Mathematical Literacy - INFLATION

Inflation

-Is a general increase in prices and fall in the purchasing value of money

One of the realities of life is that the cost of goods is always increasing. You may hear on the radio that Consumer Price index(CPI) has increased and is now 6%.This means that the cost of basic living expenses has gone up by 6%,or by R6 every R100.

Consumer Price Index measures monthly changes in prices for a range of consumer products.Changes that CPI record is the Rate of Inflation. 

Economist work out the Consumer Price Index as a measure of inflation by Calculating the increase in a 'basket' of goods representative of what most people spend their money on, such as food, clothing and housing.

Because of inflation the cost of things you pay up for goes up. This means that, with say R2000, you can not buy the same things as year goes by. This is what is meant by Purchasing power​​​​​​, the power of the R2000 to you goes down as inflation chases the prices of goods and services up.

Formulas for Calculations

Percentage increase=amount of increase/original amount spent X 100%

Purchasing power=value of money last year/value of money this year X 100%

Example 

1.Last year Susie spent R500 on the catering of her family birthday dinner. It was such a success that she decided to make exactly the same meal this year.She went to the supermarket and bought the Same ingredients, but was surprised to have to pay R535 this time.

A) What was the percentage increase on the ingredients? 

PI=amount of increase/original amount spent X 100%

=35/500X 100

=7%

B)The CPI for that year was 6%,how did the percentages increase on the goods she brought compared to CPI? 

=The price of the goods she bought increased by 1% more than the avarage CPI. 

C) How much does the inflation rate  of 6%p.a affect the purchasing power of R500? 

PP=value of money last year/value of money this year X100%

=R500/R535 X 100 %

=94%

Classwork

Question 1

1.Sissy is planning to go on a Holiday to London in 3 years time, when she turns 21. She wants to start saving now and finds out that  the current cost of the trip is R 9 999,she estimates that this cost could go up about 10% per year with inflation.

A) What is the estimated cost of the trip in 3 year's time?

B) If Sissy wants to save the Same amount each month, how much must she save in 3 year's to cover this Cost?

Question 2

2.You Have R1000 to spend on Clothes but decide to save it to spend next year. The inflation rate that year is 7%.

A)What would R1000 worth of goods cost you in a year time?

B) What is the purchasing power of R1000 after one year?

Question 3

3.Last year Lydia bought a pair of shoes for R99, 99.This year the same pair of jshoes cost R109, 99.

A)What is the percentage increase on the price of shoes?

B) If the CPI of that year is 7%,how did the price of the shoes increase in relation to this measure? 

*Read the Introduction

*Familiarize yourself with the Formulas

*Do the Class work given individually 

The Marks from Question 1 to Question 3 is Totally 15 Marks

Question 1 contains 8 Marks 

Question 2 contains 4 Marks

Question 3 contain 3 Marks

After the lesson one will know more about inflation and the effect it has on the prices of goods and services. 

15 Marks For doing the Classwork

5 Marks for Reading and understanding the lesson

Total 20 Marks