Inflation has been a major concern to Kenyan economy. Explain how persistent increases in prices of commodities have affected the life of a consumer

ANSWER

• Decline in real incomes. Real purchasing power declines due to a fall in the Value of money.
• Loses of confidence in money as a medium of exchange. A consumer may prefer to hold other assets rather than cash.
• Decline in savings. The reduction in the value of savings will discourage a customer from savings.
• The lowly paid/the poor in society suffer much since they may not purchase necessities/basics commodities.
• Individuals may waste time shopping around for reasonable price.
• Low standards of living. Leads to reduction in purchasing power and hence decline in living standards.
• Motivation to work. In an effort to maintain their standards of living, they may work harder in order to earn more.
• Trade debtors (credit consumers) pay less in real terms in the near future.