THE EFFECT OF INFLATION ON SPENDING HABITS AND PURCHASING

POWER OF CONSUMERS RESIDING IN BATANGAS: AN EMPIRICAL STUDY OF

BUDGET ALLOCATION AND CONSUMPTION PATTERNS

A Research Paper
Presented to
The Faculty of the College of Engineering, Architecture and Fine Arts
Batangas State University
Batangas, City

In Partial Fulfillment
of the Requirements for
The Contemporary World

by
DE LEON, CYRISH BERNADETTE C.
EGPIT, RALPH LORRAINE B.
GEMPES, JEYEAN
MARASIGAN, LOUIE ANDREI A.
PUNZALAN, SWEET LIANNA P.

JOSEPHINE R. MACATANGAY
Professor

February 2023
Acknowledgement

This study will not be accomplished without the intellectual and moral support
of the following considerate individuals to whom the researchers want to express their
gratitude and appreciation.

To God Almighty, for guiding us spiritually and being our strength while doing
this study.

And our family, for their assistance, compassion, and welfare support in
making this study possible.

To the University President, Mr. Tirso A. Ronquillo, Ph, D for his support.

To our research adviser and coach Ms. Josephine R. Macatangay, who

assisted the researcher in selecting and assessing the appropriate materials to use in
the research study, was significant in the successful completion of this study.

The respondents who took the opportunity to communicate with us, participate
in our study, and share their insightful thoughts deserve our sincere gratitude.

And lastly, to other bountiful individuals, Cyrish, Lorraine, Jeyean, Louie and
Lianna who participated in this study, our sincerest gratefulness is all for you.

The researchers also like to express their gratitude and respect to other
individuals who provided unwavering assistance during the entire research study
without being asked. Without all of you, we couldn't accomplish this.
Dedication

This piece of work is wholeheartedly dedicated to all the people who have
made this study possible.

To Father, the God Almighty, the source of our life, inspiration, wisdom,
intelligence, talent, creativity and strength throughout this study.

To the loving and supportive parents of the researchers who have always been
there to guide them through the process of completing this research study.

To the mentors, classmates, and friends, for being generous and for their
support and assistance.

To those who have inspired and touched their hearts, as well as those who
have lent a helping hand in making this study possible and to those who lifted the
researchers up and believed that they can finish this.

This work is all for you.

C.B.C.DL

L.B.E

J.B.G

L.A.A.M

S.L.P.P
 CHAPTER I
Introduction

Background of the Study

The immense volatile rate of inflation can potentially drive the economy to a
great distress. Uncertainty about the future prices entails major risk of uneven
distribution of wealth; this decelerates the nation’s economic growth. Extreme
variation in the inflation rate may occur if the programs have an impact on the
importing and exportation of products, job employment, production of commodities,
and other external factors. This inevitably causes a reduction in purchasing power of
some consumers, and erosion of real income. Considering that consumers' cost of
living depends on the prices of many goods and services and the share of each in the
household budget, their decisions to purchase will fluctuate since the price of the
products and commodities rises rapidly over time which is essentially the outcome of
inflation. As the cost of goods and services rises, inflation results in an increase in the
cost of living; therefore, the ability to buy products and services would also decline.
Although high inflation distresses the economy, deflation, or falling prices, is not
favorable either. As stated by the International Monetary Fund, when prices are falling,
consumers delay making purchases if they can, anticipating lower prices in the future.
For the economy this means less economic activity, less income generated by
producers, and lower economic growth

Indeed, many countries have grappled with high inflation including the
Philippines. According to the Philippine Statistics Authority, the inflation rate in the
Philippines has accelerated further from 8.1% in December 2022, to 8.7% in January
2023, and reduced into 8.6% in February 2023. The core inflation, which excludes
foods and fuels, increased 7.8% year-on-year from 7.4% previously. Such high levels
of inflation have been disastrous, the nation has taken difficult and strict policy
measures to bring inflation back to reasonable levels. According to research, various
factors, internationally and domestically, have led the persistent increase of
inflation in Philippines, which include, but not limited to: (1) increase of oil prices in
the world market, brought by the supply cuts as coordinated by the
Organization of the Petroleum Exporting Countries (OPEC) and its allied
producers, where the country imports almost all of its oil requirements; (2)
imposition of higher excise taxes on petroleum products, sweetened beverages
and other commodities as the new Philippine tax reform was enacted, the Tax Reform
for Acceleration and Inclusion (TRAIN) Law; (3) weakening of peso value, which was
recorded to be P55.30 against dollar; and (4) the country’s decreasing exports being
argued to be one of the reasons of inflation, while the imports is experiencing a
larger growth rate, caused by importation of raw materials and capital goods to be
utilized in the government’s Build, Build, Build infrastructure projects. The
consistent increase in prices may disrupt the whole economy as the currency
loses its real value and the people may suffer from its consequences, which
may lead to earners demanding a wage increase to offset the higher cost of living.
This is currently being faced by the Philippine economy and most Filipinos are
being affected in whatever class individuals belong to, in whatever profession
individuals are involved in. (Espano & Santilan, 2018)

Considerably, all the states face the same macroeconomic environment;

nevertheless, there are substantial differences between them in terms of inflation
volatility. Some of these characteristics are beyond the influence of public policy, but
others are a direct consequence of patterns of local public spending. However, to
shed light on the volatile rate of inflation facing heterogeneous consumers, we assess
how the consumer inflation expectation and spending behavior is altered when
change in goods and services prices deviate sharply and evaporate rapidly over time;
and what are the impacts of inflation volatility on various sectors.

Inflation is a persistent increase in the prices of goods and services over time,
which can significantly impact the spending habits and purchasing power of
consumers. With rising prices, consumers may need to allocate more of their budgets
towards necessities such as food, housing, and healthcare, leaving less discretionary
income for other items. Thinking of a plausible solution to the problem, the
researchers decided to conduct the study entitled “The Effect of Inflation on Spending
Habits and Purchasing Power of Consumers Residing in Batangas: An Empirical
Study of Budget Allocation and Consumption pattern” which aims to examine the
effect of inflation on the budget allocation and consumption patterns of consumers
residing in Batangas, Philippines. Specifically, this study will investigate how inflation
affects the spending habits and purchasing power of consumers, particularly in terms
of budget allocation and consumption patterns. By understanding the impact of
inflation on consumer behavior, policymakers and businesses can develop more
effective strategies to mitigate the negative effects of inflation and support the
financial stability of consumers.

Statement of the Problem

To shed light on the volatile rate of inflation facing heterogeneous consumers,

this study sought to investigate and understand further the impacts when change in
goods and services prices deviate sharply and evaporate rapidly over time.

Specifically, this research aimed to answer the following:

1. What is the demographic profile of the respondents and how does

inflation affect the consumer based on their demographic variable?

1.1 Age

1.2 Gender

1.3 Classification of the respondents

1.4 Social Status of the respondents

1.5 Average Monthly income/ allowance of the respondents

2. What is the consumer’s perception on inflation on prices of items

being consumed and expended within recent months?
 3. How does inflation changes budget consumption and decisions of
consumers in terms of:

3.1 Purchasing preferences of consumers

3.2 Quantity of consumption

3.3 Income supplements and savings

3.4 Loans and borrowing

Significance of the Study

Generally, this research was conducted to determine the impact of inflation

volatility on the economy. Specifically, may be considered beneficial to the following.

CONSUMERS. This study can raise awareness among consumers about the
impact of inflation on their purchasing power. This will provide the consumers an
insight on inflation and help them on how to spend their money correctly. This can
help them make informed decisions about their spending habits and how they
manage their finances. Understanding the effect of inflation on the cost of goods and
services will help plan their budgets more effectively. By accounting for inflation, they
can avoid overspending and ensure that they have enough money to cover their
expenses.

