hello everybody and welcome to this macroeconomic video on the causes of inflation so if you look back to our last inflation video inflation is a sustained rise in price prices so what causes this rise in price well we have two types of causes we have demand poor causes and supplied push causes now our demand pole causes will be anything that increases aggregate demand because if you remember in the last video I showed you the if accurate demand increase in the curve shifted right while price increase from p1 to p2 so therefore the price level increase therefore inflation occurred because inflation is a rise in price so what causes this increase in our growth demand well if we look at our formula ad equals C plus I plus G Plus X minus M if there is an increase in consumption or if there is an increase in investment or if there's an increase in government spending then a great demand will increase the curve will shift right the price level will increase in p1 to p2 so therefore there has been inflation because price has risen so any one of the first three things increases consumption investment or government spending then inflation will occur also if imports full or exports rise then a number we get from that bracket part of the formula will increase and if that increases then there will be an increase in aggregate demand curve will shift right price will increase from p1 to p2 so therefore inflation as it could and also if there is an increase in demand but not an increase in supply the increase in supply could cancel out the inflation but if there is an increase in the world but no increase in supply then the price level will rise from p1 to p2 as shown by shift of the curve so therefore inflation has occurred now on trial supply push causes now the first thing I'd like to point out is I made small mistake here where I said there is an increase in the price of imports if there is an increase in the price of imports we will import because they're less attractive to boy because they're more expensive so therefore imports will fall therefore the bracket part of the aggregate demand curve will increase their favorite demand will rise causing inflation so that really should be in demand pull on the other side but what are our rules supply push causes of inflation well if firms sell only inelastic goods then inflation will occur this is because an inelastic good is one where demands does not change that much if there is a change in price so this means that business is selling inelastic good to know they can increase their price and increase their price increase their price all the time but they won't use that much the world so if they are increasing their prices then there is a sustained rise in prices so therefore inflation occurs because inflation is a rising prices also if the government increases indirect taxes this increases the costs of production for businesses so therefore businesses profit margins decrease so therefore they say hang on a second I'm not making as much money I'm going to exit the market so far there that therefore means that supply will decrease or aggregate supply in macroeconomics and as I showed in the last video again if there is a decrease in aggregate supply and our curve shifts up from SR a s 1 to s Ras 2 then our price level increases from P 1 to P 2 then if for inflation has occurred because the price has risen and also if there is a wage rise and this really should come under demand as well if there is a wage rise people can buy more therefore they will demand more therefore a great demand will increase as consumption increases so therefore the price level rises in p1 to p2 so therefore inflation occurs as inflation is a rise in price