CHAPTER 1

BACKGROUND OF THE STUDY

Impact of inflation on consumer’s

buying behavior

A. Introduction
The Philippines once belonged to the poorest country in Asia. Inflation
has been highly debated phenomenon in economics, even the use of the word inflation has
different meanings in different context, it can lead to falling demand caused by high
inflation. Many consumer experiencing it especially our pa rents who are the one that always
buy goods and products. In short inflation is the increase of prices of goods and services over
time.

According to JB Maverick (2019) inflation refers to the rate which the

prices of commodities rise over a specific period of time. since inflation is a condition, when
cost of services coupled with goods rise, the entire economy seems to go out of control and
the prices affected by the rate of inflation naturally impact consumer sp ending on goods
significantly higher inflation rate erode purchasing power, make it less likely that consumers
have excess income to spend after covering the basic expenses such as food and housing .

The main reason of this study is to solve the ignorance among consumer
when it comes on inflation and the possibility that it will affect their spending and buying
behavior as a consumer and be aware that high inflation puts pressure on government to
increase the value of the state pension and this will be another issue.
For this study, I will be looking for the main impact of the inc rease in
prices of goods to the consumer’s buying behavior and their differences in view about this
issue that’s also related to the economic growth of our country.

B. STATEMENT OF THE PROBLEM

 The main objective of this study is to enlighten the consumer about the
possible effect of high inflation on their buying and spending behavior and to find the positivity
of it on consumer especially to the economy that benefits and grows. Although inflation usually
occurs and can affect your standard of living, still we should how to make it low and under control
even the policy makers focus on maintaining it at a low rate.

SPECIFICALLY, THIS STUDY AIMS TO ANSWER THE

FOLLOWING:
 To determine the possible effect of inflation on consumer’s buying behavior

 To analyze the relationship between inflation and consumer’s buying behavior

 To Formulate different ways to reduce inflation

C. SIGNIFICANCE OF THE STUDY

This study is significant because it would be beneficial for consumer
that is not yet aware on how inflation can really affect their buying behavior and analyze
why there’s too much raising of prices that might followed by a rise in interest rates. The
demand of high-end products decreases and will result people to look for cheap similar
products instead of buying the same expensive product or often limit their spending but
sometimes customers buy the expensive products too because there is no alternate product
available and that product is really important for them to have.

THIS STUDY WILL BE BENEFICIAL AND EFFECTIVE TO

THE FOLLOWING PEOPLE:
 Students- This will help them understand the important issues and its
implication to the economy. Through their awareness with the inflation effect to the
economic growth and to consumer’s behavior
  Other Researchers- This paper shall be effective and helpful reference
for the researchers who would intend to make any further relevant study about the
effect of inflation

 Consumers- They will really be the ones who are affected when inflation
occurs. This will help them know the changes in prices and how it affects their daily
life

D. SCOPE AND LIMITATIONS

This study is mainly focuses on the impact of inflation on
consumer’s buying behavior and how this problem affects their buying plans. It was
conducted to determine that inflation won’t affect you much if you have high income while
if you are a low income person then it will affect you and your buying behavior and you might
quit buying such things which you used to bought before inflation so for better
understanding, inflation affects people differently depending on how they earn their living.
however, this study does not want to cover the other platforms that may affect the
consumer’s spending or others point of view.

Definition of terms
words Definition
-According to JB Maverick (2019) inflation
Inflation refers to the rate which the prices of
commodities rise over a specific period of
time.
-a buyers willingness and ability to pay a
Demand price for a specific quantity of good or
service.
-It consists of the production, distribution
Economy or trade and consumption of limited and
goods and services by different agents.
-quantity of payment or compensation
Price given by one party to another
-It is the result of monetary, fiscal and
Economic other economic policies undertaken by its
policy makers.
Growth
E. Hypothesis
The impact of inflation has a significant effect
on consumer’s buying behavior

REVIEW OF RELATED LITERATURE

The following discussion presents some of the major components
of the study. Each section is organized under related literature, foreign and local studies.
Insistent to identify the effect of inflation on consumer’s buying behavior, there is seemed
a need to conduct a research on the subject for a wider view of some relevant circumstance.

