Inflation in Bangladesh and Its Reason and Solution

Firstly Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability. Inflation can either be negative or positive; it could mean making products more expensive. There are a number of effects of inflation that can

Companies can raise their prices in response. – This method is the most common method used by employers. The extra cost for labor is passed on to customers in the form of higher prices. This method, however should only be used if the demand for the product or service is highly inelastic and there are no readily available substitute for that product or service.

Now in regards to the rise of minimum wage this type of inflation is defined as cost-push inflation.  For cost-push inflation to take place, demand for the affected product must remain the same, while the cost of production changes. To compensate for the increased cost of production, the producer must raise the prices of the goods and services to the consumer to maintain profit levels while keeping pace with expected demand.  For example, if a manufacturer is suddenly forced to pay his workers $10.50 per hour instead of $9.25 per hour, he will suffer great financial losses as a result of the increase.  Therefore, the manufacturer is left with one of two options, which are either laying off a couple of workers or having to raise the price of his products to recoup for the

Demand-pull inflation happens when there is an extreme amount of demand for products and services. This is a result of an increase in the money supply by the central bank system. Consumers then have the ability to demand more of the products they want. Cost-push

Raising cost of raw materials. Raw materials used by the company are petroleum derivatives and highly dependent on oil prices. Variance of oil prices affects negatively the company because it increases the costs affecting profitability and competitiveness.

Inflation is the sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. (Investopedia) During periods of inflation, the prices of products and services will rise. There are several reasons why an economy would see a rise in inflation. Decrease in supplies, corporate deciding to charge more, and consumer confidence are some of the reasons why an economy would see the inflation rate increase. Consumer confidence is when consumers gain more confidence in spending due to a low unemployment rate and wages being stable. Decrease in supplies is when consumers are willing to pay more for a product or service is that is slowly becoming unavailable due to a decrease in supplies. Corporate decisions are when the corporations basically decide

Producers in turn may raise their selling prices to cover these increases, decrease production to educe their costs (resulting in lay-offs), or fail to invest in future production.

A sudden increase or decrease in the supply of a particular good is also known as a supply shock. A supply shock is an event that suddenly changes the price of a product or service. This sudden change affects the equilibrium price. The two types of supply shocks that exist are the Negative Supply shock and the Positive Supply shock. A negative supply shock, which is a sudden supply decrease, will raise the prices and shift the aggregate supply curve to the left. A negative supply shock can cause stagflation due to the combination of raising prices and the falling output. Meanwhile a positive supply shock, an increase in supply, will lower the price of a good and shift the aggregate supply curve to the right. A positive supply shock could be advancement in technology which most certainly makes production more efficient which thus increases output. For example a positive supply shock could be shown in the early 1990s when communication and information technology exploded which resulted directly in productivity increase, and an example of a negative supply shock would be that of the high oil prices associated with Arab oil embargo of the early 70s is the classic example of this occurrence. Any other factor could also produce this effect. Such as if

When there is a change of one of the factors of supply- like changes in the prices of production inputs like labour or capital; a change in production technology and its associated productivity change; or the amount of competition in a specific product market- there is a corresponding change in the supply curve. For example, if worker productivity improves due to some human capital or technology investment, then the costs of production decrease. This exerts a positive effect on the supply curve shifting it right, where the new market equilibrium is at a higher quantity and a lower price, holding everything else constant. There can also be a negative shift that moves the supply curve to the left, with the resulting market clearing price being higher and quantity lower, ceteris

Hi Conster, cost behaviors impact businesses in the way that if the raw material increases, the finished goods will also increase. For instance, every year the price of the steel goes up; therefore, any product build with steel will have an impact on their prices to cover up the increase in paid for the raw material (Edmonds,

Corn: Corn pricing is elastic. As the price of corn rising many people will look to other grains for consumption as well as using the other grains to make certain products. If the substitute grain prices rise, corn will come back into demand and people will purchase corn. A farmer can’t sell corn for more than the going price.

5) The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

commodity costs for commodities that can only be partially hedged, such as fluid milk, and high quality Arabica coffee;

There are different influences that cause inflation such as energy, food, commodities, and other goods and services. The entire economy is affected by rise of the cost of living. It also affects the cost of operating a business, borrowing money, mortgages, corporate and government bond yields, and every other aspect of the economy. There are several advantages of inflation in the economy. Some include moderate rates of inflation which allows prices to adjust. This is considered a sign of a healthy economy. With economic growth available we usually get a generous amount of inflation. Also moderate inflation rate reduces the actual value of debt. If there is a reduction, the real value of debt increase leads to a squeeze on usuable income.

Inflation is blazing subject that delays the economic development of the country. It is becoming extra hectic to economists, politicians and even people also. Factors on both demand and supply effect the inflation. So the stabilization strategies ought to consequently focus on both demand manipulation as well as