Philippine College of Advanced Arts and Technology

High School Department

1914 Doña Faustina Building, Recto Ave, Quiapo, Manila

THE IMPACT OF INFLATION ON THE PURCHASE BEHAVIOR OF GRADE 12 ABM

STUDENTS IN THE PHILIPPINE COLLEGE OF ADVANCED ARTS AND

TECHNOLOGY

In Partial Fulfillment of the Requirements of Research Project

Submitted by

Ajero, Arnold Herran, Summer Ann

Alferez, Ryzza Jayme, Jeanne Hazel

Avila, Valerie Anne Mariano, Joanna Wenzie

Berdan, Rose Ann Realingo, Angelica

Clemente, Dianne Reyes, Cathyrine Raoulyn

Denosta, Jhezare Rodriguez, Rejonce Yhuna

Edo, Jenrey Paul Villarino, Rocelyn

Gumogda, Rafael Andre

12 – DAL’LANG (ABM)

Submitted to:

Mr. Ericson John Suarez

1
 Philippine College of Advanced Arts and Technology
High School Department
1914 Doña Faustina Building, Recto Ave, Quiapo, Manila

CHAPTER I

PROBLEM AND ITS BACKGROUND

This chapter discusses the background of the study, statement

of the problem, hypothesis, conceptual framework, scope and

limitations, significance of the study, and definition of terms.

A. BACKGROUND OF THE STUDY

One author that is particularly relevant to this study is Kotler

et al. (2017). In their book "Principles of Marketing," they

discuss how inflation can affect consumer behavior. They note that

inflation reduces the purchasing power of consumers, which can lead

to a decrease in demand for goods and services. They also point

out that consumers may switch to cheaper alternatives or reduce

their consumption of certain products altogether.

According to Haron et al. (2013) In their study on the spending

behavior of Malaysian university students, they found that factors

such as income, parental influence, and peer pressure were

significant predictors of spending behavior. They also noted that

the students in their sample were generally price-sensitive and

tend to prioritize basic needs such as food and clothing over

luxury items.
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Moreover, according to Mohd, Amran, and Mohd Noor (2019), In

their study on the spending behavior of Malaysian undergraduate

students, they found that income, financial knowledge, and

financial management skills were significant predictors of spending

behavior. They also noted that students in their sample tended to

prioritize educational and career-related expenses over other types

of expenses.

Sharp changes in consumer expenditure may bias inflation during

the COVID-19 pandemic. Using public data from debit card

transactions, I quantify these changes in consumer spending, update

CPI basket weights and construct an alternative price index to

measure the effect of the COVID-induced weighting bias on the Swiss

consumer price index. I find that inflation was higher during the

lock-down than suggested by CPI inflation. The annual inflation

rate of the COVID price index was −0.4% by April 2020, compared to

−1.1% of the equivalent CPI. Persistent “low-touch” consumer

behavior can further lead to inflation being underestimated by more

than a quarter of a percentage point until the end of 2020. (Pascal

Seiler, 2020).

The COVID-19 pandemic and the lockdown and social distancing

mandates have disrupted the consumer habits of buying as well as

shopping. Consumers are learning to improvise and learn new habits.

 Philippine College of Advanced Arts and Technology
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For example, consumers cannot go to the store, so the store comes

to home. While consumers go back to old habits, it is likely that

they will be modified by new regulations and procedures in the way

consumers shop and buy products and services. New habits will also

emerge by technology advances, changing demographics and innovative

ways consumers have learned to cope with blurring the work,

leisure, and education boundaries. (Jagdish Sheth,2020)

Research can be explored using the correlation method, which

captures data from respondents without altering the environment.

This method will be use to collect data on the current state of a

phenomenon in order to determine if there is significant

relationship between the two (2) variables which is the independent

and dependent of this research study. The researcher will use a

survey-style questionnaire to gather information from the

participants. The aim of this paper is to know the impact of

inflation on the purchase behavior of Philippine College and

Advanced Arts’ Grade 12 ABM students. Inflation which has impacted

a lot of students in a way that many are struggling to keep up with

their expenses such as meals and transportation.

Furthermore, Philippines is one of the countries which have

experienced high and unstable inflation rates on year, ADB flagship

economic publication, forecast the Philippine economy to grow by

 Philippine College of Advanced Arts and Technology
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4.5% in 2021 and 5.5% in 2022. It is because inflation is a state

of disequilibrium when there occurs a sustained rise in value

level. In addition, many Filipinos in the Philippines have been

impacted by the growing inflation rates. Many people think that

their salary won’t be enough to survive because the pandemic hasn’t

been contained. Retirees and pensioners who purchase their medical

care as well as low-wage individuals who struggle to save money

are among those impacted. They are forced to give up some

unnecessary products and services, such as healthcare, as a result.

