Inflation is defined strictly as an increase in the general
price level. Whether this is related to market scarcity is another matter.
The general price level is a measure of the prices of many goods and services. There are several indexes of the price level, and the one which is commonly used is the Consumer Price Index (CPI). This is what most people mean when they talk about inflation.
The CPI is the weighted sum of prices of goods and services consumed by the "typical" family. Usually, a statistical body determines what these are.
Another measure of the price level covers all the goods and services in an economy. This index is called the implicit GDP deflator. The implicit GDP deflator compares the value of the GDP in two years, based on a base price level.
Among the causes of inflation are excess demand created naturally through the economy. The reason why the prime rate/cash rate is so important is that it indicates the relative supply of money to the relative demand, and thus the potential rate of inflation.
Other causes include union demands on wage relativity, profit pushing by companies, increase of market power by companies, increase in taxation rates, changes in the rate of social security benefits, bad wage fixing by industrial relations bodies and government. And that's not all.
Inflation potentially has no effect on producer or consumer margins. If the price of Cool Whip (what the hell is Cool whip?) rises, and the inflation rate is 0, the producers get more money.