Inflation is an economic concept that describes the increasing prices of goods and services over time. It can have a significant impact on businesses, leading to higher costs of production, decreased profits, and reduced investment returns. The official business definition of inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Businesses must consider the impact of inflation when making decisions about capital investments, pricing of products and services, budgeting and financial forecasting. Understanding the effect of inflation on their operations is essential for long-term business success.