Moreover, it is possible that not many individuals are familiar

with inflation. Nevertheless, we all encounter it and are affected

by it in a way of (1) higher food costs, and (2) As prices rise,

your purchasing power decreases due to inflation. (3) Prices are

rising, but wages are not. On the other hand, a study by Su, Li,

and Yang (2021) found that price sensitivity was the primary factor

influencing consumer behavior during inflationary times in China.

Inflation is a sustained increase in the general price level of

goods and services over a period of time. Inflation affects the

purchasing power of individuals and can have a significant impact

on consumer behavior. The students are one of the major consumer

groups, it is essential to investigate how inflation impacts their

purchasing behavior.
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The purpose of the study is to examine how inflation affects

the purchase behavior of Grade 12 ABM students. The study aims to

provide insights into the spending habits and preferences of this

demographic group, as well as to understand how they respond to

changes in the price level due to inflation.

There are several reasons why one might choose this topic.

Firstly, inflation is a major concern in the Philippines, as it

affects the cost of living and purchasing power of individuals.

Therefore, understanding how inflation impacts the behavior of

Grade 12 ABM students, who are about to enter the workforce and

become active consumers, is crucial.

Secondly, the study of inflation on purchasing behavior is

essential for businesses and consumers, as it can help them make

decisions regarding pricing strategies and product development. By

understanding the purchasing behavior of Grade 12 ABM students and

how it is affected by inflation, businesses and consumers can make

better decisions that can lead to more effective purchasing

strategies.
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B. STATEMENT OF THE PROBLEM

The study aims to determine the extent to which inflation affects

the financial resources and budget of ABM Grade 12 students, and

how this affects their purchase behavior. Especially, it sought to

answer the following questions.

1. What is the level of impact of inflation on grade 12 ABM students?

2. What is the level of factors that affect purchase behavior on

grade 12 ABM students?

3. Is there a significant relationship between inflation and

purchase behavior?

C. HYPOTHESIS

Ho: There is no significant relationship between the impact of

inflation and purchase behavior

Ha: There a significant relationship between the impact of

inflation and purchase behavior

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D. CONCEPTUAL FRAMEWORK

Independent Variable Dependent Variable

INFLATION PURCHASING BEHAVIOR

FIGURE I. RESEARCH PARADIGM

This study is based on the relationship between inflation and

the purchasing behavior of Grade 12 ABM students in the Philippine

College of Advanced Arts and Technology (PCAAT) A.Y 2022-2023. The

Independent Variable IV is Inflation, which affects the cost of

necessities such as food, transportation, and tuition fees. The

Dependent Variable DV is the purchasing behavior of students, which

includes their financial resources, budget, and academic

performance.

The intervening variables are coping mechanisms and

strategies students use to manage the effects of inflation on their

purchasing behavior. These include working part-time and seeking

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financial assistance to cover the increasing costs. The

effectiveness of these strategies will be evaluated to determine

how well they can mitigate the impact of inflation on student’s

purchasing behavior.

Furthermore, students' ability to protect their savings

against inflation is also considered as a possible intervening

variable. The strategies that students can adopt to safeguard their

savings against inflation will be explored, such as learning to

save their allowance and focusing on necessary purchases.

The study will utilize a Quantitative Research Design to

gather data through a survey questionnaire. The data will be

analyzed using statistical tools to determine the relationship

between Inflation and Students' Purchasing Behavior. By examining

the impact of inflation on the financial resources, budget, and

educational expenses of Grade 12 ABM students, the study will

provide insights into effective coping mechanisms and strategies

for managing inflation's impact on purchasing behavior.

 Philippine College of Advanced Arts and Technology
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E. SCOPE AND LIMITATIONS

The main focus of this study is to find out what will be the

impact of inflation on purchase Behavior. That is why the

researchers will gather data and information by utilizing

questionnaires and distributing surveys to identify what were the

factors that affected the purchasing behavior of students in times

of inflation. The data will be collected from 50 randomly selected

Grade 12 ABM students at the Philippine College of Advance Art and

Technology.

Despite the researcher’s objectives, there were certain

inescapable limitations. Since this is a quantitative study, we

weren’t sure we needed a large number of respondents, but since

time was of the importance, we chose to keep the number of

respondents to a manageable level. Second, materials used to

conduct this study are only the google forms and nothing else.

