How inflation affects business

[Carpon]

Inflation refers to the rise in the prices of goods and services. Though a little shift in the prices of goods is normal, prolonged increase can be dangerous at times as it leads to the general rise in the cost of living especially if their is no counter action of increase in workers salaries.

Inflation affects businesses the following ways among others.

✓ It leads to a decrease in the value of money and increase in cost of goods: Businesses with low capitals will have to find ways to fund the business other than the business funds because goods will now be purchased at higher rates and prices from wholesalers.

✓ Reduction in the level of patronage: Since the value of money goes down, people will have to cut out other expenses and Businesses will be at the receiving end since they will have to cope with goods staying for prolonged periods.

As a business person, you must be able to properly plan ahead of such conditions by having back up funds.

 

[Holicent]

1. Businesses will have money to spend.

2. The prices of goods and services will be more stable, which means you can plan much better for the future and make better informed decisions about what to buy and sell.

3. The cost of borrowing money will drop because interest rates will be lower, which makes it easier for people to take on loans or borrow from friends or family members.

4. With less inflation, the value of your money goes up faster than the cost of living does even though the currency doesn't go through any changes like a change in its amount or makeup (like with a barter system). This means that even if prices go up overall, your purchasing power will remain the same or increase at least a little bit every year.

The higher level of investment means that there is more production capacity available to satisfy demand, which means that there will be more jobs created. This increases aggregate demand and boosts economic growth.

 

[Etini]

Inflation no matter how you look at it would always have a negative impact on businesses. Inflation would lead to pie purchasing power for the consumers which would translate to lesser patronage. It is even worse for dealers of luxury items. People would only spend their money on the basics of survival.

Inflation would lead to a higher cost of production because the prices of inputs would rise. If you used to use $100 to produce 50 units of goods. With inflation, that amount might only take 35 units. It might force a business into debt if it wants to meet up with its normal capacity. I know of a lot of people who shit down their businesses because of the persistent rise in the price of inputs. They couldn't meet up and had to leave the business. Any responsible government should prioritize the need to keep the inflation rate very low.