Domestic prices affect inflation?? if so, how??

[makif130289]

hi, I read many posts in economic section to fully understand inflation concept in game terms but didn't understand domestic price effect...while some members said that domestic price has nothing to do with inflation and others said otherwise..my question is if changing domestic prices is effective against inflation(actually bringing down inflation in my rapid expansion games), in which direction does it affects?..I mean;

raising domesctic prices causes prices to even increase more and thus causes inflation to goes up....

raising domestic prices causes decline in domestic demand and thus causes inflation to go down..

which one is the chage of domestic prices' real effect?if both two affect, how can I know when I raise my domestic prices what will happen to inflation?..thanks..

[The_Blind_One]

Price does NOT effect inflation.

Price only effects inflation, if you have production set to demand.

When that is the case, ur demand will drop because of the higher price.
With less production, you have less of an expense (or income, because in economy, expense = income) and thus less economic growth, hence less inflation.

But it does NOT influence it directly.

[makif130289]

thanks for the info, it was very helpful..so, in order to bring down inflation, I have to decrease all kind of production costs..

[Eldin]

I find the best solution to decrease inflation is to try and limit how much money one pours into ones economy. If you play as a small(ish) nation you can choose to only import stuff like lumber, water, metal and coal instead of producing them yourself. By doing so you can limit how much money you spend and thus limit inflation. Also increasing taxes or reducing social services can help you control the inflation level and of course lastly not building everything at once is also advised.