Other respondents may be unwilling and unavailable to participate

when the form is distributed.

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E. SIGNIFICANCE OF THE STUDY

The study can be significant to the following as it can help

them to have better understanding of financial decisions and can

inform everyone about the impact of inflation on their purchasing

power, and how they can adapt their spending habits to mitigate

the effects of inflation.

In conducting this study, the researchers will obtain

benefits from this but also the following stakeholders:

Government: To help and be continuously aware of the issue in

inflation to be able to make decisions and solutions regarding the

problem. By being acknowledged, it will help consumers to make

solutions in buying items without being worried about the issue.

School. To help the administrators on what are the things they

will do in this situation to help the students and teachers to

guarantee that the problem will be acknowledged.

Teachers. To help them to develop more effective financial

education programs that address the specific needs of the

students that will help to prepare their students for the future.
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Parents. To provide them with insights into the spending patterns

and preferences of their children, which can help them better

understand their children's financial decisions and provide

guidance and support.

Students. To help them to develop more effective budgeting and

saving strategies that can prepare them for their future

financial responsibilities.

Future Researchers. To give them the foundation of knowledge

about the relationship between Inflation and consumer behavior

for developing more effective financial literacy interventions

that can benefit individuals and society.

F. DEFINITION OF TERMS

This part is the following term used by the researchers in

the study to have a better understanding of the readers.

CONSUMERS - A person or a group of people who purchases goods and

services for personal use.

EXPENSES - The reduction in the value of an asset as it is used to

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generate revenue.

FINANCIAL DECISION - Is a crucial decision that is to be made by

the financial manager, the decision is about the financing mix of

an organization.

GOODS AND SERVICES - The output of an economic system. Goods are

tangible items sold to customers, while services are tasks

performed for the benefit of the recipients.

INFLATION – The rate of increase in prices over a given period of

time such as increase in the cost of living in a country.

INCOME - Money or value that an individual or business entity

receives in exchange for providing a good or service or through

investing capital.

MARKETING STRATEGIES - A plan of action designed to promote and

sell a product or service.

PURCHASE BEHAVIOR - Is a process from information acquisition,

formation of purchase intention to purchase decision-making

problem.
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PURCHASING POWER - The number of goods and services that a single

unit of currency can buy.

SAVINGS - Refers to the money that a person has left over after

they subtract out their consumer spending from their disposable

income over a given time period.

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CHAPTER II

REVIEW OF RELATED LITERATURE

This chapter has the content of Research Related Literature,

which includes finished studies, articles from newspapers, and

others of the current study that the researchers are conducting.

I. RELATED LITERATURE

A. Foreign Literature

According to the study, (Aragos J, 2021) Consumer behavior was

one critical part of our modern management understanding. It

provided customers with desires and needs to understand irrational

behaviors. The main purpose of the study was to determine the

Consumer Behavior among College Students of Saint Michael College

of Caraga during the COVID-19 Pandemic. This study used descriptive

correlation to understand and accept the respondent’s opinions or

insights on a specific problem. Based on the study’s findings, out

of all the variables used to measure respondents’ level of

influencing factors regarding their buying behavior, the personal

factor is the highest influencing factor of their buying behavior,

which means that these respondents are buying according to their

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lifestyle and personality. The respondents generally fall into

looking at an affordable price before purchasing.

During times of inflation, it's expected that consumers will

switch to cheaper alternatives and stop spending on items deemed

non-essential. More surprising, however, is that higher-income

households are on this tightening-of-belts pursuit of value to

quite a similar degree as their lower-earning counterparts (Ron,

2022).

Inflation has put consumers in an anxious, angry mood, even as

the economic data shows confounding bright spots. We asked Yale

SOM’s Ravi Dhar how the perception of rising prices affects buying

behavior, and how companies can respond. With price inflation now

at the highest it’s been in 40 years, Americans are feeling the

pinch, especially in gas and food prices. Naturally, consumers are

adapting behaviors: eating even more often at home, trading down

for cheaper products, and shopping at retailers they perceive are

doing better at managing prices (CNN Business, 2022).

Due to supply issues caused by a number of factors, including

increased consumer demand, Russia’s invasion of Ukraine, and the

coronavirus (COVID-19) pandemic, inflation around the world had

risen considerably. In other words, these events caused the cost

 Philippine College of Advanced Arts and Technology
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of living to increase practically everywhere. Overall, the global

rate of inflation was estimated at roughly 8.75 percent in 2022

compared to 2021, which is a major spike in comparison to previous

years analyzed. To give an example of what this means, in the

United States, early 2022 had been difficult for many consumers,

especially low-income households who already struggle to get by

financially. And although rising prices did not massively impact

everyone, there were few U.S. consumers who said the recent wave

of inflation did not influence their financial situation at all

(Tighe, 2023).

