Smit Sir Commerce · Free interactive practice
Commerce Concept Lab: Make economics click.
Explore how inflation and income changes affect purchasing power. Change the basket price and income sliders, then explain five everyday situations. Explanations are available in English and Hindi. No account or payment is required.
The purchasing-power experiment
A fictional starting income of ₹10,000 buys ten ₹1,000 baskets. With a 25% basket price rise and unchanged income, it buys eight baskets: 20% less purchasing power. Equal percentage increases in income and prices preserve purchasing power.
Find the clue in each case
The spending surge
Households across the economy start spending more. Production cannot expand as quickly, and prices rise across many goods and services. Which cause fits best?
Demand-pull inflation occurs when aggregate demand increases faster than the economy can supply goods and services. Excess demand puts upward pressure on the general price level.
The fuel shock
Fuel and raw materials become more expensive across industries. Transport and production costs rise, and businesses increase their prices. Demand has not increased. Which cause fits best?
Cost-push inflation arises when production costs increase and create upward pressure on the general price level. Examples include widespread increases in fuel, raw-material or transport costs.
One expensive mango
A poor local harvest makes mangoes more expensive. You have no information about other goods or services. Can this alone establish economy-wide inflation?
Inflation is a sustained rise in the general price level. A price increase in one commodity does not by itself establish inflation; broader price evidence is required.
Slower does not mean cheaper
A price index rises by 10% in one year and by 4% in the following year. What happened in the second year?
Disinflation is a decline in the rate of inflation. When inflation remains positive, the general price level continues to rise, but more slowly. Deflation is a sustained fall in the general price level.
A raise with a hidden catch
In this one-period example, income rises by 10% but the representative basket becomes 25% more expensive. What happens to purchasing power?
Nominal income is income measured in money. Real income reflects the purchasing power of that income. If the price level rises faster than nominal income, real income falls.
Each case includes a new follow-up question, a model exam explanation and a shareable case link. Progress is remembered on this device when local storage is available.
GSEB Money and Inflation notes · GSEB chapter quizzes · CBSE Macroeconomics notes