Foreign Literature
According to Adrian Slabbert (2016) inflation, increases the cost of
goods and services and the cost of living, if the consumer’s income increased as the same
rate as inflation, they wouldn’t be negatively affected because they would have more money
in order to pay and to spend because of the extra cash flowing through the economy.
In contrast, based on investopedia (2015) Inflation has one more
potentially negative result, it affects people in their buying power well we are talking about
expensive goods, an average income person cannot afford expensive goods daily , for that
person buying can go through with a long process so it will take a while for that person to
buy such things.
As determined by Cashin D & Unamaya T. (2015), consumers rely
on various information cues or product attributes in their decision making. Price represents
extrinsic cues and it’s one of the most important kinds of information consumers’ use when
they make a purchase decision. Consumer change their consumption habits with change in
the perceived inflation rates. They tend to consume more if the perceived inflation rates are
high, for example if an individual perceive the price of a particular product to go high in the
future.
 Therefore, Inflation is a persistent rise in price level within an
economy over a period of time. It is important to note that inflation in a country can be
either rising or falling but as long as the inflation rate remains positive, it can still be classed
as inflation as overall the price level is still rising from one period to the next so in short
inflation increases your cost of living, if the inflation rate is high enough, it hurts the
economy.

Local Literature
Based on the economic journal (December 2011) Inflation is a
process of continuously rising prices or equivalently a continuous falling value of money.
Inflation is then fundamentally a monetary phenomenon. Some would go further and agree
with Friedman that “Inflation is always and everywhere a monetary phenomenon”

In another study conducted by Isurveille (2008) shows that

inflation means you have to pay more for the same goods and services but if your income
doesn’t keep pace with inflation, your buying power declines. Over time, inflation increases
your cost of living. If the inflation rate is high enough, it hurts the economy.

According to Ramya N. (2017) Consumer behavior is an important

factor that will help them to tap the consumer in a better way. Consumer behavior has been
always of great interest to marketers. A consumer buying behavior influenced by social,
cultural. Personal and when consumer paying less interest it gives them more money to
spend overall and creates a ripple effect of increased spending.

Therefore, people start spending less because higher inflation

rates mean higher borrowing costs. In different countries the impact of inflation is different
but in most countries its same. Basically due to inflation consumers reduces their buying
power and also the life standard of the people also decrease

.
CONCEPTUAL FRAMEWORK

V
IV.
DV.
IMPACT OF CONSUMER’S BUYING
INFLATION BEHAVIOR

The figure above shows the relationship between the two variables , the
dependent and independent variables.

CHAPTER 2
METHODOLOGY
RESEARCH METHOD
This study used qualitative research because the aim is a complete detailed
description and the design emerges as the study unfolds in which qualitative data is more ‘rich’,
time consuming and less able to be generalized. It is also depending on the real-life situations
and experiences of human beings focusing on individuals and the researcher tends to become
subjectively immersed in the subject matter.

RESEARCH DESIGN
The research design of this study is descriptive approach, when the approach
is applied correctly, it become a valuable method. It is a phenomenon within its context using a
variety of data sources to ensures that the issue is not explored through one lens. But rather a
variety of lenses which allows for multiple facets of the phenomenon to be revealed and
understood

Data Gathering
The data were gathered through online survey that distributed to
respondents via social media and was conducted providing 10 questions with 3 choices each. The
said survey was answered by some of the grade 10 students from First City Providential College,
February 2020.

Population/Sampling technique
In getting the population whom the researcher distributed, each section
was equally divided into groups whereby a segment of the population, called the sample is
observed for the purpose of describing, estimating about the total population from which the
sample was selected.

