<p>Many Filipino families continue to feel the burden of rising commodity prices. The hardship is aggravated when basic food items like rice, sugar, and corn have difficulty finding their way to the tables of the Mang Pandoys, especially since the latter's incomes do not increase proportionally with the rise in prices. As most Filipinos know, the main cause of their thinning wallet is the phenomenon of inflation. Hence, it comes as no surprise that when President Estrada asked the Filipino community for its wish for the Yuletide season, most families asked for lower inflation.</p>
<p>Since January of 1999, this wish has been fulfilled. As seen in the figure below, from a high of 11.5 percent in January, inflation has come down to 2.6 percent in January 2000 which is just a year's time. But still, the Filipinos are not satisfied and continue to protest against rising commodity prices. Could it be that they are being misled by the rosy inflation reports? Or is it just a matter of misunderstanding some basic concepts?</p>
<p>When prices of commodities rise, we refer to it as inflation. If prices fall, however, this is normally referred to as negative inflation or deflation. There are two major types of inflation, namely, the demand-pull and the cost-push inflation. Demand-pull inflation occurs when there are increases in consumer demand and production does not increase. The inflation in 1998 was a variant of demand-pull inflation since agriculture supply declined and could not cope with the existing demand for food.</p>
<p>In contrast, cost-push inflation is associated with the rise in the cost of inputs in the production process. A key example is the rise in the price of oil. An increase in wages also leads to cost-push inflation.</p>