How do businesses know how to adjust their prices for inflation? Do they go and calculate it off the consumer price index or do they just let the market force dictate price off of supply and demand?
Most of the time businesses adjust their prices depending on two criteria: 1) Demand from consumers (higher demand supports a higher price) 2) Cost of production (more expensive to make supports higher price). So often during periods of high inflation, prices will go up due to reason 2. Hope that helps! :)
Absolutely! But then obviously you would interpret the inflation rate as the rate over the course of two years not one year (annual), that's all. The formula is the exact same!
So it means that the base year of CPI does not affect the inflation rate? Is the inflation rate (2012=100) just the same with inflation rate (2018=100)?
It's stands for the "Consumer Price Index." We made a video outlining what it is and how it is used. Check it out here: ruclips.net/video/0_-Yu21puD0/видео.html&vl=en
Thanks for making it make sense👍🏼
Such a concise explanation! thank you !
I’m happy you found it helpful! :)
Thank you 👍🏻🙏🏻
Thank you for the video, my students enjoyed it, keep up the great work.
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WHERE CAN VALUES TO CALCULATE INFLATION BE FOUND ?
@sandilemqotho862 A nation’s CPI is calculated and reported monthly, and normally posted online by their government, as it is public information!
How do businesses know how to adjust their prices for inflation? Do they go and calculate it off the consumer price index or do they just let the market force dictate price off of supply and demand?
Most of the time businesses adjust their prices depending on two criteria:
1) Demand from consumers (higher demand supports a higher price)
2) Cost of production (more expensive to make supports higher price). So often during periods of high inflation, prices will go up due to reason 2.
Hope that helps! :)
Hello... will this formula still work if instead of a 12 month gap lets say it was 2 year gap?
Absolutely! But then obviously you would interpret the inflation rate as the rate over the course of two years not one year (annual), that's all. The formula is the exact same!
Can you make a video of what happens to the markets and prices after the inflation rates go down?
Absolutely! What a great video idea, Fran!
So it means that the base year of CPI does not affect the inflation rate? Is the inflation rate (2012=100) just the same with inflation rate (2018=100)?
The CPI in the base year is 100. The CPI for the year you're calculating may not be. Hope this helps!
What is CPI ?
It's stands for the "Consumer Price Index." We made a video outlining what it is and how it is used. Check it out here: ruclips.net/video/0_-Yu21puD0/видео.html&vl=en