BUSINESS OWNERS. This study will help business owners understand how
inflation affects the buying behavior of consumers, and adjust their pricing strategies
accordingly. Furthermore, this study will help businesses forecast sales and revenue
more accurately and plan for future growth and expansion. This can also help
businesses analyze how their competitors are responding to inflation, and adjust their
strategies accordingly in order to help them stay competitive and maintain their
market share. Overall, this study will provide valuable insights for business owners,
helping them to adjust their pricing strategies, forecast sales, stay competitive, and
protect their profits.

GOVERNMENT. This study will help the government create and implement
possible solutions to the increasing inflation rates in the country. It will help
government policymakers understand how inflation affects consumer behavior, and
adjust their policies accordingly. By understanding the impact of inflation on
consumer purchasing power, government planners can forecast economic growth and
plan for future development and adjust its trade policies and negotiate better deals for
the country in international trade.

FUTURE RESEARCHERS. This study can provide a foundation for future

researchers to build upon in their literature review which will serve as a reference
material for further studies and will contribute knowledge and ideas to the future
researcher in regards with this topic. They can use the findings of this study to identify
knowledge gaps and research questions that have not been addressed. This can also
provide valuable data for future researchers to analyze. It can inspire future
researchers to innovate and explore new areas of research related to the effect of
inflation on consumer purchasing power.

Scope, limitation, and delimitation of the study

This study aims to investigate the impact of inflation on the spending habits
and purchasing power of consumers residing in Batangas. The study will focus on the
empirical analysis of budget allocation and consumption patterns of consumers in
Batangas, as well as their perceptions and attitudes towards inflation.The study has
several limitations that may affect the generalizability of its findings. First, the study
only focuses on consumers residing in Batangas, which may not represent the entire
population of the Philippines. Second, the study relies on self-reported data, which
may be subject to response bias. Third, the study does not consider the impact of
other macroeconomic variables, such as interest rates and exchange rates, on
consumer behavior.To ensure the validity and reliability of the study, certain
delimitations have been imposed. First, the study will only include respondents who
have lived in Batangas for at least one year, to ensure that they are familiar with the
local economic conditions. Second, the study will only use data from reputable
sources. Third, the study will use a survey questionnaire with validated measurement
scales to collect data from respondents, to ensure the accuracy of the data.

Hypothesis

H0: There is no significant effect of inflation on the spending habits and

purchasing power of consumers residing in Batangas.

Ha: There is a significant effect of inflation on the spending habits and purchasing
power of consumers residing in Batangas.

Definition of terms

The following keywords and terms help shape and construct every content and
aspect of this study. They are defined to better have deeper context on this research.

Inflation. It is the rate of increase in prices over a given period of time.

https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-
Basics/Inflation#:~:text=Inflation%20is%20the%20rate%20of,of%20living%20in%20a
%20country. The term is used as the main problem of economic growth including in
this research.

Volatility. Tending to fluctuate sharply and regularly.

https://www.dictionary.com/browse/volatile. Specifically, the word is used to define
inflation that is rapidly changing all over the time.
Macroeconomic. It is a branch of economics that studies the behavior and
performance of an economy as a whole.
https://economictimes.indiatimes.com/definition/macroeconomics. It is used in the
study to define the environment experiencing rapid changes of prices in a given
period of time.

Heterogenous. It consists of dissimilar or diverse ingredients or constituents.

https://www.merriam-
webster.com/dictionary/heterogeneous#:~:text=%3A%20consisting%20of%20dissimil
ar%20or%20diverse%20ingredients%20or%20constituents%20%3A%20mixed. In
this study, the researchers used the term referring to the consumers that have
different character and different in terms of their common needs.
 CHAPTER II
Review of related Literature and Studies

This chapter presents the review of related literature and studies to which
had closed bearing with the present study. This gave the author enough
background in understanding the study.

Related Literature

1. Impact of Inflation on the Consumption patterns of different Demographic

profile of the respondents in terms of:

1.1 Different age groups

Inflation has a greater impact on the consumption of older households, as they

tend to spend a higher proportion of their income on healthcare and other services
that experience faster price increases. Elderly are particularly vulnerable to the effects
of inflation due to the fact that they are more likely to be on a fixed income, relying on
pensions and social security payments, which are not adjusted for inflation. As a
result, any increase in the cost of goods and services can have a significant impact on
their purchasing power and standard of living. Furthermore, older households tend to
spend a larger proportion of their income on healthcare and related services. Inflation
in this sector tends to be higher than the overall rate of inflation, which means that
older households experience a larger increase in the cost of healthcare services than
other age groups.( Munnell & Soto, 2014)

Gustman, A. L., & Steinmeier, T. L. (2012) examined how inflation affects

different age groups of consumers in the United States. The study found that older
consumers, especially those who are retired, are more likely to be affected by inflation
than younger consumers. This is because older consumers tend to rely more heavily
on fixed-income sources such as pensions and Social Security, which do not increase
in tandem with inflation. It suggests that inflation can have a significant impact on the
purchasing power of older consumers, leading to a decline in their standard of living.
For example, inflation can increase the cost of basic necessities such as food and
healthcare, which can be a larger portion of an older person's budget. In addition,
inflation can reduce the value of fixed-income investments, which can further impact
the financial well-being of older consumers.

1.2 Gender

In the paper "Gender, Inflation, and the Consumer Experience" by Hsuan-Yi

Chou and Stephanie Kelton (2019) discussed the gendered implications of inflation
and argued that women may be disproportionately affected by inflation due to various
factors, such as earning less than men, having less wealth, and spending a larger
proportion of their income on essential goods and services. The authors argued that
women tend to earn less than men on average, which can make them more
vulnerable to the negative effects of inflation. This is because as prices rise, women
may have less purchasing power than men, and may be more likely to experience
financial hardship. In addition, women tend to have less wealth than men, which
means they may be less able to withstand the negative effects of inflation on their
financial well-being. Moreover, the authors argued that women may be more likely to
spend a larger proportion of their income on essential goods and services, such as
food, housing, and healthcare.The cost of healthcare services, including medical care
and prescription drugs, has increased significantly in recent years, and education
costs, including tuition fees and textbooks, have also risen sharply. Women,
particularly those with families, are more likely to face these costs, leading to higher
inflationary pressures for them. In addition, women are more likely to face financial
constraints, including lower incomes and fewer assets, which can make them more
vulnerable to the effects of inflation. This is particularly true for women who are heads
of households or single mothers, who may have limited financial resources to absorb
the inflationary effects. This can make them more vulnerable to inflation, as these
categories tend to be more affected by inflation than other categories of spending. In
addition, women may be more likely to prioritize spending on these essential goods
and services over other categories of spending, such as leisure activities or luxury
items.

Furthermore, according to Duman, Y. S., & Aydın, T. (2014), the impact of

inflation on the consumption patterns of men and women based on their gender and
the categories of expenditure they spend on. Men and women differ in their
consumption patterns and the items they spend on. Specifically, men tend to spend
more on transportation and housing, while women tend to spend more on food,
clothing, and personal care items.

1.3 Clasiification of the respondents

The effect of the inflation is not the same on all citizens of a country. Usually,
the blows dealt by inflation have lesser effects on the self-employed citizens and
Entrepreneurs. But salary earners are more affected. People with fixed income
employed in either public or private sector organizations or Self-employed, working in
unorganized sectors are considered as victims of rising inflation, as inflation
influences the consumption, spending, and investment practices of the households.
Inflation also increases the cost of living, price of commodities and reduces the
opportunities of getting goods jobs which in turn results in reduction in income level
and finally causes a fall in consumption expenditure. Hence, this situation directly
influences households’ income and their spending capacities.

1.4 Social status

According to Ruggles and Burkhauser, inflation has a larger impact on low-

income households than higher-income households. This is because low-income
households tend to spend a higher proportion of their income on necessities such as
food, housing, and healthcare, which have experienced higher rates of inflation in
recent years. In contrast, higher-income households tend to spend more on
discretionary items such as entertainment and travel, which are less affected by
inflation. They found that inflation has a disproportionate impact on certain
demographic groups within the low-income population. For example, households
headed by single mothers, elderly individuals, and African Americans tend to be
particularly vulnerable to the impact of inflation due to their lower incomes and higher
consumption of necessities.

