A simple commonly used definition of the word inflation is simply "an increase in the price you pay or a decline in the purchasing power of money".
In other words, Price Inflation is when prices get higher or it takes more money to buy the same item.
Inflation is measured by the Bureau of Labor Statistics in the United States using the Consumer Price Index.
However, it appears that the meaning of the word inflation has changed over time. See our article, "What is the Real definition of Inflation?" for a more detailed discussion of how the definition has changed and what that means to you.
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Inflation, as the word suggest increase/ increment. Inflation denotes a figure by which the purchasing power of money decreases as at period end, for eg: if inflation is 10%, then a individual have to pay 10% extra for purchasing the same quantity of material which he has to pay at the begining of period.
In addition to above there are different category of prices increase, the mean of which is inflation. All people have different prefrences for different commodities, hence different commodities are placed in different groups, the increase in each group is evalued first and than come the inflation.
Eg of different prefrences: for common man price increase of iron & steel is not much, but for builder it is the most important, hence these commodties are placed in the diff group and weightage is assigned to each group.
Infation is the weighted average of the % increase of these groups.