Why onion prices are so high in current time ( Supply side Inflation)?

How does inflation occur from supply side?

Price of any good or service depends on supply and demand of that good or service.

If supply of any good or service increase then price will decrease and vice a versa.

Following factors of production create inflation from supply side.

• Industrial disputes between labor and management

            If there is a dispute between labor and management then strike will occur. this reduces the               output of a company. Hence supply of produce will go down and hence inflation will occur.

• Shortage of factors of production:

           Man : why an engineer gets more salary than a worker?

 Because more workers are available to do less skillful job than engineers are . So shortage of   skilled labor creates dives up the salaries. 

          Machine: Why govt. gives subsidy to farmer to buy tractor? 

   Because if farmer uses tractor he will produce more crop. So supply of farm produce will increase and inflation can be controlled. So Lack of machine will give rise to inflation.

          Money: Why government banks such as SIDBI gives loan to farmers at very less interest rates? or why  Modi govt. has created a new bank, MUDRA? 

 Without money nobody will be able to buy machines or hire men to produce goods and services. MUDRA bank provides loans to small vendors such as small fruit vendor. A small fruit vendor uses his small cart to sell his fruits. Imagine if he buys a small 3 wheeler. So he can bring   his perishable items to market very easily. So he can sell more fruits in market increasing supply and reducing inflation.

        Material: Why price of gold is more than price of steel?

  As availability of gold is less than the availability of steel, supply of gold is less in the market. Due to this price of gold is very high or we can say that the price is inflated. This is supply side inflation. 

                          

                                                 

• Natural calamities:

          Why El-Nino was so much in News few days back?

 El-Nino is a climatic situation in which Australia and India will face shortage of monsoon. The monsoon shortage affect India's agricultural produce. This will give rise to the inflation of food prices. Thats why India in the recent past was facing inflation of daily food items. Inflation level was around 10%. 

• Black marketing creating artificial shortage:

          Why onion prices were so high in the recent time?

          Middle men or traders create artificial shortage due to which supply of onion in the market goes down and onion prices sky-rocket.