Analyzing the Impact of Inflation on Household Spending Patterns

Abstract

The general price level of products and services rising steadily over time is known as inflation, and it directly affects how people and households behave economically.  As inflation increases, customers' purchasing power decreases, causing them to modify their spending habits and frequently choose needs above discretionary products.  This phenomenon is particularly important to understand in developing economies where a significant share of income is devoted to basic consumption.  As inflation becomes a common occurrence in economies around the world, its effects on decisions made at the household level become an important topic for economic research and policy development.