One thing I’ve always wondered is where does inflation actually start? Maybe it’s a dumb question, but who first decides they want more for their product or service that gets the domino effect going?
It depends.
Sometimes the underlying expenses go up. In the example of soft drinks, you've got your raw ingredients, packaging, production equipment, labor, marketing, and other expenses, and anything left over after those expenses is profit. So if raw ingredient prices go up, the company can either keep sales price the same, reducing profits, or they can increase the sales price just enough to cover the increased costs by keep profits the same, or they can increase the sales price so much that profits go up too. Same goes for packaging costs (usually aluminum or plastic), production equipment (new factories), labor (wage increases), marketing (sponsorships, advertisements), and so forth.
Other times there's more demand for a product than there is supply, so prices are raised because people are willing and able to pay.
And then sometimes prices go up simply because the sellers want more money.