Another related literature by Frank A. Wolak (2020) provides a review of the

existing literature on the impact of inflation on the distribution of personal income in
the United States. The study suggests that inflation has a regressive effect on income
distribution, as it disproportionately affects low-income households. This is because
low-income households tend to spend a higher proportion of their income on goods
and services that are more susceptible to inflation, such as food and energy. In
contrast, high-income households have a larger share of their income in assets that
may appreciate in value during periods of inflation, such as real estate and stocks.
The study also finds that the regressive effect of inflation on income distribution has
become more pronounced over time. This is likely due to several factors, including the
rising cost of healthcare and education, which have experienced higher rates of
inflation than other sectors.

2. Consumers’ perceived inflation on goods and services

Kim (2020) states that the effects of inflation volatility on economic growth and
the prices of goods in a sample of emerging market economies. He found that
inflation volatility can lead to higher prices of goods, which can have a negative
impact on economic growth. This is because inflation volatility makes it difficult for
businesses and households to make long-term financial plans, leading to lower
investment and consumption. Inflation can lead to changes in prices, which can have
significant impacts on consumers, businesses, and policymakers. Changes in inflation
have a significant effect on the behavior of prices across different categories of goods
and services. For example, the study finds that changes in inflation have a stronger
effect on the prices of goods with more flexible prices, such as apparel and furniture,
than on goods with less flexible prices, such as medical care and education. The
effect of inflation on prices varies over time. During periods of low inflation, changes in
inflation have a relatively small effect on prices. However, during periods of high
inflation, changes in inflation have a much larger effect on prices.

According to Trading Economics, the Philippines inflation rate remains high. The
annual inflation rate in the Philippines stood at 8.6% in February 2023, close to a 14-
year high of 8.7% in the previous month and slightly below market expectations of
8.8%. Main upward pressures came from clothing & footwear (4.8% vs 4.4% in
January), furnishings, household equipment & maintenance (6.2% vs 5.2%), health
(4% vs 3.3%) and restaurants & accommodation services (8.1% vs 7.6%).
Additionally, prices edged higher for food & non-alcoholic beverages (10.8% vs 10.7%)
and personal care & miscellaneous goods (5.3% vs 5%). On the other hand, inflation
was steady for housing & utilities at 8.6% while slowing for transport (9% vs 11.1%).
The core inflation, excluding foods and fuels, increased 7.8% year-on-year from 7.4%
previously. On a monthly basis, consumer prices were unchanged following a 23-year
high of 1.7% gain in January.

3. Changes in budget consumption and decision of consumers in terms of:

3.1 Purchasing preferences of consumers

Prior research suggests that inflation hits low-income households hardest for
several reasons. They spend more of their income on necessities such as food, gas
and rent categories with greater-than-average inflation rate leaving few ways to
reduce spending. When prices rise, middle-income households may react by
consuming cheaper goods and buying more generic brands. Low-income households
do not have the same flexibility; in many cases, they are already consuming the
cheapest products. Additionally, many low-income households lack the ability of
higher-income households to stock up when prices are discounted, buy in bulk and
save, delay purchases if there is an opportunity to save in the future or buy more
cheaply online. Low-income households are also likely to have smaller cash buffers to
tide them over a period of high inflation ( Jayashankar & Murphy, 2023). Periods of
inflation influence consumers to save rather than consume because of pessimism and
uncertainty in the economy. Inflation again influences consumer spending behavior by
influencing both liquid and illiquid assets since in periods of inflation, there is
motivation to hold real assets and not assets fixed to nominal values or not indexed to
inflation. Inflation may erode the real value of nominal assets and reduce the real
value of wealth held in those assets by the households. Cash-out mechanism
(mortgage equity withdrawal) in the presence of a long term interest rate in an
economy may result from inflation since inflation determines nominal interest rate and
savings.(Nyamekye & Poku, 2021),

According to Olusola et al.(2022), when one’s purchasing power is reducing,

it’s natural to want to make a purchase now rather than later. Cash will only
depreciate, thus it is preferable to complete your shopping and stock up on items that
are unlikely to depreciate in the future. As for consumers, this means filling their petrol
tanks, stocking their freezers, purchasing shoes in the next size up for their children,
among other things. The result is that enterprises must make capital investments that,
under alternative circumstances, may have been postponed. When inflation takes
hold, many investors turn to gold and other precious metals for protection against
rising prices. However, the volatility of these assets can negate the benefits of their
price protection, particularly in the short term. Osuji Casmir and Agbada Andrew
(2020) state that inflation increases household consumption expenditure. He further
gave an instance: during the inflation period, people spend more money on goods and
services than during less inflationary periods. This means that inflation increases the
average private consumption expenditure.

Moreover, Ajayi and Adegbite (2015) revealed that inflation has a significant
impact on consumer purchasing behavior in Nigeria. They found that when inflation
increases in Nigeria, consumers tend to change their consumption patterns in
response to the rising prices. Specifically, consumers shift their preferences towards
cheaper alternatives when prices of goods and services increase. For instance,
consumers may switch to cheaper brands of products, purchase smaller quantities, or
choose to purchase similar but lower quality products. Additionally, consumers tend to
reduce their purchases of luxury goods and services when inflation increases. This is
because luxury goods and services are usually more expensive and consumers may
decide to forgo them in order to prioritize more essential items. As a result,
businesses that sell luxury goods and services may experience a decline in sales
during periods of high inflation. Moreover, consumers switch to locally produced
products in response to high inflation. This is because locally produced products may
be less expensive than imported goods due to lower transportation and distribution
costs. Furthermore, the switch to locally produced products may also be motivated by
a desire to support domestic industries and promote local economic development.

3.2 Quantity of consumption

Nelson and Consoli (2010) strongly suggest that the quantity of an item
bought by an individual or household is dependent on the prices of that item.
Theoretically, individuals are operating in consumption equilibrium where
individuals are attending a particular set of wants, engaging a set of activities and
purchases to meet such wants, and are compatible with their budget and other
constraints, including the prevailing prices. Thus, if a change in price occurs, then
the order will be disrupted, altering some factors to comply with the constraints.

According to Stijn Claessens and Ayhan Kose, durable goods are typically
more expensive and purchased less frequently, which makes them more sensitive to
changes in inflation rates. Therefore, consumers may be more likely to defer or delay
the purchase of durable goods when inflation is high, leading to a decline in consumer
spending. They found that the negative impact of inflation on consumer spending
tends to be more pronounced in the short term, but tends to weaken over time. This
suggests that consumers may adjust their consumption patterns in response to
changes in inflation rates.

Nakata and Shen (2020) examines the impact of inflation on leisure time in
Japan and finds that higher inflation rates reduce leisure time, particularly for
households with lower income and educational levels. This may be due to the fact that
inflation erodes the purchasing power of households, making it more difficult for them
to afford leisure activities and luxury goods. As the prices of goods and services rise
due to inflation, households may need to allocate more of their income towards basic
necessities, leaving less money available for leisure activities. This is because as the
general price level of goods and services increases, households have to spend more
on basic necessities like food, housing, and healthcare. As a result, they have less
disposable income available to spend on non-essential items like leisure activities and
luxury goods. For example, if the price of food increases due to inflation, households
will have to spend more on groceries, leaving less money available for leisure
activities like going to the movies or dining out at restaurants. Similarly, if the cost of
healthcare increases due to inflation, households may have to allocate more money
towards medical expenses, leaving less disposable income for leisure activities. In
addition, inflation may affect the price of leisure activities themselves. For instance,
the cost of traveling or attending entertainment events may increase due to inflation,
making it even more difficult for households to afford these leisure activities.

