EFFECTS OF INCREASING OF

PRODUCT PRICES (INFLATION)

IN STOCK MARKET TO THE
VENDORS OF LIBERTAD
MARKET

Submitted By:
FEDILO, Nichole Ann A.
1.1 Chapter 1 - Introduction

BACKGROUND OF THE STUDY

In recent years, raw products value continues to increase which causes for the product values in
stock market to elevate. This problem resulted to discoveries of new alternative way on how to
lessen the expenses when buying needed products. High Inflation is causing supply chain disruption.
Organizations need to act now to be resilient to the new reality.

Rising values of products causes for some stores in Libertad Market to close due to bankruptcy.
While some stores extended because they were able to find new ways to sell their product by selling
it in alternative ways like online selling and delivering it in door-to-door houses.

Inflation is one of the big problems in our country. Almost everyone knows what inflation is, but it
remains a source of great deal of confusion because it is difficult to define it unambiguously.
Inflation is often defined in terms of its supposed causes. Inflation exists when money supply
exceeds available goods and services. Or inflation is attributed to budget deficit financing.

As years passed by value of products increases while the value of money decreases. Inflation
continues to rise while the percentage of unemployed people is also rising. Higher unemployment
rate will lead to increase government borrowing. It will cause a drop in tax revenue because there
are lesser people paying income tax and spending less. Due to the loss of earnings to the
unemployed, the government need to spend more subsidy for them in housing benefits and income
support.

Inflation is one of the most important economic issues in the world. It can be defined as the price of
goods and services rising over monthly or yearly. Inflation leads to a decline in the value of money, it
means that we cannot buy something at a price that same as before. This situation will increase our
cost of living.

If uncontrolled, inflation can result in severe loss of consumer or organizational purchasing power.
Typically, procurement managers respond to high inflation by placing orders promptly, trying to
secure supply and build inventory. Aggregated across the whole economy, this increase in demand
can worsen inflation.

STATEMENT OF THE PROBLEM

The main objective of this study is to know the effects of inflation and how to manage money in
effective way. It aims to specifically answer the following questions:

1. How much did the product’s value increase from its past value to its present value?
2. How did the increase in product value affect the vendors?
3. What were the reactions of buyers/ consumers to the increased value of products?
4. What are the strategies implied of vendors/ sellers in selling their products when there is an
increasing of product prices in stock market?
5. What are the impacts of inflation to both consumer and vendors in Libertad Market?

HYPOTHESIS

There are many factors effecting the vendors of Libertad Market due to inflation. The dependency of
income and money management of vendors on inflation are high. The researchers were able to
determine and specifically name out each factor in the inflation towards the vendors of Libertad
Market.
THEORETICAL BACKGROUND AND RELATED LITERATURES

Effects of Inflation on the Supply Chain: Procurement becomes more complex during inflationary
periods. If increased costs are to be passed on to the buyer, then demand typically fails, therefore
fewer goods or services may be required by producers. Sales and Operating (SOP) processes need a
more focused, detailed, and agile planning approach with support from all the stakeholders in the
supply chain, including Sales and Marketing, and Warehousing and Logistics teams.

In a state of reduced supply, some companies had to raise their prices, creating the inflationary
situation we are in. Although container shipping rates and delivery times have recovered recently,
this hasn’t eased consumer prices. The Bank of England expects inflation to return to its 2% target in
around two years. If this happens the rate of price increases will slow, but higher costs could remain.

Inflationary pressure directly affects the supply chain. Persistent problems with port congestion and
import containers are exacerbated by inflation and labor availability. Fuel prices are a huge factor in
logistics as well, driving up transportation and freight costs that were already in the rise because of
driver shortages.

Many supply chain and logistics professionals believe inflation has negatively affected their business.
These impacts include capacity constraints as well as rate and price increases, supply chain
instability, longer lead times and delayed orders, and continued issues with shipping containers.

SCOPE AND DELIMITATIONS

This study aims to determine the effects of the continuous increase in product value on the vendors
by personally surveying them at Libertad Market. The research team will conduct the survey with at
least 50 active vendor members at Libertad Market. For a specific research project, the research
team will survey both wholesalers and resellers to see how they were able to adapt to the sudden
increase of value. The research team will also survey the consumers/buyers to know how they buy
their needs and wants while effectively managing their money.

SIGNIFICANCE OF THE STUDY

The result of the study will be of great benefit to the following:

Community. Inflation affects consumers most directly, but businesses can also feel the impact.
Household, or consumers, lose purchasing power when the prices of items they buy, such as food,
utilities and gasoline, increase. While companies lose purchasing power, and risk seeing their
margins decline, when prices increase for inputs used in production, such as raw materials like coal
and crude oil, intermediate products such as flour and steel, and finished machinery.

Government. Inflation has two main effects on the government’s budget and the economy. First,
unexpectedly high inflation works as a “soft default” on current government debt since the real
value of the debt asset is repriced under new inflation expectations. The reduction in real debt
reduces capital crowd-out and increases investment. Second, the tax code has various elements
which are not automatically adjusted for inflation.

Agriculture. Input price inflation creates cash flow problems for farmers and increases the necessity
of a high level of operational management and conservative financial strategies. Individual farmers
can possibly counteract the effect of input price inflation through increases in productivity and
economizing on costs.
Libertad Market Vendor. Rising costs and uncertain revenue growth can take a toll on corporate
profit margins, and stock prices can fall in response. On a broader scale, high inflation creates
unknowns about future interest rates, and that uncertainty often contributes to market volatility.

DEFINITION OF TERMS

The following terms are used extensively in the study. They are defined conceptually and
operationally for better understanding.

Unambiguously. In a manner that is not open to more than one interpretation.

Procurement. The action or occupation of acquiring military equipment and supplies.t