Free Philippine Inflation Rate Essay Sample
One of the realities that each and everyone has to face is the ever changing value of currency and the price of consumer goods. Inflation results, according to the BusinessDictionary.com, from a Cost-push inflation, wherein wage increases cause business to raise prices to cover for costs; or from a Demand-pull inflation which is due to the increase of consumer demand by reason of greater availability of credit; or finally through Monetary inflation caused by an increase in the number of money in circulation, resulting to a decrease in the value of money.
One country in particular which have experienced high and unstable inflation rates is the Republic of the Philippines. While other countries have gradual inflation or even low or no inflation, the Philippines have experienced high inflation rates, capped by a 9% increase in 2009. However, during a six (6) year period from 2006 to 2010, the Philippines had an average inflation rate of 6%, which rate can be used to determine the amount of inflation on a particular type of commodity in a 5 year span, starting in 2010 and ending on 2014. Using the Formula S=C(1+r/100)^5, we can compute for the price of a commodity, let us take for example, one whole kilo of chicken, with the current price of 150 Philippine Peso representing "C", the inflation rate as "r", and finally to be multiplied exponentially with 5 which is the number of years we want to discover as the total price of the commodity.
The formula will look like this:
S = 140 (1 + 6/100) ^5
= 140 (1.338225578)
Hence, after computing the price of the commodity after 5 year, it will be 187.35 Philippine Peso. It can be adduced that while inflation rate in 2010 is merely 3%, and if this rate is the one that will be used in computing for the price of the commodity, the same cannot be plausible on the basis of the instability of the Philippine Peso and the country's inflation rate. Hence, the use of the rate of 6% as the factor to determine the price of the commodity five years from now.
Once computed it can be observed that the effect of the inflation has brought a significant increase in the price of 1 whole kilo of chicken from 140 Philippine Pesos in 2010 to 187.35 Philippine Pesos in 2014. That is close to a 40 Philippine Peso increase from the original price.