Introduction to Inflation

Welcome to our General Mathematics unit on inflation! This critical economic concept affects everything you buy—from snacks to clothes to transportation. Understanding inflation will help you make smarter financial decisions now and in the future.

The material covers how to apply percentage increases and decreases to determine inflation's impact on costs and wages over time. This practical math skill helps explain why things cost more today than they did for your parents or grandparents.

Quick Tip: Inflation knowledge isn't just for economics class—it helps you understand why your allowance or part-time job earnings might not stretch as far as they used to!

Learning Objectives

By the end of this lesson, you'll master one key skill: applying percentage increases and decreases to calculate how inflation affects costs and wages over time.

This practical math skill will help you understand why prices change year after year and how to measure these changes accurately. You'll be able to analyze real-world examples and understand historical price trends.

The concepts you'll learn apply directly to everyday financial decisions and help explain economic news you hear about rising costs.

Coffee Prices Through Time

Did you know a cup of coffee that cost just 25 cents in 1970 now costs about $3.08? That's a massive 1,132% increase over about 50 years!

Looking at the data shows a clear pattern: $0.25 (1970) →$0.45 (1980) → $0.75 (1990) →$1.00 (2000) → $1.25 (2010) →$3.08 (2024). Each decade brings significant price increases.

This example perfectly illustrates inflation in action—the same product costs dramatically more over time. This isn't because coffee itself changed, but because the purchasing power of money decreased.

Mind-Blowing Fact: If your grandparents could buy four cups of coffee for $1 in 1970, today that same dollar would get you less than one-third of a cup!

The Price is Right

"The Price is Right" game introduces a fun way to test your knowledge about inflation and current prices of everyday items.

This interactive activity challenges you to guess current prices of common products after learning about their historical costs. It demonstrates how inflation has changed prices over time in a way that's immediately relevant.

By playing this game, you'll sharpen your ability to recognize reasonable price ranges and better understand the cumulative effects of inflation on consumer goods.

Philippine Commodity Price Comparison

The table shows price comparisons between 2014 and 2024 for everyday items in the Philippines. It includes essential commodities like rice (₱55.00 in 2024), diesel (₱58.00 per liter), jeepney fare (₱13.00 base fare), and brown sugar (₱80.00 per kg).

This data reveals how prices of basic necessities have changed over a decade. The 2014 prices are missing from the table, but will be used to calculate inflation rates.

Analyzing these price changes helps demonstrate how inflation affects the cost of living in the Philippines. These everyday items represent costs that impact nearly everyone's daily budget.

Real-World Connection: Think about your family's grocery expenses—how would these price increases affect your household budget over ten years?

Commodity Price Inflation Visualization

The bar chart dramatically illustrates the price increases of four essential commodities in the Philippines from 2014 to 2024. Each item shows significant inflation: rice (31.0%), diesel (56.8%), jeepney fare (62.5%), and brown sugar with the highest at 77.8%.

These percentages represent the inflation rates for each commodity over the decade. Brown sugar experienced the most dramatic increase, nearly doubling in price.

The visual representation makes it easy to compare both the absolute prices and percentage increases across different necessities. This helps us understand how inflation affects different sectors of the economy at different rates.

Philippine Inflation Rate Analysis

The Philippines maintained a 2.9% inflation rate as of January 2025. This percentage measures how much more expensive a standard set of goods and services has become over the past year.

Three main commodity groups drove this inflation: food and non-alcoholic beverages (contributing 1.5 percentage points), housing utilities (0.5 percentage point), and restaurants and accommodation services (0.3 percentage point). These sectors account for over 75% of the overall inflation rate.

Several commodity groups actually saw decreasing inflation rates compared to previous periods, including clothing, housing utilities, household equipment, recreation, education, restaurants, and personal care services. This suggests some economic stabilization in these sectors.

Critical Insight: Understanding which sectors drive inflation helps economists and policymakers develop targeted strategies to manage price increases!

Understanding Inflation Fundamentals

Inflation is the general increase in prices of goods and services throughout an economy over time. When prices rise, your money buys less—meaning your purchasing power decreases.

This economic phenomenon affects everyone's daily life. As inflation rises, you need more money to maintain your standard of living—the same $20 that bought a week of lunches might only cover three days as prices increase.

Several factors can trigger inflation: increases in the money supply, rising production costs, or growing consumer demand for goods and services. All these push prices upward over time.

High inflation creates economic challenges beyond just higher prices—it can reduce business investment, slow economic growth, and lead to higher interest rates on loans and credit cards.

Purchasing Power Comparison

The striking image shows how ₱1,000 bought a full shopping cart of groceries in 2010 versus the much smaller amount it purchases today. The difference is dramatic and immediately visible.

This visual perfectly illustrates the real-world impact of inflation on everyday life. The same amount of money buys significantly fewer items now than it did just over a decade ago.

The comparison makes abstract inflation percentages concrete—showing how inflation directly affects your family's budget and purchasing decisions. What once might have been a week's worth of groceries might now only last a few days.

Reality Check: This isn't just about numbers—it's about how far your money stretches at the store. The next time you shop with your parents, ask them what these items cost when they were your age!

Calculating Inflation Rate

The inflation rate represents the average percentage increase in prices of goods and services over a specific time period, usually calculated annually. It's a key economic indicator that affects everyone's financial decisions.

To calculate inflation rate, use this formula: Inflation Rate (%) = $(New Price - Old Price) ÷ Old Price$ × 100. This straightforward calculation shows the percentage change in price over time.

For example, if a gallon of milk cost ₱60 last year and costs ₱66 now, the inflation rate would be $(66 - 60) ÷ 60$ × 100 = 10%. This means milk prices increased by 10% over the year.

Understanding how to calculate inflation rates gives you a powerful tool for analyzing price changes and making informed financial decisions in your own life.