Question

Explain, with the use of an example, the impact that inflation has on consumer
spending. Note: marks will be awarded for proper referencing and paraphrasing
of this question

Answer 1

Answer-The impact that inflation has on consumer spending is when inflation increases then the cost of goods and services also increases which means the cost of living for an individual also increases. In the case of inflation if the rate of increase in inflation is the same as an increase in the income of the consumers then there will be no negative effect but if there is an increase in the inflation rate and there is no increase in consumers income then it will have a negative impact on the consumers' income, there will be the condition where consumer need to pay more money to consume those goods and services whose earlier price was less than the present price.

For Example-If there is a sudden decrease in the supply of  coconut oil, then it will lead to an increase in the price of coconut oil,by this it will result into the inflation.