This is a really cute video i found on youtube. And if you think you just learned about inflation by watching it, think again! HAHA. Alright, this video is a misconception people have of inflation.

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. Inflation has little to do with supply and demand. More money in the economy decreases purchasing power of the currency therefore prices "go up". An example would be the more money the SIngapore government createsand put into the system, the less the value of each individual monetary unit.

The value of a dollar does not stay constant when there is inflation. The value of a dollar is observed in terms of purchasing power, which is the real, tangible goods that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar can't buy the same goods it could beforehand.

The video was merely an illustration of price elasticity and maybe monopoly. It has little link to the concept of inflation so be careful of what you watch on youtube! It's better to collaborate different sources to check for the credibility (AQ test is on tuesday!).


your super cool ct-mate,

MAYCHEW