>>16881359>>16881368Actual economist here. Supply and Demand.
It should be noted that inflation is calculated based on a basket of goods and services so the inflation rates you hear about on the news is not representative of actual real life cost increases.
That said inflation usually has 3 causes that can happen separately or enhance each other. The first one is a supply crush. For example due to Covid-19 or the Russian invasion of Ukraine lots of producers couldn't keep up so supply went down, demand stayed largely the same which means prices go up because more people are trying to buy fewer products so only the people able to pay higher prices get the product.
The 2nd cause is a demand rise. This is where (suddenly) a lot more of a certain product or service is consumed and the manufacturer can't scale up production fast enough to match this demand. This was the case during the lockdown for electronics such as GPUs used for gaming, AI training, Crypto mining etc. People had spare income since they couldn't spend it out of the home so consumer goods consumed from home rose in price as they were demanded more while the factories couldn't produce as much as demanded
The 3rd cause is rising production cost, usually labor. This is caused by labor shortage. Essentially if there are fewer workers you need to pay your workers more to attract applicants to the job. Higher labor cost means higher production cost so you raise the prices of your goods and services to cover this labor cost. Eventually the goods and services people consume become more expensive so they demand a raise from their employer as well causing a spiral of inflation.
Currently we're seeing all 3 play out in the world. There has not been a lot of historic moments where all three circumstances happened in tandem. I'm honestly surprised with how slowly inflation has been rising in the world considering how bad these conditions are. To me this indicates that profit margins are shrinking.