3.3 Income supplements and savings of the consumers

Consumers increase current spending as a result of a wealth-redistribution

channel if they predict inflation rates to be higher, according to academics ( Atif Mian,
Kamalesh Rao, & Amir Sufi, 2013). This is because they have larger marginal
propensities to consume out of their wealth. Higher inflation acts as an implicit tax on
households’ use of paper money as a medium of exchange, resulting in less
consumer spending in an economy since disposable income is reduced (Aruoba &
Schorfheide, 2011). Precautionary savings (Bloom, 2009; Pastor Lubos & Veronesi
Pietro, 2013) is another avenue via which inflation pressures influence consumer
spending. Inflation can influence consumer spending in several different ways. The
most straightforward explanation is that inflation has a negative impact on consumer
confidence and, as a result, leads to increased savings. Inflation may also alter the
income distribution among households, which may have an impact on consumer
behavior in the process. As can be seen from the preceding, inflation’s effect on
private consumption expenditure is driven by the importance of private consumption
and the economic consequences of inflation.
 Inflation has a significant impact on the distribution of household budget shares,
particularly among lower-income households. When inflation rates increase,
households tend to allocate a larger share of their budget to necessities such as food
and housing, while reducing their spending on discretionary items such as
entertainment and travel. Moreover, the effects of inflation on household budget
shares vary across different income groups, with lower-income households being
more affected than higher-income households. Lower-income households are more
sensitive to changes in inflation rates, as they have less flexibility in their spending
patterns and are more likely to cut back on non-essential items to compensate for the
increased cost of essential goods and services. In contrast, higher-income
households are less affected by inflation, as they have more resources and can more
easily adjust their spending patterns. The study also identifies several factors that
moderate the impact of inflation on household budget shares, including household
size, age, and education level. Specifically, larger households and households with
younger members are more likely to adjust their budget shares in response to inflation.
Additionally, households with higher education levels are less likely to change their
budget shares in response to inflation. (Lacroix and Picot, 2012)

Another related literature by Osman Zaim and Ahmet Hakan Ozturk (2016)
examines the effect of inflation on savings in Turkey and identifies alternative income
sources that households may use to offset the negative impact of inflation on their
savings. The authors find that inflation has a negative effect on savings, as
households face higher costs of living and reduced purchasing power. However, they
also find that households may utilize alternative income sources, such as self-
employment, renting out property, and working overtime or multiple jobs, to mitigate
the negative impact of inflation on their savings. Pender and Place (2011) found that
households in Tanzania used a range of strategies to cope with inflation, including
increasing agricultural production and diversifying income sources through non-farm
activities. The study also found that households adjusted their savings behavior
during periods of inflation, with some households increasing savings to protect against
inflationary pressures, while others reduced savings to meet immediate consumption
needs.
3.4 Loans and Borrowing

Michael F. Bryan and Brent Meyer (2010) states that inflation increases the
demand for borrowing among households, as households are more likely to take out
loans to maintain their desired level of consumption when prices are rising. This is
because inflation reduces the purchasing power of households, making it harder for
them to afford the same level of consumption as before. To maintain their standard of
living, households may turn to borrowing to finance their spending. Inflation increases
the likelihood of households using revolving credit, such as credit cards, which can
have higher interest rates and increase the overall cost of borrowing. This is because
revolving credit is more flexible than other forms of credit, such as mortgages or auto
loans, and can be used to finance a wide range of expenses. As inflation increases,
households may turn to credit cards to cover their expenses, leading to higher levels
of debt and potentially higher interest payments.

II. Related Studies

1. Impact of Inflation on the Consumption patterns of different Demographic

profile of the respondents in terms of:

1.1 Different age groups

The study "Inflation and Age-Specific Consumption Patterns" by Zhiwei Zhang

and Xu Zhang published in 2013, aims to examine the relationship between inflation
and consumption patterns of different age groups in China. The study uses a sample
of over 17,000 households and divides them into three age groups: young (aged 18-
35), middle-aged (aged 36-55), and elderly (aged 56 and above). The study finds that
inflation has a greater impact on the consumption of younger households compared to
older households. Specifically, the authors find that younger households tend to have
higher consumption volatility in response to inflation shocks than older households.
This suggests that inflation has a larger impact on the consumption patterns of
younger households, who are more sensitive to changes in prices.Moreover, they find
that the impact of inflation on consumption varies across different categories of goods.
Inflation has a greater impact on the consumption of durable goods, such as housing,
transportation, and education, than on non-durable goods, such as food and clothing.
This is particularly true for younger households, who tend to spend a larger share of
their income on durable goods. Overall, the study suggests that inflation has a
significant impact on the consumption patterns of different age groups in China.
Younger households, in particular, are more vulnerable to inflation shocks, especially
in relation to their consumption of durable goods.

However, in the study "Inflation and the Consumer: The Impact on Different
Age Groups" by Barry Bosworth and Kathleen Burke (2015) it is found that, older
consumers were more sensitive to inflation than younger ones. Specifically, the
authors found that individuals aged 65 and older experienced higher inflation rates
than younger age groups for the categories of healthcare, housing, and food.
Moreover, older individuals spent a larger share of their income on these categories
than younger ones. The study also found that older consumers were more sensitive to
changes in interest rates, which are closely related to inflation. As interest rates rise,
the value of fixed-income investments declines, which can be particularly problematic
for older individuals who may rely more heavily on such investments to fund their
retirement. Overall, the study suggests that older consumers are more vulnerable to
the effects of inflation than younger ones. This is because older consumers may have
fixed incomes, rely more heavily on savings, and have higher healthcare and housing
costs associated with aging.

1.2 Gender

The study "Inflation and Household Consumption Patterns in Brazil" by Joao

Pedro Wagner de Azevedo and Silvio Sales (2014) examined the impact of inflation
on household consumption patterns in Brazil, with a particular focus on the potential
differences between male-headed and female-headed households. The authors used
household budget data from the Brazilian Household Budget Survey to estimate the
impact of inflation on different categories of household spending. The study found that
female-headed households were more affected by inflation than male-headed
households, particularly in terms of food and other basic needs. Specifically, they
found that female-headed households spent a larger share of their income on food,
which is a category that tends to be more affected by inflation than other categories.
In addition, female-headed households were more likely to purchase lower-quality,
less expensive food items in response to inflation, which can negatively impact their
nutritional status. Female-headed households were more likely to cut back on
spending in response to inflation, particularly in non-essential categories such as
clothing and leisure activities which suggests that female-headed households may be
more vulnerable to the negative effects of inflation, as they may have less flexibility in
their spending patterns. This is because women are more likely to be responsible for
household budgeting and purchasing decisions, and may therefore be more sensitive
to changes in expected prices. (Lee and Klaauw , 2020)

The study "Inflation and Gender in Urban Ethiopia" by Tassew Woldehanna

and Tizita Mulugeta, published in 2018, investigates the impact of inflation on gender
differences in household consumption patterns in urban Ethiopia. The authors find
that inflation has a differential impact on men and women, with women being more
vulnerable to the effects of inflation. It was found that women in urban Ethiopia tend to
have lower levels of education and income than men, and are more likely to be
engaged in informal employment or unpaid household work. As a result, they have
fewer resources to cope with the effects of inflation and may be forced to cut back on
essential expense.

1.3 Classification of the respondent

The study conducted by Chandio, Mahar, and Shaikh (2019) aimed to examine
the impact of inflation on poverty across different income groups in Sindh Province,
Pakistan. The study utilized secondary data from various sources, including the
Pakistan Bureau of Statistics, to analyze the relationship between inflation and
poverty from 2000 to 2017. The study found that inflation had a more significant
impact on low-income groups, including students and unemployed individuals,
compared to employed individuals. This is because low-income groups tend to spend
a higher proportion of their income on basic necessities such as food, which are more
affected by inflation. Inflation led to an increase in the cost of living, making it more
challenging for low-income groups to afford basic necessities. This resulted in a
higher poverty rate among these groups, as they had to allocate a larger proportion of
their income towards necessities, leaving less for other expenses such as education
and healthcare.