Consumers are adapting behaviors to counter rising prices by

eating even more at home, trading down for cheaper products, and

shopping at retailers that they perceive are doing better at

managing prices (IPSOS,2022).

B. Local Literature.

According to Rhummuel Miguel Quibael (2023), Demystifying

Inflation Rate in the Philippines the problem that the Philippines

is facing right now is inflation, it can be summed up as the

unexpected or consistent upward movement in the cost of an item or

prod1uct. While the price of goods increases, the value of money

goes down significantly causing the inflation effect. If the costs

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of most products are grouped it is inflation and for the Philippines

Statistics Authority the inflation rate from the year 2009 capped

by 9% increases, as it lasts it rises. According to the latest news

According to Asian Development Outlook (ADO) 2021, The Philippines

is one of the countries which have experienced high and unstable

inflation rates on year, ADB flagship economic publication,

forecast the Philippine economy to grow by 4.5% in 2021 and 5.5%

in 2022. It is because inflation is a state of disequilibrium when

there occurs a sustained rise in value level. In addition, many

Filipinos in the Philippines have been impacted by the growing

inflation rates. Many people think that their salary won’t be

enough to survive because the pandemic hasn’t been contained.

Retirees and pensioners who purchase their medical care as well as

low-wage individuals who struggle to save money are among those

impacted. They are forced to give up some unnecessary products and

services, such as healthcare, as a result. Moreover, it is possible

that not many individuals are familiar with inflation.

Nevertheless, we all encounter it and are affected by it in a way

of (1) higher food costs, and (2) As prices rise, your purchasing

power decreases due to inflation. (3) Prices are rising, but wages

are not.

The study contributes to the literature on expectations by

providing insights on household expectations from an emerging

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market and inflation-targeting country like the Philippines. Using

the results of the Consumer Expectations Survey (CES), a quarterly

household survey conducted by the Bangko Sentral ng Pilipinas

(BSP), the study is the first to look at the characteristics and

determinants of household inflation expectations in the Philippines

at a granular level. Results show that survey-based household

expectations in the country are not rational. Filipino households

exhibit an upward bias in their forecast of future inflation and

they tend to rely more on information about past inflation to form

their expectations. Nonetheless, in recent years, households have

started to incorporate information about future outcomes in their

inflation expectations process. To determine the factors that drive

household expectations in the Philippines, aggregated (i.e., time

series) and disaggregated (i.e., pooled data) data from CES

quarterly survey rounds between 2010 and 2020 are used on a standard

inflation expectations model. Empirical results point to a

significant effect of income conditions, perceptions of economic

and financial conditions, the inflation target, and demographic

factors (e.g., educational attainment, marital status) on the

formation of household expectations in the Philippines. Based on

the findings and observations, the study draws insights for central

bank communication strategy, particularly in influencing household

expectations (Cacnio and Basilio, 2022).

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The Philippines is a country that has been experiencing a

gradual rise in inflation in the past decades, and this affects

the prices of goods and services, therefore decreasing the currency

purchasing power. The aim of this study is to analyze the

relationship between Inflation and selected economic indicators,

such as Unemployment Rate, Money Supply, Policy Rate, and Exchange

Rate, based on time series quarterly data from the year 2003 to

2020 in the Philippines. This effect was investigated using the

Auto regressive distributed lag (ARDL) cointegration technique.

The results showed that Inflation, which is the rate of increase

in prices over a given period in the Philippines, has a significant

positive relationship with the Policy rate in the short run. (Pama

et al., 2022).

GLOBAL inflation breached 7.4 percent this year, according to

Statista. This is the highest since 1996 and even surpasses the

6.3 percent caused by the 2008 financial market crash. While the

pandemic led to a drop to around 3.23 percent, factors such as

supply chain issues, economic volatility, rising commodity prices,

and the war between Russia and Ukraine have led to the current

rise. The Philippines, which is still rebuilding its pandemic-hit

economy, expectedly isn’t immune. Inflation hit a four-year high

of 6.9 percent in September, above a Reuters poll forecast of 6.7

percent and the central bank full-year target of 2-4 percent. While
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the BangkoSentral ng Pilipinas is working to bring the percentage

down, Filipino consumers are feeling the pinch. In connection to

the field of accounting, the question to ask is how this current

crisis will affect Philippine taxation. (Jessica Mae Gois, 2022)

According to Ramon Royandoyan (2023), MANILA, Philippines

(Updated 10:46 a.m.) — Inflation unexpectedly eased in February,

bringing good news for policymakers that have been struggling to

control soaring prices that have forced millions of Filipinos to

tighten their belts. Inflation, as measured by the consumer price

index, quickened to 8.6% year-on-year last month, the Philippine

Statistics Authority reported Tuesday. This was slower than the

8.7% print recorded in January.

