The word is a combination of 'Shrink' and ‘inflation'. We all know what ‘inflation’ is. It is when the price of everything goes up. Things become expensive. Common sense suggests that ‘shrinkflation’ is the opposite of inflation – it is the shrinking of inflation. This, however, is not the case. When there is inflation, companies generally do one of two things — normally, they increase the price of a product. Sometimes, they keep the price of the product the same, but reduce the quantity of the product being packaged. For example, instead of giving the consumer 500 grams of something for a certain price, the manufacturer may now give only 475 grams for the same price.
Example:
During 'Shrinkflation', the price remains the same. What shrinks is the quantity or the quality of the product.

Another name for ‘shrinkflation’ is ‘package downsizing’.