Why the price is increasing for all goods? What are Supply and demand?

 To understand this concept imagine a scenario for Farmer John.

        John is cultivating 100 bags of rice every 3 months means he can supply 100 bags of rice every 3 months. His customers need 90 bags in the first cultivation means demand is equal to supply. So John will sell rice bags for 100 RS per bag(Assume)

        On the second cultivation, John can able to deliver only 100 bags but one new customer is demanding 50 bags. So he needs to supply 140 bags. Here the demand is high and supply is very low. So John thinks about how to tackle this situation and he needs to satisfy his customer.

        He plans to supply 50% of their customer needs for 100 RS per bag as like previous cultivation. Now he supplied 70 bags to the customers. Still, 20 bags are in his warehouse. He planned to give those 20 bags to the customer who gave the highest price. The last customer bought those 20 bags for 200 RS.

        That last customer requirement is 50 Bags but he bought 45 bags and on that 20 bags are double valued. Assume he can sell rice to local customers with a 40% premium. This means if he bought a bag at 100 RS he will sell that bag in the local market for 140 RS this 40 RS is his profit.

        From the above example this customer bought 25 bags from John at 100 RS and the remaining 20 bags at 200 RS by averaging it he bought 1 bag of rice for 144 RS. So by keeping a 40% premium he will sell 1 bag of rice for 200 RS to the local customer.

        Basically, supply and demand play the main role in the price rise. If customers need only 50 bags of rice John will sell 50 bags at 100 RS and the remaining 50 at a very low price to avoid wasting cultivated food.

What is money inflation?

        Let us take the above example. We will see from the consumer point of view. Assume 3 characters in this story John as a farmer, Alexandra as middlemen, and Emma as a local consumer. Emma is working in a company and got a salary(1000 RS) from them every month. In January she bought 1 rice bag at 140 RS. In February month she got a hike of 100 RS so her salary is not 1100 RS. In March she bought other rice bags at 200 RS. Price of the rice bag rises because of the increase in demand.

        As with rice bags, all products price rises that she is using every day. Which will make her salary hike equals to her expanses or price rise. One fine evening she thinks about where did her hike go. She bought rice back at 200 RS from Alexandra in March month. Alexandra's 40% profit is not changed because he bought from John at a higher price. Because of this demand, John earned a lot means Emma's hike is going to John and other product manufacturers as demand for their goods increases.

        Money inflation is nothing but a large amount of money is going for only a set of people which makes lower-level people stay lower. Emma is going to stay as middle class unless she shifted her job to another company with a good hike or doing any type of business.

Hope this article is helpful