Both low inflation and high inflation have their advantages and disadvantages for a business.
The important thing for a business is to know what does low inflation or high inflation causes. Companies should analyse the market situation and take an appropriate measures to set the right pricing strategy, that will make an expected revenue and keep a business competitive.
There are multiple types of Inflation:
- Low inflation - less than 10%
- Higher inflation - between 10% and 1000%
- Hyperinflation - 1000% and more
- is considered to be better than higher inflation. For most businesses, the optimal inflation is low, stable and predictable
- can be generally harmful. It can rapidly increase costs for a business, which can lead to higher prices for customers. Higher product prices can make a company less competitive. But company can also make a short-time profit increase because of the high inflation. This can occur when company has bought a lot of inputs for a low price. Later when inflation is increasing, they can sell their products (made from cheaper inputs) for increased prices.Hyperinflation
- is also called the "out-of-control inflation". It has quite a negative impact on economy.