1.4 Social Status

"The Effect of Inflation on Low-Income Households" is a study published in

2014 by Oluwatosin Adeniyi and Oluwaseun Ojo, which investigates the impact of
inflation on low-income households in Nigeria. The authors use data from the Nigerian
Living Standards Survey to analyze the impact of inflation on the consumption
patterns and welfare of households in different income brackets. The study finds that
inflation has a significant negative impact on the consumption and welfare of low-
income households. Specifically, the authors find that as inflation increases, the
purchasing power of low-income households decreases, which leads to a decrease in
their consumption levels and overall welfare. This impact is more pronounced for low-
income households, which have limited access to credit and other financial resources
to cope with rising prices. The authors also find that the impact of inflation on different
goods and services varies across income groups. For example, inflation has a larger
impact on the consumption of food and housing for low-income households, while it
has a larger impact on the consumption of transportation and communication for high-
income households. This suggests that the distributional impact of inflation is not
uniform across goods and services.

Yilmazer and Gunluk-Senesen found that low-income households were more

likely to reduce their consumption of non-food items in response to inflation, while
high-income households were more likely to adjust their savings behavior. Low-
income households were also found to be more likely to report that they were unable
to afford certain items due to inflation. The authors suggest that the reason for this
disparity is that low-income households have less flexibility in their consumption
patterns and are more likely to rely on essential goods and services, such as food and
housing, which are more affected by inflation. High-income households, on the other
hand, have more discretionary income and are therefore able to adjust their
consumption patterns in response to inflation.

2. Consumers’ perceived inflation on goods and services

Balisacan and Hill (2017) conducted a study to investigate the impact of inflation
on food prices in the Philippines from 2010 to 2016. The authors used monthly data
on food prices and inflation rates obtained from the Philippine Statistics Authority. The
study employed a Vector Autoregression (VAR) model to estimate the relationship
between inflation and food prices. The results of the study showed that inflation had a
significant positive effect on food prices in the Philippines, particularly for rice and
meat products. The authors found that a 1% increase in inflation led to a 0.55%
increase in the price of rice and a 0.39% increase in the price of meat products. In
addition, the study found that the impact of inflation on food prices varied across
different regions in the Philippines. The authors also found that the impact of inflation
on food prices was more significant in the short-run compared to the long-run. They
noted that the short-run impact of inflation on food prices was due to the inelasticity of
food supply in the short-run. Overall, the study by Balisacan and Hill (2017) highlights
the significant impact of inflation on food prices in the Philippines, particularly for rice
and meat products.

Consumers tend to overestimate the inflation rate, with the average respondent
believing that inflation is higher than it actually is. This overestimation is more
pronounced for low-income households, who tend to perceive inflation as being more
severe than it actually is. Consumer perceptions of inflation have important
implications for behavior, with households that perceive higher levels of inflation being
more likely to cut back on spending and to delay major purchases. This effect is
particularly strong for households with lower incomes, who are more likely to feel the
impact of inflation on their daily lives. ( Armantier, et. al.,)
3. Changes in budget consumption and decision of consumers in terms of:

3.1 Purchasing preferences of consumers

"The Impact of Inflation on Consumer Spending" is a study that examines how

inflation affects consumer spending patterns in the United States. The study was
conducted by Lira M. Kellermann and Douglas E. Jondle and was published in 2011.
To conduct their analysis, the authors used data from the Bureau of Labor Statistics
Consumer Expenditure Survey from 1984 to 2009. The survey collects data on
household spending patterns, including the types of goods and services purchased,
the amount spent, and the frequency of purchases. The authors found that as inflation
rates increase, consumers tend to shift their spending patterns towards less
expensive goods and services. Specifically, they found that consumers tend to reduce
their spending on non-durable goods such as food, clothing, and personal care
products, while increasing their spending on durable goods such as furniture and
appliances. This is because non-durable goods are more likely to be affected by
inflation, while durable goods are less sensitive to changes in prices. In addition, the
authors found that inflation can also lead to changes in the quality of goods and
services purchased by consumers. As prices increase, consumers may opt for lower-
quality products or services in order to save money. Overall, this study suggests that
inflation can have a significant impact on consumer spending patterns. As prices
increase, consumers may shift their spending towards less expensive goods and
services, and may also reduce their consumption of certain types of goods.

Chiquiar and Noriega (2013) states that the higher inflation rates lead to lower
consumption of non-durable goods and services, such as food, clothing, and personal
care products, as well as a decrease in the frequency of purchases. Specifically, they
found that a 1% increase in inflation rates leads to a 0.2% decrease in the
consumption of non-durable goods and services. Furthermore, higher inflation rates
have a greater impact on the consumption patterns of households with lower incomes.
This is because households with lower incomes have less flexibility in their budgets
and are therefore more sensitive to changes in prices. Overall, this study suggests
that inflation has a significant impact on household consumption patterns in Mexico.
As prices increase, households tend to reduce their consumption of non-durable
goods and services, which can have important implications for the economy and for
individual households. Daniel Chiquiar and Antonio E. Noriega was published in 2013.

3.2 Quantity of consumption

The study "Inflation and Household Consumption Behavior" by Gokhan

Karabulut and Bilge Kagan Ozdemir (2018) investigates the impact of inflation on
household consumption behavior in Turkey. The authors examine the relationship
between inflation and household consumption behavior. The study finds that inflation
has a significant negative effect on household consumption, particularly for non-
durable goods. The authors also find that the negative impact of inflation on
household consumption is more pronounced for lower-income households.
Specifically, the study finds that a 1% increase in inflation leads to a 0.05% decrease
in household consumption for non-durable goods, and a 0.02% decrease in
household consumption for durable goods. Furthermore, the study also finds that
inflation has a differential impact on the consumption of different types of non-durable
goods. Specifically, inflation has a larger negative impact on the consumption of food,
tobacco, and alcoholic beverages, while the impact on the consumption of clothing
and footwear is less pronounced. Furthermore, inflation has a significant impact on
the distribution of household budget shares, particularly among lower-income
households. When inflation rates increase, households tend to allocate a larger share
of their budget to necessities such as food and housing, while reducing their spending
on discretionary items such as entertainment and travel. (Lacroix and Picot, 2012)

3.3 Income supplements and savings of the consumers

The study "Inflation, Financial Development and Household Saving: Evidence from
African Countries" by Afees A. Salisu and Kazeem Isah, published in 2018,
investigates the relationship between inflation, financial development, and household
saving in African countries. The authors use a panel dataset covering 31 African
countries for the period of 1996-2014 to examine the impact of inflation and financial
development on household saving. They use a fixed effects model to estimate the
relationship between the variables, controlling for other factors such as income,
demographic characteristics, and macroeconomic conditions. The findings of the
study indicate that inflation has a negative impact on household saving. In other
words, as inflation increases, households tend to save less. This is consistent with the
theory that inflation reduces the real value of savings, making it less attractive to save.
However, the authors also find that financial development can mitigate the negative
impact of inflation on household saving. Specifically, they find that countries with
higher levels of financial development, as measured by indicators such as the ratio of
credit to GDP and the number of commercial banks per capita, are better able to
absorb the negative impact of inflation on household saving. The authors suggest that
this may be due to the fact that financial development provides households with more
options for saving and investment, such as access to bank accounts, insurance
products, and other financial services. This allows households to better diversify their
portfolios and protect themselves against the negative effects of inflation.

Moreover, the study "Inflation and Household Income in the US" conducted
by the Congressional Research Service in 2014 aimed to explore the relationship
between inflation and household income in the United States. They found that inflation
can erode the purchasing power of household income, especially for those with fixed
incomes. This means that as prices increase due to inflation, the same amount of
money can buy fewer goods and services, leading to a decrease in the standard of
living for households. The study further suggests that consumers may seek out
additional sources of income, such as part-time work or freelance gigs, to offset the
effects of inflation. This is because inflation can make it harder for households to
make ends meet with their current income, leading them to seek out other ways to
earn money.

