UNIVERSITY OF PORT HARCOURT
FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF MARKETING
ASSIGNMENT
ON
INFLATION
BY
NWAGRABE ELIZABETH
U2023/0630039
COURSE TITLE: MARKETING ECONOMICS
COURSE CODE: MKT 123.2
COURSE LECTURER: DR. EUCHARIA
SEPTEMBER, 2024
INFLATION
Inflation is the long term increase in prices of goods and services due to the devaluation of
the currency. Even though inflation is a bad thing, it might be a good thing for
entrepreneurs.
In economics, inflation is defined as a sustained increase in the general price level of goods
and services in an economy over a period of time.
TYPES OF INFLATION
1. Demand pull inflation
Inflation from high demand for goods and low unemployment.
2. Lost push inflation
Inflation caused by sudden decrease in the supply of goods prices.
3. Anticipated
Prices rise because people expect it to rise.
HOW DOES INFLATION HELP ENTREPRENEURS
1. Increase in spending and investment: As inflation rises, the value of money decreases.
2. Impact businesses from a supply side _cost of materials and it may influence costs
associated with trade.
3. It benefits the producers of product. they experience better profits since they can sell their
products at higher prices.
WHY DOES INFLATION OCCUR
1. DEMAND PULL INFLATION
This occurs when aggregate demand for goods and services in an economy rises more
rapidly than an economy's productivity capacity.
2. EXCHANGE RATE
If a country increases the exposure to foreign marketplace, it's inflation will become
worse.
3. COST_PUSH EFFECT
This is an economy theory that explain what drives up the prices of consumer goods and
services.
This theory states that when companies faced with increased input costs like raw materials,
they will retain their profitability by passing this increased cost of production onto
consumers in the form of higher price.
EFFECTS OF INFLATION
Inflation affects the economy especially companies when prices rise for energy, food,
commodities, and other goods and services.
Inflation impact the cost of living, the cost of doing business, borrowing money, mortgages,
corporate and government bonds and every other facet of the economy.
HOW TO MEASURE INFLATION
1. Consumer policy index (CPI)
2. Gross domestic product (GDP) deflator
3. Inflation rate (percentage change in CPI or GDP deflator)
HOW TO CONTROL INFLATION IN NIGERIA
The study recommends that government should concentrate on providing social
infrastructure that would encourage the private sector to invest and expand output, taking
advantage of existing unemployed resources.
This would help to stem inflation in Nigeria which is usually caused by scarcity.
It can also be controlled by an adjustment in monetary policy. Implementing monetary
policy will increase interest rates, which will reduce the purchasing power and they lower
aggregate demand. Lower demand will reduce prices and thus reduce inflation.
METHODS USED IN CONTROLLING INFLATION
MONETARY POLICY
1. Interest Rate Hikes: Increase borrowing costs to reduce consumption and investment.
2. Reducing Money Supply: Decrease money circulation to reduce demand for goods and
services.
3. Reserve Requirements: Increase banks reserve Requirements to reduce lending.
FISCAL POLICY
1. Reducing Government Spending: Decrease government expenditures to reduce demand.
2. Increasing Taxes: Increase taxes to reduce disposable income and consumption.
SUPPLY_SLIDE POLICY
1. Improving Productivity: Encourage investments in technology and infrastructure.
2. Price Controls: Regulate prices (though this Can have unintended consequences).
3. Investing In Human Capital: Enhance education and training to boost Productivity.
INFLATION TARGET
Set an inflation target (e.g 2%) and use monetary policy to achieve it.
PRICE STABILITY AGREEMENT
Encourage businesses to maintain stable prices.
SUPPLY CHAIN MANAGEMENT
Improve logistics and distribution to reduce costs.
ENCOURAGING SAVINGS
Promote saving over spending through incentives.
REDUCING TARRIFS AND TRADE BARRIERS
Increase imports to reduce prices
SUMMARY
Inflation is a sustained increase in the general price level of goods and services in an economy over a
period of time.
CAUSES OF INFLATION
1. Demand and Supply Imbalance
2. Monetary Policy (excessive money printing)
3. Economic Growth
4. Increase In Wages And Raw Materials Cost
5. External Shocks (e.g global events, natural disasters).
EFFECTS
1. Reduced Purchasing Power
2. Uncertainty For Businesses And Investments
3. Inequality (hurts fixed_income earners and
benefit borrowers)
4. Encourages spending and investing (as money
loses value over time)
TYPES
1. Creeping Inflation (slow and steady)
2. Galloping Inflation (rapid and out of control)
3. Hyper Inflation (extremely high and usually accompanied by a collapse in value of money)
4. Stagflation (combination of inflation and stagnant economic growth)