Statistical Treatment
First City Providential College has a total population of 347 students in
Grade 10, having 9 sections with inexact 40 students each. To take the formula sample, must use
a Slovin formula to figure out what sample size you need to take. Sometimes you know something
about a population, which can help you determine a sample size.
SOLUTION FOR SAMPLE SIZE
 n= sample size
N= population
𝑒 2 = 𝑚𝑎𝑟𝑔𝑖𝑛 𝑜𝑓 𝑒𝑟𝑟𝑜𝑟
𝑁
n=1+𝑁𝑒 2

347
=
1 + 347(0.15)2
347
=
1+347(0.0225)
347
=
8

= 43 respondents

CHAPTER 3

Presentation and Interpretation of data

Graph 1. Percentage of their understanding

about inflation
 27.1%

39.6%

33.3%

General level of prices is going up increase in the prices of goods Can be both good or bad

Out of 43 students, there are 39.6% who understand inflation as a general level of prices
that is going up, 33.3% said that inflation is the increase of prices of goods and 27.1% chose that
it can be good or bad depending upon which side one takes. Therefore, many students
understand inflation as General level of prices is going up
Graph 2. Percentage of affected in buying
their daily needs
2%

45.8%
52.1%

sometimes yes no

There are 52.1% respondents said that sometimes inflation affect them by buying
their daily needs while 45.8% experience the impact of inflation on their buying and in contrast
with the 2% who said their spending is not affected by inflation. Therefore, many said that
sometimes inflation affect them by buying their daily needs. However, good to hear that there is
still consumer that is not that affected.
Graph 3. Percentage of how inflation
affects their spending

12.5%

27.1%

60.4%

I usually limit my spending Start looking for cheap alternatives

I prefer the cheap one with low priced

In the graph above, it shows that 60.4% said that inflation affects their buying
by usually limit their spending and 27.1% said that they start looking for cheap alternatives while
12.5% prefer the cheap one with low priced. Therefore, most students limit their spending when
inflation occurs.
.
Graph 4. Percentage of their experience
as a consumer

6.3%
6.3%

22.9%

64.6%

Moderately satisfied slightly satisfied very satisfied slightly dissatisfied

In their experience as a consumer, 64.6% experience a moderate

satisfaction and 22.9% said that they are just slightly satisfied for being a consumer and both very
satisfied and slightly dissatisfied chosen by respondents with 6.3%. Therefore, there are many
students that’s moderately satisfied in their experience as a consumer.
Graph 5. Percentage of consumer who
sees inflation as a widespread problem

8.3%

50%

41.7%

yes maybe no

In the graph above 50% consumer said that they see inflation as a
widespread problem while there are 41.7% consumer that chose maybe, in comparison 8.3% said
that they not see inflation as a wide problem. Therefore, many said that they see this issue as a
widespread problem so in short many consumers are aware that inflation is an economic problem
Graph 6. Percentage of consumer that
prefer the alternative products
2%

6.2%

22.9%

68.8%

sometimes yes no never

In the findings of how many prefer the alternative products, 68.8% said
that sometimes they prefer the alternative one while 22.9% said yes and 6.2% said no for buying
the alternative products. In conclusion, sometimes consumers prefer the alternative one instead
of the original product with high price
Graph 7. How has the increase in the
prices of goods affected your buying
plans?.
8.3%

12.5%

79.2%

Im buying only the basic needs it hasn't affected my plans at all I've sorted to second-hand items

79.2 respondents said that they are only buying the basic needs and
this is how inflation affect their buying plans while 12.5% said that their buying plans hasn’t
affected at all but 8.3% chose the second hand items and this is how inflation affect them.
Therefore, there are many students that buy only the basic needs and this is how they deal with
the inflation.
Graph 8. Percentage of what might
happen in the inflation in the next
months