3.4 Loans and Borrowing

Same study titled "Inflation and Household Income in the US" by the
Congressional Research Service (2014) note that the effects of inflation can vary
across income groups. For example, lower-income households are particularly
vulnerable to the effects of inflation as they tend to spend a larger share of their
income on goods and services that are subject to inflationary pressures, such as food
and energy. As a result, lower-income households may need to cut back on their
spending or take on debt to maintain their standard of living during periods of high
inflation.

Moreover, the study by Jorge Alberto Charles Coll and Luis Munguía Corella,
"Inflation and Consumer Borrowing: Evidence from Personal Loans" (2018), examines
the impact of inflation on consumer borrowing behavior in Mexico, focusing on
personal loans. The authors use data from a sample of personal loans issued by a
major financial institution in Mexico over the period 2011-2016. The study finds that
inflation has a significant negative impact on consumer borrowing, with borrowers
reducing their loan amounts in response to higher inflation rates. In particular, the
authors find that inflation has a stronger negative effect on borrowing behavior for
loans with longer terms. This suggests that borrowers are more sensitive to inflation
risks for loans that will take longer to repay, as the erosion of purchasing power over
time makes it more difficult to meet the loan repayment obligations. The authors also
find that the negative impact of inflation on consumer borrowing behavior is more
pronounced for borrowers with lower incomes and for loans issued in less developed
regions of the country. This suggests that inflation has a disproportionate impact on
vulnerable segments of the population, who may have fewer resources to manage
inflation risks and to access alternative sources of credit.
 CHAPTER III
Methodology

In this chapter, the researcher presents certain strategies in conducting the

study precisely. Several topics will be discussed. It includes the research design,
research environment, data gathering instrument, data gathering procedures, and
statistical processing of the data that were used to obtain a better understanding of
this research study.

3.1 Research Design

The researcher utilized the descriptive method using qualitative and

quantitative approaches in gathering information about the present condition.
Krathwohl, D. R., (2009), defined descriptive research as a purposive process of
gathering, analyzing, classifying, and tabulating data about prevailing condition,
practices, beliefs, processes, trends, and cause-effect relationships and then making
adequate and accurate interpretation about such data with or without the aid of
statistical methods.

According to Gay (2012) stated that descriptive research is survey research.

This research involves collecting data in order to test hypotheses or to answer
questions about the opinions of people about some topic or issue. It is designed to
gather information or conditions existing at a particular period of time. The focus of the
whole process is on the discovery of theory on comparison or contrast of the findings.

3.2 Subjects of the Study

The study was conducted around Batangas City, Batangas. The location is
feasible as the researchers and respondents reside at Batangas City. Furthermore,
geographical location has an impact to alter prices and values of consumed goods
and commodities.
3.3 Data Gathering Instrument

Different techniques were used by the researchers to determine the impact of

inflation volatility on consumer’s purchasing power. Researchers utilized interviews
and observation in gathering the necessary data.

Survey Questionnaire. In conducting the survey, the researchers formulated

the questionnaire which was validated by the research adviser. The survey was
conducted as soon as the questionnaire was finished and validated. The survey was
distributed through the use of google forms.

Observation. Observation was used to determine the impact of inflation

volatility on consumer’s purchasing power. In which the researchers observed the
behavior or attitude of the consumers when spending.

3.4 Data Gathering Procedure

The researchers committed a significant amount of time, effort, and

cooperation constructing their questionnaire so as to serve the intended participants.
The survey was developed using suitable questions modified from related research
and individual questions formed by the researchers. The survey consisted of two main
parts subdivided into different subparts which were related to the study. Likert scale
was used to determine if the respondent agreed or disagreed in a given statement.
Subsequently, the proponent submitted the said questionnaire to the chosen validator
for further improvement. Afterwards, the validated online questionnaire will be
distributed to the respective respondents. Thereafter, the researchers will gather the
survey forms and evaluate to determine the various effect of inflation to
heterogeneous consumers’ purchasing power

3.5 Statistical Treatment of Data

In order to determine the Effect of inflation to heterogeneous consumers’

purchasing power, the researchers employed the following statistical tools in
analyzing the data:
1. Frequency and Percentage Distribution - was used to determine the
percentage for data on respondents’ profile (e.g. age, gender, status etc.)

2. Weighted Mean - was used to compute the weight of the responses in the
questionnaire.
 CHAPTER IV
Presentation, Analysis and Interpretation of Data

.This chapter focuses in the presentation, analysis and interpretation od the

data gathered to answer the specific questions in this research study.

4. Results and Discussion

Demographic Profile of the Respondents

The demographic profile of respondents in this research was a) age, (b) gender,
(c) classification of the respondents, (d) social status, and (e) average combined
monthly income of the family.

Table 1. Age of respondents

Age of the respondents Frequency Percentage
18- 25 years old 20 57.14
25- 32 years old 4 11.43
33- 40 years old 5 14.29
41 years old and above 6 17.14
Total 35 100%

Based on Table 1, the composition of the respondents in terms of Age, the

majority aged from 18-25 years old with 20 or 57.14%, followed by 41 years old and
above with 6 or 17.14%, and 33-44 years old with 5 respondents or 14.29%. The least
of the respondents were 25-32 years old with 4 respondents only.

Table 2. Gender of respondents

Gender of the respondents Frequency Percentage
Male 6 17.143
Female 27 77.143
Bisexual 2 5.714
Non-binary 0 0
Total 35 100%
 Table 2 shows the gender distribution of the respondents in this study. Out of
the 35 respondents, 27 or 77.143% were female, 6 or 17.143% were male, and 2 or
5.714% identified as bisexual. There were no respondents who identified as non-
binary.

Table 3. Classification of the respondents

Classification of the respondents Frequency Percentage
Student 17 45.71
Self-employed 1 2.86
Government employee 15 42.86
Employed in private company and Organization 2 5.71
Currently unemployed 0 2.86
Total 35 100%

As to the respondent's Classification, it was revealed that the majority of the

individuals who participated in this research were students with 16 or 45.71%,
followed by Government Employee with 15 or 42.86% while Employed in Private
Company and Organization with 2 or 5.71 . However, the least of the respondents
were Self employed and Currently not employed with 1 or 2.86% of the total number
of respondents. Thus, the researchers believed that they could gather relevant
information about the effects of inflation on the spending habits and purchasing
power of consumers residing in Batangas since the respondents were classified
differently.

Table 4. Social Status

Social Status of the respondents Frequency Percentage
Upper Class 0 0
Upper Middle Class 0 0
Middle Class 22 62.86
Lower Middle Class 10 28.57
Lower Class 3 8.57
Total 35 100%
 Table 4 presents the social status of the respondents. It can be observed that
out of the 35 respondents, none of them belong to the upper class or upper-middle
class. The majority of the respondents, 22 of them or 62.86%, are classified as middle
class. 10 respondents or 28.57% belong to the lower-middle class while only 3
respondents or 8.57% belong to the lower class. It can be inferred that the sample
population of the study is predominantly composed of individuals from the middle
class.

Table 5. Average Monthly income or allowance

Average Monthly income or allowance Frequency Percentage
1,000- 4,000 5 14.29
5,000- 10,000 11 31.43
11,000- 15,000 3 8.57
16,000- 20,000 1 2.86
21,000- 25,000 4 11.43
26,000- 30,000 5 14.29
31,000 and above 6 17.14
Total 35 100%

The data revealed that the majority of the individuals who participated in this
research have an average monthly income or allowance ranging from P5,000-
P10,000 with 11 or 31.43%, followed by 6 individuals having a monthly income of
P31,000 and above or 17.14% of the total respondents; while the least of the
respondents have P16,000-P20,000 monthly income or 2.86% of the total
respondents. Therefore, this research can affirm the effects of inflation on the budget
consumption of the consumers in Batangas, since the majority of its respondents
were from low to middle-income class.