II. RELATED STUDIES

A. Foreign Studies

Ali et al. (2020) investigated the impact of inflation on the

purchasing behavior of Pakistani university students. The study

found that inflation had a significant negative effect on students'

purchasing behavior and that students preferred to purchase low-

cost products.
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Mahmood et al. (2017) conducted cross-country empirical research

on online shopping behavior and found that students from different

countries had different online shopping preferences and behaviors.

The study also revealed that students' financial attitudes and

practices influenced their impulsive buying behavior.

In a study conducted by Younas, M. (2020), in Pakistan, the

generational difference in purchasing habits is evident, although

inflation is a problem for all economies and generations. Customer

preference, which differs from person to person, is another crucial

issue. Because every person will be affected differently by a price

increase—some may buy in large quantities, while others may cease

purchasing—there is considerable ambiguity regarding the outcomes.

Yet, most consumers favor quality over cost-effectiveness, fancies,

and trends. Thus, while some consumers might go for branded goods

and some might opt for generic goods, most people would pick both.

Moreover, consumers may cease purchasing fashion clothing due to

growing prices, but they would continue to purchase necessities

like food. Many styles depend on additional elements including age,

marital status, and job type.

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In the study conducted by EffahNyamekye, G. and AduseiPoku, E.

(2017), they found that there is a positive relationship between

inflation and consumer spending. Also, since inflation influences

consumer spending, policymakers should take the study's conclusions

into account while managing the economy. As inflation, one of the

variables in the marketing environment influences consumer spending

behavior in a favorable way, marketers should also take the study's

findings into account when trying to influence consumer spending.

Future research should consider this.

Muniady et al. (2017) explored the factors influencing consumer

behavior among university students in Malaysia. The study found

that income, personal values, and social factors significantly

affected students' purchase decisions.

B. Local Studies.

The Covid-19 pandemic, being a health crisis, made Filipinos

more aware and conscious of their health and financial wellness.

From what we have heard and read; we know how expensive it can

be to be hospitalized due to covid. Sadly, the majority of those

who died or get hospitalized do not have the needed health or

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life insurance plans so they have to pay their medical expenses

out of their own pockets, leaving a big dent in their savings.

But we also realized that we don’t even have to be sick or

hospitalized to feel the pinch of the virus in our pockets. The

unemployment resulting from quarantines and lockdowns caught

many people financially unprepared. Because of this, people are

now making sure that a portion of their budget is properly

allocated for savings, health, and life insurance plans. Those

with more means are making smart investments while market prices

are at a bargain (Ledezma, 2021).

High inflation is likely to weaken activity by obscuring and

distorting relative prices, creating uncertainty that undermines

long-term decision-making and discouraging savings;

redistributing incomes, thereby weakening consumption; and

eroding financial stability (Ciccarelli, M., and C. Osbat,

2017).

The Start of the Year 2020 was rough, especially when the

world was shaken of covid-19 virus, which until now in the

Philippine is still rampant and can be seen on the news daily

with this, the study aims to understand the Filipino consumer

buying behavior in the new normal within the ages of 18 years

old and above. Thus, a recent study has taken that in every era,
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there is a set of behavior among the different generations,

which shows different factors that influences these consumers

to buy a particular product. With the understanding of the

consumer behavior, companies would be able to adjust and manage

these factors such as which products are being bought by

consumers the most such as food, medicine, clothes, and others

(Svadova, 2021) as cited by Santiago, 2022).

With almost all households on a tight budget, Filipino

consumers are looking for products and services where they can

get more value for their money. Nowadays, brands don’t matter

as much as the quality and value consumers get from what they

are buying. And with the information made available in one click,

it is so easy for consumers now to compare your products and

services with those of others in the market. This puts every

business owner on their toes as a brand name is not a guarantee

of customer loyalty. The one who can give/offer better quality

for the least amount is what consumers are going for (Ledezma,

2021).