What is Inflation rate? How to calculate it? M bought his morning coffee for ₹ 12 in 2019, but now he is paying ₹ 16 in 2023. Calculate the inflation rate.

What is Inflation Rate? Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. The inflation rate is the measure of the rate at which the general price level is rising, or equivalently, the purchasing power of currency is falling. It indicates how quickly the cost of living is increasing. Inflation is typically expressed as a percentage. A rising inflation rate means that a given amount of money will buy fewer goods and services in the future than it does today. This fluctuation in the value of any currency impacts the cost of living, investment decisions, and the overall economy. How to Calculate Inflation Rate? The inflation rate is typically calculated using the following formula: Inflation Rate = [(Price in Current Year - Price in Base Year) / Price in Base Year] × 100 Where: 'Price in Current Year' (B) is the price of a good or service in the later period. 'Price in Base Year' (A) is the price of the same good or service in the earlier period. Calculation for M's Coffee: Given: Price of coffee in 2019 (Base Year, A) = ₹ 12 Price of coffee in 2023 (Current Year, B) = ₹ 16 Applying the formula: Inflation Rate = [(₹ 16 - ₹ 12) / ₹ 12] × 100 Inflation Rate = [₹ 4 / ₹ 12] × 100 Inflation Rate = [0.3333...] × 100 Inflation Rate = 33.33% Therefore, the inflation rate for M's cup of coffee from 2019 to 2023 is 33.33% .