Inflation

The Prices Project

The idea of the Prices project is to go to one store and track the prices for ten (10) items at that store for the whole semester. The store can be a regular store or an online store. You don’t have purchase anything: just write down the prices once a month for three months.

Make sure the same product and prices are recorded at:

a. approximately the same time of the month

b. Same quality and quantity each month

c. do not include sales tax

d. pick items for which prices may change; do not pick items for which the price will not change (rent, cellphone bill on a contract, etc.)

e. you are trying to keep “everything the same” except for prices: that’s what you are observing in this project.

Submissions for the Project

You will turn in the project in two parts. Firstly, a table with a list of the 10 items. You want to pick items that you suspect have a relationship. Such as two goods which are

(1) complements

(2) substitutes,

(3) brand name vs generic,

(4) higher quality vs lower quality item,

(5) seasonal versus standard items or

(6) some other relationship.

You need to create five set of relationships, with two set of items, totaling up to 10 items. Then you will collect the prices for the 10 items for the next three months. At the end of the three months, you will calculate the inflation rate for each item, and the total inflation rate. You may do the table on paper by hand, Word, Excel, or any other program. An example of the table is provided below. You will have two sets of inflation rates for each item as well as the total inflation rate for all the 10 items. The total inflation rate is calculated by plugging in the total amounts for each month into the inflation rate formula, below. Do not add up the inflation rates for each product and call it the total inflation rate. Secondly, after the inflation calculations, write an essay on what, where and how did you did your project. What is the relationship in the price changes between the set of items that you choose? Did the prices increase, decrease, or stay the same? Was there a relationship between the prices for the two set of items that you choose? Your job is to think about explanations for why prices increased, decreased, or stayed the same. If an item went on sale or was discontinued, eliminate that item from the inflation calculation but discuss why that might have happened.What type of economic (or other) reason(s) can you give to explain the differences? Think about:

a.type of product and the relationships with the other product

b.is there pattern that you see, is it consistent with the economic theory

c.the level of competition of the store in your area

d.the type of buyers in the store

e.weather conditions

f.seasonal demand

g.Company deciding not to change prices, benefits of the price not worth the cost of doing so.

Sample Table of the Prices Project (round to whole numbers)
Items	Month #1	Month #2	Month #3	Inflation rate: Month #1-Month #2	Inflation rate: Month #2-Month #3
milk	$1.79	$1.79	$1.89	0%	6%
cheese	$2.50	$2.67	$2.79	7%	5%
pop	$1.50	$1.76	$1.76	17%	0%
battery	$2.99	$3.16	$3.28	6%	4%
Total	$8.78	$9.58	$9.72	9%	2%

Formula calculating price change (use this month versus last months, rather than year):

current price - previous price / previous price x 100, so price change from month #1 to #2 would be: Month #2 price - Month #1 price/ Month #1 price x 100

PART 1

item	month 1	month 2	month 3	inflation rate month 1	inflation rate month 2
bread	$ 5.00	$ 5.50	$ 5.50	0.1	0
peanut butter	$ 10.00	$ 10.25	$ 10.25	0.025	0
vehicles	$ 100,000.00	$ 120,000.00	$ 130,000.00	0.2	0.083333333
gasoline	$ 10.00	$ 15.00	$ 20.00	0.5	0.333333333
Shoes	$ 10.00	$ 12.00	$ 12.00	0.2	0
Socks	$ 2.00	$ 2.00	$ 2.00	0	0
Beef	$ 20.00	$ 26.00	$ 30.00	0.3	0.153846154
Eggs	$ 13.00	$ 15.00	$ 15.00	0.153846154	0
Bacon	$ 10.00	$ 12.00	$ 15.00	0.2	0.25
Pork	$ 20.00	$ 24.00	$ 30.00	0.2	0.25
Total	$ 100,100.00	$ 120,121.75	$ 130,139.75	0.200017483	0.083398718

Part 2

Introduction;Inflation is defined as the gradual rise in the price of goods and services. As a result, inflation is a fundamental idea in capitalism, and it is critical to comprehend price actions, commerce, profit development, and revenue maximization for businesses. In this assignment's case study, the work required making queries about five pairs of products that had an unusual association. The impacts could have been substitutions, complements, or derivatives of one another, and the price rises and falls are analyzed using various economic theories. However, it has the potential to derail the quantity of investment made within a company. As a result, inflation is an important part of modern economics that should be understood. Therefore, the understanding concerning the present inflation rates based on a sample product analysis as well as the economic explanation ascertaining the plausibility is pertinent to understating inflation.

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