Question

• What is an example of a measurement of inflation?
• How does inflation affect you as an individual consumer?
• Why is it important for managers to understand inflation?
• After reviewing the resources on inflation, how have your perceptions changed on the concept of inflation? If they have not changed, explain why.

Answer 1

One of the best examples of measurement of inflation is the gross domestic purchases price index which is the BEA’s measure of inflation for the economy of U.S. It overall measures the changes in the prices that are paid by the customers, the businesses and the governments in the U.S.A. which also includes the import prices which they buy.
Inflation directly affects the individual consumer because it is related with the rise in the price of the commodity so when the consumer is making the budget then the rise in the price of the commodity will play a very important role in the overall budget of the consumer. Therefore it is a major concern for the consumer to closely observe the rate of inflation and the trend of inflation going on in the economy. Because if income will not rise or the price of the commodity will rise then it is very difficult for the consumer to manage the overall budget.
For the manager, it is very important to understand the inflation in the economy because all the policies of the organisation totally depend on the future pricing of the commodities and the value of money in the economy. Because it will completely change the cost structure and pricing structure of the organisation if there is a change in inflation. So the observation of inflation from the manager point of view is important to frame the economic policy of the organisation and to plan future investments and to forecast the objectives related to the organisation.
Yes, after reviewing the resources on inflation my perceptions changed on the concept of inflation because a little bit rise in the price of the commodity is a regular scenario in the economy. Therefore, a slight change in the price or the money value in the economy does not impact the overall economic structure and the economic planning but a major change in the price of the commodity or very high inflation in the economy is very harmful to the government for the household and for the organisation.