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Impact of Inflation on Small Businesses

Inflation has negatively impacted many businesses by reducing consumer buying power and earnings. As inflation rises faster than incomes, consumers have less ability to purchase goods, leaving some businesses with excess inventory and higher debts. To adapt, businesses must adjust to current consumer spending levels and prices, which can reduce profits. A study in Masinloc, Philippines found that inflation in 2022-2023 increased costs for small businesses like food bars and dress rentals, without a corresponding increase in profits. Inflation makes affording goods a challenge for both consumers and businesses in the local area.

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John Brad Angelo Lacuata
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177 views2 pages

Impact of Inflation on Small Businesses

Inflation has negatively impacted many businesses by reducing consumer buying power and earnings. As inflation rises faster than incomes, consumers have less ability to purchase goods, leaving some businesses with excess inventory and higher debts. To adapt, businesses must adjust to current consumer spending levels and prices, which can reduce profits. A study in Masinloc, Philippines found that inflation in 2022-2023 increased costs for small businesses like food bars and dress rentals, without a corresponding increase in profits. Inflation makes affording goods a challenge for both consumers and businesses in the local area.

Uploaded by

John Brad Angelo Lacuata
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Theoretical framework

The impact of inflation among business owners and how it


affects the earning power of consumers.
Monetary Theory of Inflation
The monetary theory of inflation asserts that money
supply growth is the cause of inflation. Faster money supply
growth causes faster inflation. In particular, 1% faster money
supply growth causes 1% more inflation. With other things
constant, the price level is proportional to the money supply.
Doubling the money supply would double prices.
Impacting a whole lot of business, inflation has made some
business, dull or shunned by consumers as they have lower
buying power. and since inflation has risen and the earning
power of the consumer has not. For that reason, some
businesses are left nothing with an inventory full of unsold
items from previous orders and higher debts for rent payers.
Inflation has made all kinds of business to adjust and adapt
in current consumers power and deal with lower profit due to
adapting.
Since we are conducting research about inflation here in
Masinloc, Philippines we are considering the culture of
customers here in Masinloc we are aware of how much our
mothers, the ones who shop and buys the needs of the
household, we are going to say that they’re very meticulous on
the prices on what they buy. They do always say money don’t
grow on trees but paper does. But the better saying is money
don’t just increase, the bank is in control.
Inflation has caused more and more dilemma to the
people of Masinloc making a business and earning a living. This
has further worsened as inflation rosed and income still in a
stagnant state.
Affording things these days can be a hassle, and the
inflation does not help one bit. Many of the business we have
questioned said that the impact of inflation in the year of 2022
to the year of 2023 have increased but profits have not
increased or become much better and it reflects on how the
inflation can affect businesses, specially small businesses, such
as food bars and dress rentals.

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