Want to know more about Inflation?

Inflation is the increase in the price of a product.

How can you say there is inflation?
Because, earlier in the year 2001, we could buy a litre of petrol for Rs.50, but now it's Rs.70/- per litre. So there is price-rise and hence there is inflation.



Means you need to compare the current price, with some old price to say that the price has increased (or decreased), right ?

Hence, to calculate the inflation (CPI,WPI) we'll need to compare the price of some item for two different years.
Examples:
Suppose Price of a lifebouy soap was Rs.10 in 2001. And now it has increased to Rs.12 per bar. So what is the % increase?
[(12-10)/10]*100=20% incrase in the price of a soap.

Price of a bike was 30,000 in 2004 and now its close to 55,000/-.
Price of one litre milk was 25 Rs. in 2004 and now it is almost 60/-
So, What hurts to you more, or what hurts the people at large: bike price or milk price? ofcourse the milk price inflation because you need to buy it every day.
So when calculating the inflation, you need to 'weight' the products according to their usage.