10.6%

44.7%

44.7%

not sure go up no change

Based on the graph above, there are same percentage with 44.7% said
that inflation might go up or not sure in the next months while there are some of respondents
said that there will be no change in it or it will remain constant. Therefore, many students have
different perspective on what might happen on inflation in the next months.
Graph 9. Percentage of respondents
think why inflation considered as
economic problem

16.7%

43.7%

39.8%

It affects many aspects of the economy Greatly affecting the economy Cannot be controlled

Based on the graph above. There are 43.7% respondents said that
inflation considered as economic problem because it affects many aspect of the economy
while there are 39.6% said that it’s because it greatly affecting the economy, the 16.7% said
that it cannot be controlled. Therefore, many respondents believe that inflation is
considered as economic problem because it affects many aspects of the economy
Graph 10. Percentage of respondents
think what is the best way to control
inflation

8.3%

47.9%

43.8%

Raising interest rates reduces demand and bring inflation under control
control of the money supply
reduce government spending

Out of 43 respondents, 47.9% said that raising interest rate might

control inflation and the other 43.8% chose that controlling money supply might bring
inflation under control while the 8.3% said that the best way is to reduce government
spending.

Overall, the various perspective of the respondents about the issue

means that they are aware on how inflation can affect many aspects of the economy and
how it occurs. Many see inflation as major problem and can affect many consumers in their
buying and saving behavior, they also said that raising interest rate can bring inflation under
control
 Chapter 4
Summary, Recommendations,
Conclusions

I. Summary
Inflation is the rate at which the prices of goods and services rise.
Inflation has a major effect on the entire country’s economy. It impacts not only the
government but the little things in the average person’s daily life. Inflation as mentioned is
the rate a price rises and essentially how much the dollar is worth at a given moment with
regards to purchasing.

Thus, the most significant cited reference in this study was taken from
the study of Ramya N. (2017) stated that consumer behavior is an important factor that will
help them to tap the consumer in a better way. Consumer behavior has been always of great
interest to marketers. A consumer buying behavior influenced by social, cultural. Personal
and when consumer paying less interest it gives them more money to spend overall and
creates a ripple effect of increased spending.

Upon conducting this research, the main objective of this study is to

determine the impact of inflation specifically on consumer’s buying behavior and their
different point of view about inflation at the present time to find solution about how
inflation affect the buying behavior of consumer and to find what are the possible solution
for it which are given to the grade 10 students who served as respondents by answering a
survey.

Therefore, the hypothesis of this research is proven and correct that

the inflation has significant effect on consumer’s spending and buying behavior and can also
affect many aspects of the economy.
II. Recommendations
Below are a few recommendations of the researcher to recommend
some better way so that they will not be affected much by inflation e specially their buying
behavior and will serve as guide for them as a consumer.

Students- They must be more aware on what might happen next on

inflation so that they will not be affected that much, inflation increases cost of education as
school fees or study materials so that some parents cannot able to afford for be tter
education so as long as government can be able to control it, they should do.

Parents- All they have to do is rely on the solutions which is done by the
government and as parents don’t just buy product that is not sure safe because some of it
are not good and has low quality even though its price is low.

Government- The government can increase taxes such as income tax

and VAT and cut spending. This improves the government’s budget situation and helps to
reduce demand in the economy.

III. Conclusions
Inflation is usually occurring but there’s one thing we can do; we
can control it the way we can. This study will serve as a good example of the impact that
inflation has on consumers. We all know that it has a good and bad effect but the point is
weather bad or good as long as we have some knowledge about it, we can c ontrol it.
Hopefully, this research will help consumers on how can they deal with inflation and improve
what they’re doing thus avoiding negative effects, no doubt it affects consumer especially
hard because the prices of things they buy go up while their income stays the same. Note
that this does not mean that all prices are rising, in fact if enough prices fall, the average
may fall too, resulting in negative inflation.
 IMPACT OF INFLATION ON
CONSUMER’S BUYING BEHAVIOR

Submitted by: Ella Maxene S. D Sarmiento

Submitted to: Ma’am Sheryl Solis

10-Del Pilar