Effects of Inflation

Perception on Inflation

Consumers’ perception on inflation was measured through their assessment

on prices of items being consumed and expensed with, which covers both
personal and household-related items and work-related items.
Table 7. Perceived Inflation on Goods and Services
Weighted Verbal
Perceived Inflation on Goods and Services
Mean Interpretation
1. Foods and Beverages 4.46 Strongly Agree
2. Water and electricity charges 4.29 Strongly Agree
3. LPG or other petroleum products 4.29 Strongly Agree
4. Gasoline, diesel, or other fuel refilling your 4.00 Agree
personal vehicle
5. Travel and transportation fare 4.34 Strongly Agree
6. Tuition fees and other school requirement 4.09 Agree
7. Medicines and other healthcare needs 3.86 Agree
8. Apparel including clothes, footwears, bags, 3.97 Agree
garments, and other accessories.
9. Personal care products like perfumes, skin 3.94 Agree
moisturizers, eye and facial makeup
preparation, shampoo, toothpaste, and etc.
10. Gadgets including mobile load and 4.43 Strongly Agree
internet
11. Rental fees on apartments or boarding 4.00 Agree
houses
12. Household durables including home 4.23
electronics, home furnishings and household Strongly Agree
appliances.
Composite mean 4.16 Agree

Presented in table 7, the item with the highest perceived inflation is Foods and
Beverages, with a weighted mean score of 4.46%, indicating that respondents
strongly agree that there is a significant increase in the cost of these goods. This is
very evident as the food inflation hit 10.8% on February 2023. Moreover, Gadgets
including mobile load and internet, Travel and transportation fare, Water and
electricity charges, LPG or other petroleum products are also perceived to have a
significant increase in cost, with weighted mean scores of 4.43%, 4.34%, and 4.29%,
respectively. On the other hand, Personal care products, Apparel, Rental fees on
apartments or boarding houses, and Gasoline, diesel, or other fuel refilling your
personal vehicle have a lower weighted mean score, indicating that respondents only
"agree" that there is an increase in cost. Medicines and other healthcare needs have
the lowest weighted mean score at 3.86%, indicating that respondents "agree" that
there is an increase in cost, but the increase is not as significant as the other items.
 Overall, the data suggests that respondents agree that there is a significant
increase in the cost of goods and services related to basic needs such as food, water,
and transportation, as well as technological products, while personal care products,
apparel, and housing have a lower perceived inflation rate.

Table 8 presents the responses on the changes on consumers’ purchasing

choices and preferences that they made in past few months. These are the items
that were substituted with other items which are perceived by consumers as less
costly.

Table 8. Changes in purchasing preferences of the consumers

Changes in purchasing preferences of the Weighted Verbal

consumers Mean Interpretation
1. Expensive items/ products were less
prioritized and substituted with cheaper 4.09 Agree
items/ brands
2. Prioritizing necessity purchase than 4.29 Strongly Agree
personal desire and luxury
3. Purchasing products only when they are 4.11 Agree
on sale or one that offers big discount
4. Buying products online rather than going 3.97 Agree
in the market or shops
5. Local products are being purchased than 3.91 Agree
imported ones
6. Purchase of household consumables on 3.74 Agree
bundles rather than in retail
7. Frequent consumption of vegetables than 3.89 Agree
meat and poultry process due to their prices
8. Taking public transportation rather than 4.11 Agree
using own vehicle, or vice versa to lessen
expenses
9. Uses of alternative source of water and 3.49 Agree
electricity to minimize expenses
10. Enrolling or transferring children on 3.86 Agree
schools or universities with lower tuition fees
and school expenses
11. Staying at home rather than going out for 4.20 Agree
travels and do leisure activities
12. Cooking food/meals at home instead of 4.20 Agree
eating out.
Composite Mean 3.99 Agree
 Prioritizing necessity purchase than personal desire and luxury was ranked
highest with 4.29 weighted mean score, indicating strong agreement with this
statement. This suggests that consumers are more focused on buying essential items
rather than indulging in non-essential ones. The other statements also received
relatively high scores, indicating that respondents generally agreed with the changes
in purchasing behavior presented in the study. These changes include substituting
expensive items with cheaper ones, buying products only when they are on sale or
offer discounts, purchasing local products instead of imported ones, using public
transportation to save on expenses, and cooking meals at home instead of eating out,
with a weighted mean score ranging from 3.74%- 4. 20%. Meanwhile, the least
concern of the consumers was the use of alternative source of water and electricity to
minimize expenses, with a score of 3.49, indicating that respondents agreed with the
statement but to a lesser extent compared to the other statements.
This result is being supported by the study of Ajayi and Adegbite (2015).
They found that consumers tend to reduce their purchases of luxury goods and
services when inflation increases. This is because luxury goods and services are
usually more expensive and consumers may decide to forgo them in order to prioritize
more essential items. Additionally, consumers tend to change their consumption
patterns in response to the rising prices. Specifically, consumers shift their
preferences towards cheaper alternatives when prices of goods and services increase.
Table 9 reveals the extent to which consumers residing in Batangas made
reductions on their consumed items over the period.

Table 9. Changes in quantity of consumption

Changes in quantity of consumption Weighted Verbal
Mean Interpretation
1. Reduction of quantity of food items 3.77 Agree
purchased.
2. Limiting the purchase of apparels, 4.03 Agree
accessories, and the personal wants or
buying only when they are on sale
3. Acquisition of gadgets and other leisure 4.00 Agree
items only once the need arises or when the
 bonuses/incentives arrive
4. Scheduling or limiting the usage of 4.34 Strongly Agree
electric appliances, gadgets, water and/or
other utilities.
5. Fewer travels on vacations, holidays or 4.23 Strongly Agree
leaves or look for promos
6. Less income allocation on recreation, 3.97 Agree
promenading, watching movies, or eating out
Composite Mean 4.06 Agree

As presented in table 9, it is apparent that scheduling or limiting the usage of

electric appliances, gadgets, water and/or other utilities ranked the highest with 4.34%
weighted mean score. This suggests that the respondents strongly agree and are
taking measures to conserve resources and reduce their utility bills, possibly due to
financial constraints. Followed by the weighted mean of 4.23%, is the reduction in the
number of travels during vacations, holidays, or leaves, which indicates that the
respondents also strongly agree with the idea of limiting their travel to save money
during inflationary period. In general, the quantity of consumption was rated at 4.00
with a verbal interpretation of Agree, signifying that the consumers have become
more conscious of their spending habits and are willing to adjust their consumption
behavior to cope with financial constraints.

The result is supprted by the study of Nelson and Consoli (2010) which
strongly suggest that the quantity of an item bought by an individual or household
is dependent on the prices of that item. Theoretically, individuals are operating
in consumption equilibrium where individuals are attending a particular set of wants,
engaging a set of activities and purchases to meet such wants, and are compatible
with their budget and other constraints, including the prevailing prices. Thus, if a
change in price occurs, then the order will be disrupted, altering some factors to
comply with the constraints.

Table 10. Alternative source of income and savings

Alternative source of income and Weighted Verbal
savings Mean Interpretation
1. Insufficient salary/ allowance to cover 3.94 Agree
 the increasing commodity prices
2. Realization of less or no savings at all for 4.03 Agree
the past few months
3. Currently working or planning to look for 3.43 Agree
part-time jobs
4. Engaged or planning to engage in 3.26 Moderately
businesses Agree
5. Raising livestock and/or doing backyard 3.14 Moderately
gardening to augment income Agree
Composite Mean 3.56 Agree

Generally, income supplements parameter has a composite mean of 4.10,

which suggests that, with their fixed income, teachers in their effort to regulate
themselves during the inflationary period ultimately led them to take on extra
income-generating works. This finding is in line with the results of the study of
Cardoso , which stated that when the increase in income of an individual is lower than
the increase on prices of commodities, then the indivual has to reduce his expenses
or engage in other jobs to augment his income.

