Inflation vs cpi

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  • Publicado : 17 de diciembre de 2011
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Internarional TradeNovember 28 th 2011 | Relationship Between Inflation and Product Behaviour |
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Introduction
The gradually more complex world we live in carries out new risks andconcerns in economic decisions as a result of the every time broader, external and internal factors by setting up parameters in our daily life activities.
Around economic behaviours the modern andrepetitive terms in society and media, as globalization, economic crisis, currency exchanges rates, market values and even terms that are apparently not directly related as the global warming, oil scarcityand the green trends are as well important issues in determining our decisions towards finance.
Throughout this report I would mainly focus in the relationship between INFLATION and the NATURE OFPRODUCTS, their influence on our daily lives, and the importance of being aware of these concepts.
The report is based on what I have learnt in past lectures during my studies at Donghua University andsources as internet and books.

The Behaviour of Products’ Price

The behavior /nature of products is represented with Price Elasticity, which measures the responsiveness of demand or supply to achange in price or in other words elasticity refers to how
customers or suppliers react towards Price stimulus.
How is price elasticity calculated?
% change in quantity (ofsupply or demand)
E =
% change in price (of a product or service)
Elasticity of demand
Occurs when the price of a good increases or decreases by L% and consumersrespond by decreasing or increasing their purchases by M%.
Elasticity of supply
Occurs when the price of a good increases by L% and consumers respond by decreasing or increasing their output by M%.This calculation determines ELASCTIC & INELASTIC demands/supplies, according to the quantities changed in the following way:
when the nominator changes more than the percentage changed in price...
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