Supply and demand play a big role in how prices change in our economy, which is what we call inflation.

1. Demand-Pull Inflation:

   • This happens when people want to buy more things than what is available to sell.
   • For example, if people spend 10% more money, prices might go up by 5% if the amount of goods stays the same.

2. Cost-Push Inflation:

   • This type of inflation happens when it costs more to make products, like when wages or materials get more expensive.
   • For instance, if oil prices increase by 20%, it could cause prices for everything else to rise by 2%.

In the UK, inflation is tracked using two main tools: the Consumer Price Index (CPI) and the Retail Price Index (RPI). Recently, the CPI showed inflation around 2%, while the RPI was around 2.5%.