Inflation

• Inflation is the rate at which prices are rising. A higher inflation rate means that you will generally pay more for the things you buy. However, inflation is not uniform. Within the general inflation rate, certain sectors of the economy might have higher or lower rates. For example, the price of real estate might rise rapidly, while at the same time the price of food might be steady. On the other hand, inflation in one sector can affect other sectors of the economy. For instance, when oil prices go up, it affects the prices of other products that rely on oil for producing or transporting their goods. Many people (such as retirees) have income that provides yearly increases tied to the rate of inflation.
  
  

Supply and Demand

• Perhaps the overriding concept driving the economy of the world is that of "supply and demand." Supply and demand means that as goods become more popular and scarcer, the price for those goods will go up. As a result, factories or other businesses will increase production, thus filling the demand again. At a certain point, the supply will exceed the demand, the price will drop and production will slow. This self-correcting feature of the economy is a central principle of capitalism.
  
  

Profit and Loss

• People who are starting their own business for the first time often fail to have a full understanding of profit and loss. While many will see that they have to take into account the costs of their supplies and perhaps their overhead costs like electricity or gas, they often overlook other things. For example, the money that you make from any enterprise should also provide for maintenance and replacement of equipment, advertising, and salaries and health care for yourself and your employees. In addition to these things, you have to also look at what are called "opportunity costs." These costs are the ones you incur by not doing something else rather than what you are doing. For example, if your taco stand makes you $30,000 a year, but a hot dog stand in the same location would make $50,000, that is a $20,000 opportunity cost.
  
  

Costs

• Customers sometimes complain to a store manager or the guy who sells them gas about rising prices. However, they fail to take into account that the person they are speaking to is just one link in a chain of rising prices. As businesses find that their supply and delivery costs rise, they have to pass these costs on to stay in business. For example, if the price of fuel rises, the cost of delivering goods might rise, causing an increase in the price of food.