Table 11. Loans and Borrowings

Loans and Borrowings Weighted Verbal
Mean Interpretation
1. Recent incurrence of loans on GSIS, SSS, 3.17 Moderately
financial and/or private lending institutions Agree
2. Recently borrowed money from private 3.26 Moderately
persons to cover other personal or Agree
household expenses
Composite Mean 3.21 Moderately
Agree

As revealed in Table 11, the respondents' moderately agreed that they incurred
loans and borrowings. They all moderately agreed that they borrowed money from a
private person to cover household and personal expenses, and they recently incurred
loans in GSIS, PAGIBIG, SSS to augment budget during their financial constrain and
in the midst of inflationary period this past few months; and borrowed supply for
personal and household consumptions in stores and entities. This is supported by the
study of Michael F. Bryan and Brent Meyer (2010) which states that inflation
increases the demand for borrowing among households, as households are more
likely to take out loans to maintain their desired level of consumption when prices are
rising. This is because inflation reduces the purchasing power of households, making
it harder for them to afford the same level of consumption as before. To maintain their
standard of living, households may turn to borrowing to finance their spending.
 CHAPTER V
Summary, Conclusion and Recommendations

This chapter presents the summary, conclusion, and recommendations to thoroughly discuss
this research study.

SUMMARY OF FINDINGS

The primary focus of this research is to examine how inflation affected the
residents of Batangas Province. The study also delves into how respondents make,
use, and save money. The data for this research were collected from 35 residents
from the province of Batangas, who were selected as respondents using convenience
sampling. The research approach employed in this study was quantitative research,
aligning with the main objective of the research. Furthermore, the study investigates
the effects of inflation on common goods, necessities, and luxuries used by the
residents.

To collect data, a survey was administered to the respondents using a

questionnaire prepared by the researchers. The findings of the research were
presented and analyzed in Chapter IV using tabular presentations. The results
revealed that half of the respondents were between 18-25 years old. The majority
were mostly female with 77.143% of the total number of the respondents. Most
respondents were classified as 17 students and 15 government employees having a
percentage of 45.71% and 42.86%, respectively. There were no respondents
belonging to the upper class or upper-middle class. 22 of the respondents were
distinguished to be among the middle class, being 62.86%. Among the lower-middle
class, there were 10 respondents or 28.57, and 3 belong to the lower class, having
8.57%. It is observed that the majority of the respondents have a monthly income of
P5,000 to P10,000 and were 11 or 31.43%, while the least respondent being one or
2.86% has a monthly average income of P16,000-P20,000. The research found that
the respondents had first-hand experience on how common goods and necessities
were influenced by inflation. Furthermore, the respondents showed dismay towards
how the fluctuating inflation rates currently hitting the Philippine Economy affects them
the most.

In addition, respondents showed that foods and beverages had the most
increased cost of price while medicines and other healthcare needs were mildly
influenced and had not seen a change in price. As a consequence of this perceived
inflation on goods and services, respondents were forced to focus more on prioritizing
basic necessities over luxuries and to stay and eat at home rather than going outside.
To limit and save money, the respondents came up with ways such as scheduling or
limiting the usage of electric appliances, gadgets, water and/or other utilities. With
having little income, most respondents were not able to save money for the past few
months, however some were able to raise livestock and/or produce fruits and
vegetables in their backyard to augment income. Due to these following dilemmas,
respondents moderately agreed to borrow money from private institutions and private
persons to cover personal or household expenses.

CONCLUSION

Based on the findings, the following conclusions were drawn:

1. It is evident that the sample population is skewed towards younger respondents,

with a majority of females belonging to the lower and middle classes. Furthermore,
the majority of the respondents have a relatively low monthly income, with a
significant number of students and government employees among the sample. In
terms of how inflation affects these demographic variables, it can be said that the
impact of inflation is likely to be greater for those with lower income levels. In terms
of how inflation affects these demographic variables, the findings suggest that
young individuals, particularly those who are still studying or starting their careers,
may be more vulnerable to inflation due to their limited income and ability to absorb
price increases. Women, especially those with lower-income jobs, may also be
disproportionately affected by inflation. Meanwhile, the classification of the
 respondents suggests that those in the middle and lower classes may be more
affected by inflation compared to those in the upper classes, who may have more
resources to adjust their consumption patterns. Overall, the study highlights the
importance of considering demographic variables in understanding how inflation
impacts consumers. It is clear that the impact of inflation on consumers depends on
a wide range of demographic variables, including age, gender, classification, and
social status. While some consumers may be able to weather the impact of inflation
more easily, others may face significant challenges in maintaining their standard of
living.

2. Consumers perceived that the prices of items they regularly consume have
increased, such as groceries, gasoline, housing, and utilities, leading to a higher
cost of living. This may result in reduced purchasing power, as prices rise faster
than their income, leading to potential cutbacks on discretionary spending.
Consumers may also be concerned about the impact of inflation on their savings
and investments, as it disintegrates the purchasing power of money gradually. In
response to inflation, consumers may search for alternatives, compare prices more
carefully, and adjust their spending behavior, savings strategies, and investment
decisions. Individual perceptions of inflation can vary depending on various factors,
and it's important to consult reliable sources for up-to-date information.

3. Inflation can have significant effects on various aspects of consumers' budget

consumption and decisions. It can alter the purchasing preferences of consumers, as
rising prices may lead them to prioritize more affordable options, switch to cheaper
brands, or seek out discounts and promotions. Consumers may also reduce the
quantity of consumption to stay within their budget, opting for smaller quantities or
delaying non-essential expenses such as luxuries. In terms of income supplements
and savings, inflation may require consumers to look for additional sources of income
to keep up with rising prices, or explore alternative savings and investment strategies
to have some money left. Moreover, inflation can impact consumers' decisions on
loans and borrowing, as higher borrowing costs due to increased interest rates may
affect their borrowing decisions, and they may be more cautious about taking on debt
in an inflationary environment. Overall, consumers may need to adapt their spending,
saving, and borrowing behaviors in response to changing prices and inflationary
pressures, and it's crucial for them to monitor their budget closely, seek financial
advice when needed, and make informed decisions to manage their finances
effectively in an inflationary environment.

RECOMMENDATIONS

In the light of the Findings and the Conclusions drawn, the researchers gave
the following recommendations

1. Education and awareness campaigns should be conducted to inform

consumers about the impact of inflation on their budget and consumption
decisions. Consumers need to be aware of the potential effects of inflation,
particularly those with lower incomes, to better manage their finances.This
could include programs that provide financial literacy training, access to
affordable credit, and other resources that can help them build financial stability
and resilience.

2. Government and private sector organizations should take steps to mitigate the
impact of inflation on vulnerable groups This could include providing financial
assistance, subsidies, or relief measures to help ease the burden of rising
prices.

3. Financial institutions should provide information and guidance to help

consumers manage their finances in an inflationary environment. This could
include advice on savings, investment, and borrowing strategies, as well as
offering financial products that are tailored to meet the needs of consumers in
an inflationary environment.

4. Consumers should take a proactive approach to managing their finances by

closely monitoring their budget, seeking financial advice when needed, and
 making informed decisions about their spending, saving, and borrowing
behaviors. It is crucial for consumers to adapt to changing prices and
inflationary pressures to manage their finances effectively.

5. Address gender-based inequalities in the labor market, such as pay gaps and
discrimination, that contribute to their vulnerability to inflation. This could
include policies that promote equal pay, support for women in entrepreneurship,
and other measures to address gender-based barriers to economic
empowerment.

6. Promote financial literacy and access to affordable financial services,

particularly for those in lower-income brackets. This could include policies that
promote financial inclusion, such as access to affordable credit, savings
accounts, and other financial products that can help consumers build wealth
and protect their assets in an inflationary environment.