Relative Price Variability and Inflation

Abstract

Inflation in an economy reflects the phenomenon of an overall rise in prices. This rise in prices is mainly determined by the excess demand of many individual goods which prevails in the market [6]. But, if the prices of one group of commodities are moving in one direction and those of another group in a different direction (or even in the same direction but at a markedly different pace), then the concept of overall inflation in an economy becomes vague for any economic analysis.