

    What Do You Need To Know About Inflation?

    When it comes to inflation, there is no shortage of opinions: one side argues the Fed should raise rates, and the opposition says the Fed should stay put.
  9. Economics

    What’s Missing For A Turnaround In Brazil?

    Today, many investors have written off Brazil following several years of poor performance, decelerating growth and chronically high inflation.
  10. Forex

    Is Quantitative Easing Destroying The Euro?

    Quantitative easing being undertaken by the ECB to stabilize the Eurozone economies is sure to have some impact in decreasing the value of the euro.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center