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HOW DOES INFLATION AFFECT SALES?

HOW DOES INFLATION AFFECT SALES?. INFLATION.

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HOW DOES INFLATION AFFECT SALES?

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  1. HOW DOES INFLATION AFFECT SALES?

  2. INFLATION Is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

  3. High inflation distorts consumer behavior. Because of the fear of price increases, people tend to purchase their requirements in advance as much as possible. This can destabilize markets creating unnecessary shortages. • The price of the raw material and everything needed to continue operating such as fixed costs like rent, warehouse´s, machinery and variable costs like wages, utilities and material used in production, goes up • It affects buying power. Inflation affects people´s economy, is not about how much you make, its about what you can buy with that. People buying capacity will go down, that will low oursales. • It causes stock. As people don't have economic power to buy, final product would get stocked, which in turn, would cause economic lost for warehouse´s expenses and the due date might over pass.

  4. Examples: • Argentina - 1980s. During the 1980s inflation averaged 750pc a year, reaching a peak of 4,924pc in December 1989. The main cause was a persistent government budget deficit. This was financed by the country's central bank, which led to high inflation. • Japan - 1998 to 2005. The 1990s were known as the "Lost Decade", and the country' difficulties were linked to the large amount of debt in the economy. Prices began to fall in 1998, a process that continued for several years. By 2005, consumer prices had fallen by more than 4pc from their peak in 2005. • Entrepreneur case. We are a soda producers, one of our customers who makes $1.20, buys one soda daily at $1 dollar, and with that 20 cents he buys his subway ticket. If inflation goes up, the soda price would be $1.20 and he wont be able to buy his soda because he needs to go home, so he wont buy the soda and that would low our sales.

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